Understanding employment dynamics across the business cycle: is education important in reducing the risk of losing a job during an economic downturn?

Abstract

Purpose: This paper aims to assess the impact of output changes on gender-, age- and educational attainment level-specific employment considering two business cycle phases. It also aims to answer whether education is essential in reducing the risk of losing a job during an economic downturn.
Methodology: We employ the first differences approach to evaluate the asymmetric response of different employment types to output changes in 27 EU countries from 2000 to 2020. The Eurostat database provides the data for this analysis, and we use the Pooled OLS estimation technique for our calculations, ensuring the robustness of our findings.
Findings: The results of this study are significant, indicating that during periods of economic upturn, the reaction of employment to output changes is weaker than during economic downturn. This is a crucial insight, as it suggests that the negative impact on employment is more severe, particularly for young and less educated individuals, with men generally facing sharper declines in employment compared to women. However, older and more educated workers exhibit greater job stability during economic downturns, highlighting the protective role of higher education and experience. These findings underscore the importance of education in reducing the risk of job loss during economic downturns, a key point of this research.
Originality: This research stands out for its comprehensive examination of how employment reacts to output changes in the EU, considering the asymmetric output-employment relationship and the various employment types segmented by age, gender, and educational attainment levels. The findings underscore the necessity for targeted measures to uphold employment stability across diverse economic circumstances and demographic groups.