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THE SIGNIFICANCE OF SOCIAL AND ECONOMIC SCARRING
This topic has often described how economic downturns are portrayed as
short-term events. However, a substantial body of economic literature
shows how high unemployment, falling incomes, and reduced economic
activity can have lasting negative consequences. In addition to the short-
term economic problems that unemployment causes for people, there are
serious long-term debilitating social effects ( Irons, 2009; von Wachter,
Song, & Manchester, 2009 ). Clark, Georgellis, and Sanfey (2001) and a
number of other writers describe the negative long-term consequences of
unemployment as “scarring effects.” Those scarring effects are the result
of such factors as the deterioration of job skills and forgone work experi-
ence. Scarring can also result in a potential employer's belief that long-
term unemployed workers will have lost some of their productivity. The
longer a person is unemployed the more severe the scarring effects are
presumed to become and remain.
Katz (2010) wrote that the human costs of economic downturns are
much more far reaching than temporary loss of income. This includes the
long-term scarring effects of lost lifetime earnings, human capital, worker
discouragement, adverse health outcomes, and loss of social cohesion.
Sullivan and von Wachter (2009) and Holzer (2010) stated that some neg-
ative effects of long-term job loss are associated with higher risks of heart
attacks and other stress-related illnesses. These writers noted that high
unemployment, falling incomes, and reduced economic activity can also
have a number of family-related consequences. For example, job loss and
falling incomes can force families to delay or forego a college education
for their children. Children may also experience a decline in schooling
achievement ( Stevens & Schaller, 2012 ). Palme and Sandgren (2008)
found a significant relationship between a parent's reduced economic
circumstances during their offspring's childhood and reduction in lifespan
of the child.
Long-term job loss not only reduces a worker's probability of being
quickly rehired but also leaves permanent emotional scarring on many
individuals. The Department of Commerce (Census Bureau) Current
Population Study (2010) found that workers are financially scarred by lost
income and job benefits during periods of joblessness, and further scarred
by reduced income when they find new employment. Arulampalam
(2001) found that a period of initial unemployment carries an average
wage penalty of about 6% upon returning to work. Three years after a
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