Europe’s labour-market policy is currently shaped by a pervasive metaphor: “scarring.” This idea suggests that even brief periods of unemployment inflict lasting damage, influencing how governments approach work, welfare, and the individuals navigating these systems. The term appears in European Union Commission briefings, United States Department of Labor recovery plans, and reports from the Organisation for Economic Co-operation and Development (OECD), as well as across the Global South. Despite its scientific sound, the term is neither medical nor truly scientific
The exact phrase “unemployment scarring” was first used in 1982 by David Ellwood, an American economist, who questioned whether job loss was merely a “blemish” or a deeper “wound.” He found little evidence to support either claim, yet the image persisted. Over time, it solidified into a doctrine. By the early 2000s, “scarring” had become a “stylised fact” in European economics — a statistical regularity in search of a mechanism. Policymakers readily adopted it after various crises, making it a staple, a reality rather than a theory.
The metaphor of scarring currently carries more weight than the evidence supporting it. While some studies indicate a correlation between unemployment and lower future wages or well-being, there is no consensus on the precise causation. Economists remain uncertain whether this is due to a loss of skills or confidence, or if employers penalise gaps in CVs. This lack of clear understanding has not, however, deterred politicians.
In 2020, the European Council integrated “avoiding long-term scarring” into its €800 billion Recovery and Resilience Facility. The Commission issued warnings about “lasting scars” among young people. In a 2021 G20 brief, the OECD and EU urged governments to act swiftly to avert a “lost generation.” When technocrats panic, metaphors often evolve into mandates.
The underlying logic is appealing: if unemployment causes damage, then individuals must be “activated” — motivated, corrected, and nudged. For politicians, the fear of scarring justifies intrusive policies. These policies, in turn, can create the very conditions — stress, instability, and reputational damage — that make scarring appear real. This is not sound economic logic; rather, it is circular reasoning with a dedicated budget.
As economist Deirdre McCloskey has observed, economics frequently relies on metaphors such as scarcity, elasticity, and stickiness. Now, “scarring” joins this lexicon. Following the Great Depression, economists used “scarring” to describe the lasting impact of crises on GDP and trade. However, they have since transposed this concept from the structural to the personal, mistaking the metaphor for reality.
This situation arises from an unusual combination of economics and psychology, coupled with a degree of political opportunism. Since at least the 1960s, economists have grappled with the persistence of unemployment. In 1968, Edward Phelps borrowed the concept of hysteresis from physics to describe a labour market that does not reset, where past unemployment influences future outcomes. Economies, it seems, possess a memory.
During the 1980s, unemployment began to rise across Europe. Initially, structural explanations prevailed, citing skills mismatches, declining industries, and localised labour markets. However, these explanations struggled to account for the persistence of joblessness even as macroeconomic indicators improved. Policymakers subsequently sought alternative explanations, often gravitating towards moral clarity or psychological simplicity.
This led to the “trauma script.” It was reasoned that being unemployed must negatively affect individuals, eroding their confidence, diminishing their skills, and making them less employable. A language of damage began to infiltrate the discourse. Economic metaphors, once used to describe GDP loss, were redirected inwards, focusing on the individual. A policy apparatus originally designed to rectify dysfunctional markets began to treat individuals as if they were broken.
This conceptual shift has had significant consequences. “Scarring” transitioned from a spreadsheet correlation to a behavioural diagnosis. While it is true that some individuals who are unemployed in one year earn less in the subsequent year, the evidence is weak, contingent, and statistically averaged. Nevertheless, policymakers act as if this effect is automatic. When the anticipated harm does not materialise, they often conclude that activation policy itself was effective. This represents policy-generated evidence, rather than evidence-based policy.
Consequently, the concept of scarring justifies the implementation of remedial measures. Unemployment benefits are often tied to mandatory training courses, CV workshops, and coaching sessions. Germany and the Netherlands employ digital tracking to monitor compliance, while Ireland utilises predictive scoring to triage applicants. Bureaucracy expands to address a perceived “wound” that it cannot reliably detect.
The costs of this approach are substantial, extending beyond merely running ineffective schemes. Europe’s activation regimes often push individuals into low-paid, insecure jobs that do little to enhance their long-term prospects. These policies extend conditionality deeper into daily life and operate on the assumption that the unemployed are flawed, rather than the labour market itself. Despite overwhelming evidence from macroeconomic events, unemployment is treated not as a social risk, but as a personal failing.
A more effective approach would begin with the opposite premise: that individuals are not the problem. Governments could prohibit employers from inquiring about employment gaps, mirroring existing prohibitions on questions regarding race, gender, or health. They could invest in long-term industrial policy and job security, rather than solely focusing on employability in weak labour markets. Furthermore, they could cease designing welfare systems that penalise individuals for not securing employment quickly enough.
Ultimately, “scarring” does not accurately describe what unemployment does to people. Instead, it reflects what economists and policymakers have chosen to believe about them. Disturbingly, the supposed “cure” is increasingly proving worse than the condition it aims to address.
Dr Tom Boland is Senior Lecturer in Sociology at University College Cork. He researches critique, culture, unemployment, welfare, and governmentality.
Dr Ray Griffin is Senior Lecturer in Organisation Studies at South East Technological University, Ireland. His research focuses on the experience, organisation, and administration of unemployment.