The South African labour market, 1995–2015

This study investigates the changes in the South African labour market in the post-apartheid period. While unemployment increased over the 1995–2015 period, employment also increased. Nonetheless, the extent of employment increase is not rapid enough to absorb all net entrants into the labour force, resulting in increasing unemployment, or an employment absorption rate of 65.3%. Unemployment is concentrated in specific demographically and geographically defined groups, most notably Africans, the lowly educated and those aged below 30 years, residing in rural areas in Gauteng. Finally, four worrying findings are observed: youth jobseekers aged below 30 years struggle to find their first job; chronic unemployment is more serious for the relatively older jobseekers (aged 45 years or above) with past work experience; employees working for small, medium and micro enterprises still stagnate at approximately 3.5 million; and jobseekers from the older age cohorts are less likely to actively seek work by enquiring at workplaces and answering job advertisements.     

Labour hoarding in a disequilibrium model of the Dutch labour market

Summary This paper presents a method to integrate labour hoarding into a disequilibrium model of the labour market. Disequilibrium indicators for the labour market that include labour hoarding are constructed. These indicators, being important determinants of policy multipliers with respect to employment, are found to be less volatile than the corresponding disequilibrium indicators for the goods market which are available from business surveys. The lower volatility reflects the role of labour hoarding as a buffer between actual and efficient employment levels. Our results indicate that labour hoarding in Dutch enterprises ranges from a minimum of 0.5 per cent of employment in early 1985 to a maximum of 7.0 per cent in 1975. Furthermore, the paper pays special attention to the modelling of mismatch unemployment and to the simulation results of an empirical disequilibrium macromodel of the Dutch economy.The authors thank M.M.G. Fase and two anonymous referees for their useful comments.     

Sectoral Wage Rigidities and Labour and Product Market Institutions in the Euro Area

We estimate wage Phillips curve relationships between sectoral wage growth, unemployment and productivity in a country-industry panel of euro area countries. We find that institutional rigidities – such as labour and product market institutions and regulations – limit the adjustment of euro area wages to unemployment, in both upturns and downturns, particularly in manufacturing and, to a lesser extent, in the construction and service sectors. In addition, there are further limitations in the response of wages to changes in unemployment during economic downturns which suggests that euro area wages are also characterised by significant downward wage rigidities, especially in the manufacturing sector. These results are robust to specifications that account for factors that may affect structural unemployment (such as duration-dependent unemployment effects), as well as changes in the skill composition of employment that may affect the evolution of aggregate wages. The results also hold for panels including or excluding the public sector (where wages may be determined differently to the private sector also due to the effects of fiscal consolidation on public sector wages during the crisis). From a policy perspective, reforms in product and labour markets which reduce wage rigidities can facilitate employment growth and enhance the rebalancing process in the euro area.     

Synergies in Labour Market Institutions: the Nonlinear Effect of Minimum Wages on Youth Employment

Empirical evidence on the effect of minimum wages on youth employment is inconclusive, with studies pointing to negative, positive or insignificant effects. In trying to explain some of the conflicting evidence, this research paper examines synergies of minimum wages with other labour market institutions using an unbalanced panel dataset of 19 OECD countries over 1985–2013. Institutions that enforce labour market rigidity, such as unemployment benefits and union density, are found to exacerbate the negative effect of minimum wages on youth employment, while government expenditure on training programmes for the unemployed dampen it. This finding of significant synergy effects indicates that panel data models which omit interactive terms between minimum wages and institutions might be misspecified. In addition, the analysis suggests that the negative effect of minimum wages is most severe in rigid labour markets with high unemployment benefits and union density. Therefore, policymakers need to consider the full spectrum of institutions they face before adjusting minimum wages.     

