Impact of unemployment on skill depreciation: Evidence from China's labor market

Clarifying the changes in skills during unemployment is crucial for improving the reemployment and long-term development prospects of unemployed individuals. Utilizing data from the China Family Panel Studies (CFPS), the China Labor Statistical Yearbook, and the China Statistical Yearbook, this study empirically investigates the impact of unemployment on the skill depreciation of Chinese workers. The findings indicate that unemployment results in a 3.6 % overall decline in skills, encompassing a dual depreciation of both cognitive and non-cognitive skills. Mechanism analysis reveals that the reduction in skill training opportunities and the deterioration of health are primary drivers of this depreciation, with rural residents and urban migrant workers experiencing more severe skill depreciation due to disparities in infrastructure and public services. Importantly, the study identifies that promoting job creation serves as an effective measure to mitigate skill depreciation during unemployment. Based on these findings, the study proposes expanding high-quality reemployment training programs through measures such as subsidizing skill development, prioritizing vulnerable groups, and fostering job creation during unemployment to mitigate skill depreciation. • During unemployment, reduced access to skill training and deteriorating health conditions lead to skill depreciation. • Migrant workers in urban areas and rural laborers experience more severe skill depreciation following unemployment. • Unemployment has negative impacts on both cognitive and non-cognitive skills. • Job creation helps alleviate skill depreciation during periods of unemployment.