Is a Risk Index Approach to Unemployment Possible?

This paper examines the ways that productivity, personal characteristics such as birthplace and gender, structural factors and labour market history impact on the distribution of the burden of unemployment. It is shown that labour market history is a major explanator of unemployment outcomes in the Australian labour market. The results from the empirical analyses of unemployment outcomes are used to identify individuals at risk of being unemployed. When individuals classified as at risk of being unemployed are followed through time, it is found that they spend considerable time looking for work and have short working spells. This suggests a risk index approach may have considerable merit as a way of identifying the relative difficulty individuals experience in the labour market.     

The social costs of unemployment: accounting for unemployment duration

This article contributes to the literature on unemployment and well-being by investigating the linkage between personal life satisfaction and a macroeconomic indicator of the duration of unemployment. Using data for more than 50?000 individuals in 10 European countries, 1992–2002, we find that the social costs of unemployment, in terms of general unemployment's impact on life satisfaction, relate significantly and to a considerable extent to unemployment duration. It is thus not just the risk of becoming or staying unemployed that people worry about, but especially the prospect of staying long-term unemployed. This fear affects employed and unemployed people alike. Our findings provide a strong point for focusing labour market policies on long-term unemployment, in addition to considerations of human capital depreciation.     

Sectoral shifts and unemployment persistence

This paper deals with possible explanations of unemployment persistence within a sectoral approach to the Austrian labour market. First the concept of unemployment persistence is specified in terms of the time series properties of the unemployment rate. Sectoral job gains and job losses form the labour market flows in this approach. The standard matching model is replaced then by a model of the competition between the unemployed and new entrants in the labour market for new jobs as an ‘adding up’ demand system of the AIDS type. The estimations of different system specifications indicate, that the sectoral structure of job gains plays a role in the competition mechanism between unemployed workers and new entrants.     

Labour market transitions and unemployment duration: Evidence from Bulgarian and Polish micro-data1

The segmentation of the labour market is one of the most striking characteristics of the transition process in Central and Eastern European countries. Not only do the young, unskilled workers and women face a high risk of unemployment, but joblessness also varies significantly geographically. This paper sheds some light on labour market segmentation in transition countries by analysing individual records of individuals registered at the labour offices of two Polish regions (Warsaw and Ciechanov and two Bulgarian regions (Sofia and Botevgrad) over the initial three to four years of the transition to a market economy. The empirical results confirm the existence of highly selective firing and hiring processes in the Polish and Bulgarian labour markets. Overall, unskilled or poorly educated workers have the highest probability of becoming unemployed and remaining without a job for a long period of time. We also analysed the determinants of unemployment duration across regions and over time using a piece-wise constant hazard model with multiple destinations, i.e. employment and exit from the labour force. The results suggest that the unemployed with a high education and previous experience in the private sector have a higher probability of getting a new job, especially in the more dynamic labour markets, while those without previous work experience tend to stay unemployed for a longer period of time and often leave the labour market. The econometric results also suggest that the reforms of the unemployment benefit systems have produced important effects on unemployment flows.     

Modelling labour market dynamics with on-the-job search

A flow model of the Dutch labour market is used to calculate the effects of policy options which aim to enhance employment, especially at the lower end of the labour market. The model distinguishes between good and bad jobs, allows for endogenous wage formation and job creation, and describes the flows between these jobs so that job-to-job mobility and the vacancy chain is made endogenous. In the matching process employed job seekers with bad jobs compete with short-term and long-term unemployed for the filling of vacancies for good jobs. In each period part of the good and bad jobs are destroyed which results in inflow into unemployment. The model explicitly describes the flow of unemployed through the various duration classes of unemployment and it allows for negative duration dependence so that the escape probability from unemployment for long-term unemployed is smaller than for short-term unemployed. The model is used to simulate the effects of external shocks, such as structural productivity shocks. An impulse response analysis using the model is also conducted considering labour market policies which aims especially to enhance employment at the lower end of the labour market. In particular, the effects are analysed of measures subsidising the opening of bad jobs (jobs at the lower end of the labour market) and a rise in the productivity of a bad job as compared to a good job which can be achieved by changes in the tax system.     

Becoming unemployed and poor in Great Britain

In this study on Great Britain, we estimate the labour market and income process of prime-aged men simultaneously and control for spillover effects. Evidence is presented that the risk of becoming unemployed and poor increases with the duration of unemployment and decreases with the duration of employment. Moreover, the experience of poverty influences the labour market and income prospects negatively, though on a much smaller scale than does the labour market position.     

