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Prepared by Cristina Arbelaez (APD) and Johanna Schauer (APD).
E.g., Oreopoulos et al., (2012) using Canadian data find that a rise in unemployment rates by 5 percentage points can lead to cumulative earnings losses of up to 8 percent in the first 10 years after graduation. Gregg and Tominey (1995) found a wage penalty from early unemployment of the magnitude of 13–21% at age 42 for the UK. Kahn (2010) finds large, negative wage effects of graduating in a worse economy for the US. Other literature also finds scarring in the form of youth unemployment increasing the incidence of future unemployment (Gregg, 2001; Nilsen and Reiso, 2011).
Korea also stands out due to its very low share of long-term unemployed (defined as being unemployed for one year or longer) in total unemployed. For those aged 15 to 24 it stood at 0.5 percent.
In the analysis, we focus on the age group from 20 to 29 whenever data is available. The use of the word “youth” thus refers to the age group 20 to 29, if not explicitly presented otherwise. Given the high share of tertiary enrolment this age group appears the most important for employment analysis.
This translates into 67 percent to 96 percent of the average wage in 2016.
The OECD defines tax wedges as the ratio between the amount of taxes paid by a worker and the corresponding total labor cost for the employer. It is supposed to measure the extent to which tax on labor income discourages employment.