Institutional wage-setting,labour demand and labour supply: Causal estimates from a South African pseudo-panel

Unemployment in South Africa has multiple causes. This article uses a district pseudo-panel to estimate the elasticity of labour demand, labour supply and unemployment with respect to wages. We assess whether hiring decisions are more sensitive to increases in wages of low-paid workers than high-paid workers, and whether wage growth prompts entry into the labour market. These channels combine to result in the positive causal effect of wage growth on unemployment. The research investigates whether these effects are dominated by districts in which unionisation rates are high and employment is concentrated in large firms. Wage growth of middle-paid to highly paid workers – as opposed to low-paid workers – reduces local labour demand and raises local unemployment. Bargaining arrangements correspond closely to the spatial wage distribution; in turn, a large part of the impact that wage growth has on labour market outcomes is determined by these wage-setting institutions.     

Does Homeownership Lead to Longer Unemployment Spells? The Role of Mortgage Payments

This paper examines the impact of housing tenure choice on unemployment duration in Belgium using EU-SILC micro data. We contribute to the literature in distinguishing homeowners with mortgage payments and outright homeowners. Accounting for tenure endogeneity and unobserved heterogeneity, we find that homeowners with a mortgage exit unemployment first, while outright owners stay unemployed the longest. Tenants take an intermediate position. Our results emphasize the key role of housing costs in the link between housing tenure and labour market outcomes. Considered together with the results of recent macroeconomic research on housing and employment in Belgium, this paper provides indirect evidence for significant negative effects of homeownership on the labour market and the economy beyond the owners themselves.     

THE MEASUREMENT OF EMPLOYMENT STATUS IN SOUTH AFRICA USING COHORT ANALYSIS, 1994‐20041

We analyse trends in employment, unemployment and labour force participation by simple graphical techniques, using all the October Household Surveys and the September Labour Force Surveys. We show that African male employment in 1995 seems high, when compared to all the other surveys. Furthermore much of the increase in African female labour force participation is concentrated in the period 1998 to 2000, which suggests that measurement and sampling changes may be partially responsible for the trend. We track cohorts of individuals over the eleven years for which we have data. We show that young people are leaving school earlier, while being better educated than their elders. They are not, however, being absorbed into employment at a faster rate. This has led to a spike in youth unemployment.     

Unemployment and Economic Policy in Denmark in the 1930s

Abstract

The paper examines Danish unemployment and the employment policy in the 1930s. The unemployment data indicate that though the unemployment increased dramatically the rate of unemployment remained low. The official Danish unemployment records definitely underestimated the actual unemployment in the early 1930s, but the discrepancy was hardly as big as some scholars have suggested. The paper furthermore points out that the rather atypical rise in the Danish unemployment from the mid-1930s can be attributed to a rise in the natural rate of unemployment due to an improved unemployment insurance coverage and a more comprehensive registration of the unemployment. The second part of the paper deals with the Danish employment policy. Unemployment remained high on the political agenda, but the employment problem never became the main target for the economic policy. An active employment policy was constrained by the problems of the balance of payments and the political disagreements in parliament. While the macroeconomic policy did help to stabilize the economy and the employment, the number of measures directly targeting the labour market was small, and they seldom gave rise to much job creation.     

Trade, capital mobility, and the German labour market

Trade, Capital Mobility, and the German Labour Market. — This paper sets up three structural variants of a general equilibrium model of a small open economy with three sectors (exportables, importables, non-tradables) and three factors (internationally mobile capital and immobile skilled and unskilled labour) in order to analyse the employment and wage effects of globalisation shocks. The model is numerically implemented for West Germany in 1980 on the base of input-output tables and employment data from a random sample of social security accounts. Overall this study indicates that the globalisation process does not have strong effects on unemployment and/or the wage differential in West Germany.     

Minimum wage rates and unemployment in The Netherlands

Summary A static limited dependent variable model is formulated to analyse the Dutch labour market from an individual's viewpoint. Results suggest that high minimum labour costs are an important source of unemployment. Secondly, the reduced-form participation equation is replaced by a neoclassical labour supply equation. Thus, also the effect of high minimum wage rates on employment through labour supply is taken into account. Supply appears to be forward bending and participation is insensitive with respect to unemployment benefits. Simulations suggest that the effect of lowering the productivity threshold by reducing before-tax minimum wages dominates supply effects.The author wishes to thank Geert Joosten, Arie Kapteyn, Peter Kooreman, Bertrand Melenberg, Viji Narendranathan and Theo Nijman for helpful comments and the Netherlands Central Bureau of Statistics for providing the data. The views expressed in this paper do not necessarily reflect the policies of the CBS.     