Labour Market Policies and Long-term Unemployment in a Flow Model of the Australian Labour Market

This paper develops a general equilibrium job matching model, which is used to assess the impact of active labour market policies, reductions in unemployment benefits and reductions in worker bargaining power on long-term unemployment and other key macro variables. The model is calibrated using Australian data. Simulation experiments are conducted through impulse response analysis. The simulations suggest that active labour market programs (ALMPs) targeted at the long-term unemployed have a small net impact and produce adverse spillover effects on short-term unemployment. Reducing the level of unemployment benefits relative to wages and worker bargaining power have more substantial effects on total and long-term unemployment and none of the spillover effects of ALMPs.     

The Role of Education vis-a-vis Job Experience in Explaining the Transitions to Employment in the Spanish Youth Labour Market

It is well known that young cohorts experience higher unemployment rates than their adult counterparts. However, it is less well known that more educated young cohorts may face higher unemployment rates than less educated ones. This seems to be the evidence in some OECD countries such as Spain and Italy. We use data on the Spanish labour market and estimate a duration model for young unemployed people. University graduates’ lack of job experience may explain this puzzling observation.     

The Youth Labour Market in Australia*

This paper uses unit record data from the 1985 Australian Longitudinal Survey to review the major features of the youth labour market. It is shown that education plays an important role in determining the incidence of unemployment, wages, hours of work and access to training opportunities. Analyses of labour market dynamics indicates that the probability of leaving unemployment falls off substantially as the duration of the unemployment spell increases. A major conclusion of the paper is that the longer term unemployed appear to be segmented from other labour market participants. An implication of this finding is that there b very little which the longer term unemployed can do at the margin to influence their success other than adopt the most productive method of job search.     

Effects of reintegration activities on the Dutch labour market,regarding several levels of education

In the Netherlands during the early nineteen nineties social security administration offices and labour exchange offices decided to co-operate. Goal of this cooperation is to support the reintegration of unemployed people into the labour market and to shorten the individual spells of unemployment. As a result of the cooperation information is available about levels of education of the unemployed. This article primarely focuses on the effects of reintegration activities on the duration of unemployment for different levels of education. Results of the analysis are compared with the human capital theory. Also the question is discussed whether within the framework of the cooperation persons with a higher level of education have shorter spells of unemployment. Finally there is an analysis of the effects of activities undertaken by the unemployed themselves to find a job. People with a university degree have significant longer spells of unemployment. The reintegration activities of the social security administration offices shorten unemployment durations significantly for this group only. Activities undertaken by the unemployed themselves shorten the spells of unemployment for lower educated people (only primary education) and for persons with higher general secondary/secondary/intermediate vocational education as highest completed education.     

THE LABOUR FORCE DYNAMICS OF THE MARGINALLY ATTACHED*

One of the most important measures of the state of the labour market is the unemployment rate. However, the standard definition of unemployment ignores an important group of people who are not employed but who want to work – the marginally attached workforce. The marginally attached are defined as those who are not employed, want to work but are not actively seeking work and therefore not classified as unemployed. The paper uses longitudinal data from the Survey of Employment and Unemployment Patterns (SEUP) to test whether the marginally attached are behaviourally distinct from the unemployed or those who are not attached to the labour force. We find that the labour force transitions of the marginally attached, on the whole, are between those of the unemployed and the unattached. Another finding is that the length of time over which the labour market dynamics are considered is crucial to our understanding of the labour market dynamics of the marginally attached. An implication of the findings of this paper is that a range of measures of potential labour supply should be considered, and that the measure used should depend on the specific question being asked.     

Shocked by therapy? Unemployment in the first years of the socio-economic transition in Poland and its long-term consequences

We examine the long-term implications of unemployment for material conditions and well-being using the Polish sample from the Survey of Health, Ageing and Retirement in Europe (SHARE). Retrospective data from the SHARELIFE survey are used to reconstruct labour market experiences across the threshold of the socio-economic transformation from a centrally planned to a free market economy in Poland. These individual experiences are matched with outcomes observed in the survey about 20 years later to examine their correlation with unemployment at the time of the transition. We find that becoming unemployed in the early 1990s correlates significantly with income, assets and a number of measures of well-being recorded in 2007 and 2012. Using plant closures to reflect exogenous changes to labour market status at the time of the transition, we are able to confirm the causal effect of unemployment on income and house ownership 20 years later, but find no evidence for a long-term causal relationship between unemployment and such measures of well-being as life satisfaction, depression and subjective assessment of material conditions.     

