Inequality in the risk of job loss among young and prime-aged workers – is it explained by human capital or structural factors?

Iga Magda, Warsaw School of Economics
Anna Baranowska-Rataj, Umeå University

We aim at identifying the determinants of the gap in the risk of job separation between the young and prime aged workers. Using a Oaxaca-Blinder type of decomposition for binary outcomes and data from Polish Labour Force Survey, we disentangle to what extent the age heterogeneity in the risk of job separation is shaped by differences in the composition of young and prime age workers with respect to their individual and job characteristics, and to what extent it is driven by different risks of job separation associated with those endowments. Our results show that the differences in the composition of young and prime age workers and differences in the returns to these characteristics in terms of employment stability contribute to similar extent to the gap between young and prime age workers. Differences in the composition of workplace characteristics between youth and prime aged workers explain a considerable share of the overall gap in the risk of jobs loss, because young people tend to find jobs that are associated with higher risk of job security. At the same time, overall, the diverging effects of workplace characteristics close rather than raise the gap in job security between young and prime age workers. In other words, the jobs that are “on average” precarious, do less harm or provide more benefits to youth.