The Short-Run Relationship Between Sectoral Shifts and U.S. Labor Market Fluctuations

Monthly data for the aggregate U.S. economy are used to assess competing hypotheses concerning the relationship between sectoral employment shifts and fluctuations in the unemployment rate. It is shown that sectoral shifts are caused by major work stoppages, aggregate fluctuations unrelated to permanent sectoral shifts, a reallocation-timing effect, and allocative shocks at the sectoral level. Larger employment shifts are associated with higher unemployment during slow growth periods and lower unemployment during above-average growth periods. Models are presented which demonstrate that both aggregate and allocative shocks are causes of cyclical increases in unemployment.     

Adjustment dynamics and the natural rate: an account of UK unemployment

This paper challenges what is the standard account of UK employment,namely that the major swings in unemployment over the past 25years are due predominantly to movements in the underlying empiricalnatural rate of unemployment (NRU). Our analysis suggests thatthe UK NRU has remained reasonably stable through time and thatthe medium-run swings in unemployment are due, instead, to veryprolonged after-effects of persistent (transitory but long-lasting)shocks. We argue that (i) past UK labour market shocks haveprolonged after-effects on unemployment due to interactionsamong different lagged adjustment processes in the labour market;(ii) many of the important shocks that have hit the UK labourmarket over the past 25 years have been persistent; and (iii)the persistence of the shocks is complementary to the persistenceof the lagged adjustment processes in generating movements ofUK employment.     

What Happened to European Unemployment?

Summary  Many academic papers were still being written on mass unemployment in Europe. While, unemployment in the EU15 was falling dramatically. Not only academics, but also European workers at large did not seem to appreciate these labour market developments. I offer two explanations for this puzzling deterioration of workers perceptions of the labour market in spite of disappearing unemployment: (i) labour market risk increased, and (ii) employment growth occurred at the cost of stagnating labour productivity. This means that the new labour market offers a worse risk-return combination. Strategies to address these issues are discussed in the final section of the paper. This paper provides an extended version of the first Willem F. Duisenberg Lecture, held at the University of Amsterdam on February 28, 2008. I am particularly grateful to NIAS for this opportunity and to Petry Kievit for having greatly improved my English.     

The Recent Performance of the UK Labour Market

We consider both the overall macroeconomic performance of theUK labour market since 1997, as well as some of the underlyingmicro problems, particularly those facing unskilled workers,On the macro front, we have seen unemployment decline to itslowest level for a generation without excessive inflationarypressure. The main factors behind this decline in equilibriumunemployment stem from actions taken by the previous government.Changes introduced in the labour market since 1997 are likelyto have only small effects on equilibrium unemployment. Underlyingthis favourable aggregate labour-market performance are seriousproblems facing unskilled men who have seen dramatic increasesin their unemployment and inactivity rates, concentrated particularlyin Wales and the northern regions of Britain. The policy responsesince 1997 has focused on encouraging the unskilled into work(the New Deal) while simultaneously raising the rewards forworking (the minimum wage, tax credits). These policies havehad a positive impact on youth employment and have significantlyreduced child poverty. So far, however, existing policies donot seem likely to have a serious impact on the high levelsof worklessness among unskilled men.     

Unemployment and Food Insecurity in Urban Ethiopia

Although unemployment is often associated with food insecurity, the paths through which it leads to food insecurity is less explored. This study investigates the effects of unemployment on food insecurity based on data collected from 410 randomly selected households in Addis Ababa and the Munessa district of Arsi Zone. Binary logistic regression was used to analyze the data. The results show that 55.9 percent of the respondents were unemployed and only 12.4 percent of the households were food secure. The prevalence of food insecurity was higher among households headed by unemployed persons. Education and economic factors are the mechanisms through which unemployment leads to food insecurity. Lack of education reduces the chance of employment and the quality of jobs engaged in whilst the economic path to food insecurity is partly related to the inability of poor households to cope with soaring food prices and seasonal unemployment. Thus, increasing employment opportunities through pro‐poor measures is a means to enhance human capital development that helps the people take advantage of the labour market and improve the economic status of households, ultimately leading to ensuring food security.     

