How long will the economic downturn last? While some claim to see green shoots, others – such as my colleague Martin Wolf – see a slow and painful process ahead. I have little to add to that debate, but I can guarantee that for some of us, the impact of this downturn will last a lifetime.
That is the conclusion I draw from the research of Till Marco von Wachter, an economist at Columbia University, who has been tracing the lasting effects of bad luck in the job market. Having to look for a job at the wrong time can force us into compromises whose repercussions can last years or even decades.
For example, when von Wachter teamed up with two US government economists, Jae Song and Joyce Manchester, to study the experiences of those hurled into unemployment by mass layoffs in the 1982 US recession, they discovered horrendously long-lasting effects. The recession itself – one often compared with today's downturn – was savage, but it was over in less than two years. Yet von Wachter and his colleagues discovered that those who lost their jobs had incomes about 20 per cent lower than would otherwise be expected, even two decades later.