How do different forms of early employment instability affect future employment chances? A factorial survey experiment with employers

• Date: 13 August 2024
• Pages: 1738-1755
• DOI: https://doi.org/10.1108/IJM-06-2023-0320
• Published date: 13 August 2024
• Subject Matter: Economics,Labour economics
• Author: Lulu P. Shi

How do different forms of early

employment instability affect

future employment chances?

A factorial survey experiment

with employers

Lulu P. Shi

University of Oxford, Oxford, UK

Abstract

Purpose –Periodic economic instabilities and structural changes in the labour market have given rise to a

variety of forms of job insecurity. This article compares the scarring effects of different forms of job insecurity

on future employment chances, and how they vary across education groups.

Design/methodology/approach –Using a sample of real vacancies and data collected in a vignette

experiment with employers in Switzerland, a country with a strongly developed vocational education and

training (VET) system, this article investigates how employers evaluate a period of unemployment, job

hopping and work experience in deskilling jobs when hiring candidates.

Findings –The findings reveal that work in deskilling jobs is by far more scarring than unemployment or job

hopping. The study also demonstrates that applicants with upper secondary vocational education are

impacted the greatest by all three forms of job insecurity.

Originality/value –The study makes use of real vacancies. While experiments have the strength of high

internal validity, most experimental studies in recruitment research rely on students as respondents. As this

study works with real employers hiring for positions it benefits from high external validity.

Keywords Education, Factorial survey experiment, Hiring, Employment instability, Scarring,

School-to-work transition, Vocational education and training (VET)

Paper type Research paper

1. Introduction

This article analyses and compares the impact of different forms of employment instability

at an early career stage on individuals’ later employment chances, and how they vary across

education groups. Young people are comparatively more likely to find themselves

unemployed, in mismatched jobs or with fixed-term contracts [1]. The reasons for the

labour market precarity of young people are complex and have been explained by different

factors, such as possessing little work experience, being less effective in the job search and

having a smaller network of contacts (Bell and Blanchflower, 2011). The goal of this paper is

not to explain why young people are more vulnerable; rather, the aim is to understand how

early employment instabilities may affect their future employment chances. A difficult entry

into the labour market can impact individuals’ careers in the long run in the form of decreased

employment prospects or lower wages (Bell and Blanchflower, 2011), these negative impacts

IJM

45,9

1738

The opinions expressed and arguments employed herein do not necessarily reflect the official views of

the Swiss Government.

Funding: The study was funded by the Swiss State Secretariat for Education, Research and

Innovation (SERI) (Nos. 15.0089 and 649395) as part of the Horizon 2020 project “Negotiating early job-

insecurity and labour market exclusion in Europe -NEGOTIATE” (Horizon 2020, Societal Challenge 6,

H2020 - YOUNG SOCIETY-2014 and YOUNG-1-2014).

The current issue and full text archive of this journal is available on Emerald Insight at:

https://www.emerald.com/insight/0143-7720.htm

Received 18 June 2023

Revised 29 December 2023

26 March 2024

28 May 2024

Accepted 26 June 2024

InternationalJournal of Manpower

Vol. 45 No. 9, 2024

pp. 1738-1755

© Emerald Publishing Limited

0143-7720

DOI 10.1108/IJM-06-2023-0320

are often referred to as “scarring effects”. This article provides an understanding of how

employers contribute to the scarring effect.

There is established evidence for unemployment scarring (e.g. Arulampalam et al., 2000).

However, the consequences of different forms of employment instability have most often

been studied separately, and little is known about how they impact future employment

chances in comparison to one another. Yet, with changing labour market structures, such as

deregulation or the rise of the gig economy, the transition phase from education into

employment has become more complex (for an overview see Karamessini et al., 2015), and

young people may face the choice between taking up a job poorly suited to their skills profile,

a fixed-term position or unemployment.

Only a handful of studies – Pedulla (2016),Nunley et al. (2017) and Baert and Verhaest

(2019) – have compared the effect of unemployment and skills mismatch. The findings are

mixed, partly due to different definitions for skills mismatch, partly to different

operationalisation of key variables and the mixed results also highlight the context-

dependency of the determining factors for career outcomes. Studies that statistically

compare the effects of more than two forms of employment instability are lacking.

Addressing this gap, this article compares the effects of three common forms of employment

instability – unemployment, job hopping and work in deskilling jobs – on future employment

prospects. The first aim of this study is to compare the effects of three different forms of

employment instability.

Secondly, this study aims to understand the role of education in moderating the effects of

early employment instability with a focus on the vocational education. School-to-work

literature has shown that employers draw on applicants’ education credentials when making

hiring decisions. Especially for younger workers with little work experience, education is

crucial information. Credentials can reveal specific information about the type and level of

skills of the applicants (Becker, 1964), or they can be used as a cue for applicants’ trainability

and capabilities (Stiglitz, 1975). In Switzerland, a country with strongly standardised

vocational education and training (VET), the vocational credential is particularly informative

for the employer as the vocational titles reveal the exact skills the applicant received the

training for. Credentials can also be used instrumentally to create barriers to entry into

certain occupations (Bol and Weeden, 2015). There is extensive research on the relationship

between education and labour market outcomes such as propensity to be employed or

lifetime earnings, and there is a large body of literature on specifically discussing the VET

(e.g. Iannelli and Raffe, 2007;Solga et al., 2014;Forster et al., 2016;Hoidn and 

S

tastn

y, 2023).

However, less is known about how education contributes to re-employment chances after a

turbulent career start. An exception is Shi and Valentina (2022) who studied how education

can moderate job finding chances after initial unemployment and indeed found evidence for

the moderating effect of education. However, how education may moderate employment

chances after experiencing forms of employment instability other than unemployment has

been a neglected research area. This study addresses this research gap.

This paper has a specific focus on the scarring effect of employment instability for the

vocationally educated applicants. The upper secondary dual VET system has been praised

to facilitate the school-to-work transition, resulting in a low degree of skills mismatch and

youth unemployment (Shavit and M€

uller, 1988). Less investigated is the school-to-work

transition for graduates of vocational tertiary education: graduates from the universities of

applied sciences. In comparison to the upper secondary VET system, the universities of

applied sciences are relatively new and were established only in the mid 1990s (OPET, 2010).

There is evidence that that the return on education measured in earnings is higher for

vocational tertiary graduates in comparison to academic tertiary graduates at least in the

career entry stage (Backes-Gellner and Geel, 2014), but a comparison between the upper

secondary and tertiary vocational education is lacking. A particular interest in this article is

International

Journal of

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