Scars of recession: the long-term costs of the Finnish economic crisis

This research examines the long-term cost of joblessness in Finland by concentrating on the deep financial mess of the early 1990s. The sheer number of plant closures increased dramatically in the recession and the unemployment rate went up by over 13 % points. In the study, prime working-age guys who encounter unemployment because of plant closure are matched to those who remained employed in the recession. The average effect of being unemployed in the recession is approximated for a 6 year follow-up period. After Six years, there’s a 25% annual earnings penalty for being unemployed. Months in employment recover gradually following the recession but are still 10% lower after 6 years. The projected wage loss is 14%.

The growth and development of the finnish economy in the 1990s offers a distinct setup for researching the cost of unemploment. After a boom in the late 1980’s the economy fell into a deep recession and also the Gross domestic product slipped dramatically by 10.5% between 1990 and 1993.

Source: Institute for Labour Market Policy Evaluation

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