MONITORING THE LABOUR MARKET: A PROPOSAL FOR A COMPREHENSIVE APPROACH IN OFFICIAL STATISTICS (ILLUSTRATED BY RECENT DEVELOPMENTS IN FRANCE,GERMANY AND THE U.K.)1

This paper analyses the weakness in labour demand which appeared in 1973–78 in France, Germany, and the U.K. and attempts a comprehensive assessment of it. Hitherto, the situation in labour markets has usually been measured by official figures of the registered unemployed which tend to understate unemployment itself and neglect other dimensions of labour slack, such as reversal of previous migration flows or declines in labour force participation or in working hours which may contain highly significant cyclical movements cushioning unemployment. The report proposes the adoption of a more comprehensive concept for labour market monitoring, along lines already used in the annual reports of the German Institute of Employment Research. Such an approach presents advantages in economic and labour market policy analysis. A simplified form of the proposed monitoring tables is presented in Annex Tables F-1 to F-4, G-1 to G-4 and U-1 to U-4. They can be considered as a potential satellite to existing national accounts. It is also suggested that analysis of the degree to which labour potential is used be conducted on a regular basis. The possibilities of this approach are outlined in considerable detail in Section V and in the annex. The different dimensions of the use-of-potential account are summarised in Table 3. The report contains a review of the literature on the full employment rate of unemployment and its components. This is one of the major issues on which a judgement must be made in use-of-potential analysis. This review is presented in Section VI of the report. It emerges from the analysis that Germany had the biggest labour slack (8.6 percent of potential) in 1978 though its unemployment rate (3.8 percent of the labour force) was the lowest of the three countries.     

The effects of age and unemployment percentage on the duration of unemployment: Evidence from aggregate data

In this paper models for the duration of unemployment are estimated using aggregate data on incomplete unemployment spells. In particular the elasticities of the probability of leaving unemployment with respect to age and unemployment percentage are estimated. Special attention is paid to the time dependence of the re-employment probability and to the effect of omitted regressors. Because models are fitted for male and female unemployed separately, these groups can be compared. We find that their position on the labour market is different.     

Identification and dimension of the NAIRU

In this paper, we have re-examined the identification of the NAIRU and presented a well-defined reduced form for analysing the equilibrium unemployment rate, using a cointegrated VAR model. We have stated that the NAIRU estimates using the conventional reduced form (or Phillips curve) models are misleading since the natural rate of unemployment cannot be considered as a fixed point calling for the ceteris paribus assumption for all the data involved. This implies that the NAIRU estimates are unable to provide valuable information on the labour market status.     

A model of female labour supply in which supply is dependent upon the chances of finding a job

In this paper, we extend a model of female labour supply, by considering the impact of the local labour market. Thus, in our model, a woman supplies her labour if she has both made the decision to participate and found a job. This extension is of particular importance in times of high unemployment when discouraged worker effects will be at their strongest. We also consider the contribution of such a model to the debate concerning the labour supply of women married to men who are unemployed.     

To search or not to search? The effects of UI benefit extension for the older unemployed

In Finland the older unemployed can collect unemployment insurance benefits until retirement, while the entitlement period for younger groups is two years. In 1997 the eligibility age of persons benefiting from extended benefits was raised from 53 to 55. This paper takes advantage of this quasi-experimental setting to identify the effect of extended benefits on transitions out of unemployment among the older unemployed. We apply a competing risks version of a split population duration model to account for multiple exit routes and the possibility that some of the older unemployed may not be active in the labour market due to pension rules. Our finding is that roughly half of the unemployed with extended benefits withdraw from job search.     

Estimating the relationship between labour market tightness,unemployment insurance benefits and union election activity

Using detailed data from the US National Labor Relations Board, we find labour market tightness, defined as the ratio of job vacancies to the number of unemployed, has a positive relationship with the likelihood of voting in favour of union representation. Specifically, a 1 SD increase in labour market tightness increases Vote Share in favour and the likelihood of union certification by roughly 1.5% and 3%, respectively. We also find that length of unemployment insurance benefits has a positive relationship with Vote Share in favour. Taken together, these results suggest that workers are more comfortable engaging in pro-union election behaviours when exogenous conditions, like labour market tightness and unemployment insurance benefit duration, shift in a way that more favourably insulates them from unemployment and income risk.     

Work incentives and other effects of the transition to social assistance: Evidence from the Slovak Republic

In this paper we investigate whether the potential disincentive effects of the Slovak benefit system have an actual meaning. Using data from subsequent labour force surveys we study the determinants of the outflow from unemployment to a job and the determinants of the outflow to out of the labour force. We find that single unemployed, highly educated unemployed and unemployed living in the capital Bratislava have higher exit rates both to a job and to out of the labour force. The characteristic with a distinctly different effect on both exit rates is the previous labour market position We also find that there are fluctuations in the hazard rate over the duration of unemployment. However, these fluctuations are not very informative. The direct indicators of the type of unemployment benefit do not affect the exit rates, neither do the indirect indicators like, for example, the presence of young children. Although there are potential disincentive effects in the Slovak benefit system we find no evidence that these potential effects materialise.