This paper estimates the impact of unemployment on earnings following re-em
ployment for a large and representative sample of British men, 1984-94. Une
mployment incidence is found to have only a temporary effect, an average ea
rnings setback of 10% on initial re-engagement largely eroding over two yea
rs. The effect of unemployment duration, by contrast, is permanent, a one-y
ear spell adding a further penalty of 10 percentage points. These wage pena
lties are least for Young men and the low paid - those most at risk of unem
ployment - and greatest for prime age and highly paid men.