Growing inequality during the Great Recession: Labour market institutions and the education gap in unemployment across Europe and in the United States

Abstract

We study how the education gap in unemployment has evolved by gender and age groups across 28 European countries and the United States from 2000 to 2014, using the European Union's Labour Force Surveys and the US Current Population Surveys. During and after the Great Recession, the absolute education gap in unemployment expanded in almost all countries, which was mainly driven by a marked increase in the unemployment risk among low educated men. A two-step multilevel analysis confirmed the negative relationship between the education gap and both (lagged) GDP growth and GDP level. Further, institutional labour market features moderated the impact of the business cycle. A higher share of temporary employment boosted employment for less educated persons, thus flattening the education gradient in unemployment, while a larger public sector somewhat protected more highly educated individuals against unemployment. The gap for young workers was large in settings with strict regular contract regulations.