Hiring and Separation Rates Before and after the Arab Spring in the Tunisian Labour Market

We seek to explore the hiring and separation rates in Tunisia before and after the Arab Spring based on quarterly business level data for 503 firms over the span of January 2007 to December 2012. Furthermore, we examine whether employers are willing to dismiss older workers to trigger an effective increase in mobility that will open new opportunities for the youth community. We build our analysis upon six main empirical models to study employment decisions reflected by major indicators such as the number of hiring, number of separations, total employment effects, male‐female ratio, age cohorts, labour mobility and net employment. The results show that the Arab Spring has created structural unemployment trends. In addition, we note that the 2008 global turmoil has fostered the firing level of employment. Our conclusions also indicate that the response of Tunisia's government to high unemployment rates caused by the financial meltdown in 2008 and the events in 2011 was not sufficient to remove the attached lingering effects that still distress the country's labour market. In addition, our findings emphasize the significant challenges faced by Tunisian youth that could be mitigated by efficient policy actions to incentivize training and development geared towards the private sector.     

Labour market dimensions of poverty in Indonesia

This paper focuses on labour market issues relevant to poverty alleviation. Patterns of participation, unemployment and employment are examined among the poor compared with the non-poor in general, among urban and rural households, and among various socio-demographic groups. Using data from the 2002 National Socio-Economic Survey, the paper finds that low participation in the workforce and high unemployment, while important, are less closely related to poverty status than expected, especially among spouses of household heads. However, sector of employment and underemployment are closely associated with poverty, especially for those in informal jobs in urban areas; in rural areas, the poor are heavily concentrated in agriculture. Among the poor, young people and females are more likely to be underemployed and to work in agriculture than prime-age workers. The data suggest that labour market policies that tend to protect those in formal sector employment are unlikely to reduce poverty much, if at all.     

Utilising a Demand-led Approach in a Local Labour Market

Traditional labour market activation policies have tended to be focused on labour supply and improving the opportunities for new entrants or re-entrants to obtain appropriate paid employment. This emphasis was encouraged in the 1980s and 1990s by shifts in the location and nature of employment (deindustrialisation), growing and persistent levels of unemployment and policy concerns with labour market disadvantage. More recently, the need to ensure international competitiveness, often by minimising local labour costs and enhancing labour flexibility, has been accompanied by a concern amongst employers at the impact of skill shortages. One response has been to shift the policy focus from supply to demand, essentially by seeking to understand the changing nature of local labour demand and by developing appropriate labour market initiatives. This paper analyses the case study provided by a labour market initiative in a regional labour market in New Zealand to assess the utility of such an approach. The Waitakere Employment and Skills Project (WESP) is a collaborative approach to labour demand, involving a number of economic development and local/national government agencies, as well as a university research team (including the author).     

Is there a trade-off between the employment and wages of unskilled African South Africans?

The possible trade-off between employment and wages has characterised most of South Africa’s labour market debates, particularly with regards to decent wages versus unemployment. In this article we explore the relationship between labour market earnings and the level of employment among African birth cohorts using labour force data from 1997 to 2011. We find that the association between an increase in the proportion of unskilled employed in a birth cohort and earnings is mediated by the sector of employment. While some sectors exhibit the expected negative association, there is a robust positive relationship between the first two quartiles of the earnings distribution within birth cohorts and the proportion of the birth cohort who are employed in unskilled occupations in the manufacturing and trade sectors. Because a range of market forces determine this relationship, further research is needed to unpack the reasons for such varied outcomes in order to better inform the debates on labour market interventions like the proposed National Minimum Wage and to appreciate the potential impact of such policy interventions on wages and employment.