The British youth labour market in crisis

The paper argues that the British youth labour market is in a crisis with employment falling, unemployment and long-term unemployment rising rapidly. In section one the paper reviews the evidence and, in particular, looks at alternative measures of unemployment duration. Section two discusses various explanations for the growth of youth unemployment and dismisses the view that it is due to the increase in relative wages of young people. It is argued that the youth labour market has several distinctive features that make it more sensitive to cyclical fluctuations. Section three takes a brief look at various policies to alleviate the problem. Section four concludes the paper stressing that a reflation of the economy is necessary to make a significant impact on youth unemployment.     

Unemployment,long-term employment relations and the determination of unit labour cost growth in US manufacturing industries

This paper examines the effect that unemployment and long-term employment relations exert on the determination of unit labour costs. The paper proceeds in three sections. Section one analyses the relationship between labour market conditions and unit labour costs by developping a simple model of a firm that relies upon dismissal threats to elicit work effort. The comparative static properties of this model suggest that a tightening of labour markets may result in an increase in unit labour costs. In addition, it is argued that the labour market disequilibrium that occurs at full employment levels of unemployment will likely result in an increase in the growth rate of unit labour costs. The second section of the paper reviews diverse theories of long-term employment relations (LTERs), each of which suggest that the presence of LTERs ought to reduce the effect that labour market conditions exert on unit labour costs. The third section of the paper presents empirical estimates of the effect unemployment and LTERs exert on unit labour costs. The central empirical findings can be briefly summarized. First, movements towards full employment increase the growth rate of wages, reduce the growth rate of labour productivity and increase the growth rate of unit labour costs. Secondly, where long-term employment relations are prevalent, the effect of unemployment on wage, labour productivity, and unit labour cost growth is diminished. The paper concludes by discussing the implications these findings have for effort regulation models and the macroeconomic foundations of microeconomic labour market structures     

马克思就业理论与西方就业理论比较研究

对中国失业的研究已是无法回避的一个问题,而寻求理论支持则是进行研究的一个重要方向。检索就业理论的资料,可以发现最有代表性的就业理论是马克思就业理论和西方就业理论。因此,对这两种就业理论加以比较,理解它们形成的不同背景和分析路径,对比它们不同的内容体系,可以发现它们其实发掘的只是失业的一个方面,遵循的是失业发生、发展的一条路径。因此,在比较中更全面地理解失业,并且可以为研究我国的失业提供某些启示。     

Equilibrium Unemployment in Australia: Concepts and Measurement*

This paper reviews some concepts of equilibrium unemployment and outlines the fundamental difficulties facing any attempt to produce estimates of the equilibrium rate of unemployment. It develops simple quasi-reduced form models of aggregate unemployment based on rival non market-clearing and market-clearing theories. These equations form the basis of an empirical model of aggregate unemployment in Australia since 1969. The empirical evidence suggests that most of the observed increase in unemployment can be attributed to cyclical rather than structural-frictional factors. However, stylized explanations of cyclical unemployment exclusively along the lines of Keynesian, Classical or equilibrium search theory are found inadequate.     

Wage,productivity and unemployment: microeconomics theory and macroeconomics data

We confront microeconomics theory with macroeconomics data. Unemployment results from two main micro-level decisions of workers and firms. Most of the efficiency wage and bargaining theories predict that over the business cycle, unemployment falls below its natural rate when the worker’s real wage exceeds the reservation wage. However, these theories have weak empirical support. Firm’s decision predicts that when the worker’s real wage exceeds the marginal product of labour (MPL), unemployment increases above its natural rate. Accounting for this microeconomic decision helps explain almost all the fluctuations of US unemployment.     

Long‐Term Unemployment and the Great Recession: Evidence from UK Stocks and Flows

Long‐term unemployment more than doubled during the United Kingdom's Great Recession. Only a small fraction of this persistent increase can be accounted for by the changing composition of unemployment across personal and work history characteristics. Through extending a well‐known stocks‐flows decomposition of labour market fluctuations, the cyclical behaviour of participation flows can account for over two‐thirds of the high level of long‐term unemployment following the financial crisis, especially the procyclical flow from unemployment to inactivity. The pattern of these flows and their changing composition suggest a general shift in the labour force attachment of the unemployed during the downturn.     

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 European unemployment problem: its cause and cure

The stubbornly high unemployment experienced by European countries since the mid-1970s have led to a major reconsideration of the natural rate paradigm. Traditional theories which describe movements of unemployment as fluctuations around a moving natural rate have been challenged by hysteresis theories. The question arises how one can discriminate between these competing theories. To this end, we estimate a time-varying parameter model of the unemployment rate for the US, UK, Germany, and France. The parameters of the model were estimated jointly by maximum likelihood estimation using the Kalman filter algorithm. When the moving natural rate model is tested against the alternative of a unit root process, the unit root hypothesis is resoundingly rejected. Among the determinants of the natural rate institutions that alter labour market incentives for workers appear to have been more important than institutions that affect labour demand.     

Banking crises,labor reforms,and unemployment

Using a sample of 97 countries spanning the period 1980–2008, we estimate that banking crises have, on average, a large negative impact on unemployment. This effect, however, largely depends on the flexibility of labor market institutions: while in countries with more flexible labor markets the impact of banking crises is sharper but short-lived, in countries with more rigid labor markets the effect is initially more subdued but highly persistent. These effects are even larger for youth unemployment in the short term, and long-term unemployment in the medium term. Conversely, large upfront, or gradual but significant, comprehensive market reforms have a positive impact on unemployment, albeit only in the medium term.     

The Impact of Labour Market Reforms and Economic Performance on the Matching of the Short‐term and the Long‐term Unemployed

As a reaction to high and persistent unemployment in Germany, the largest labour market reforms in post‐war history were implemented between 2003 and 2005. We analyse the impact of the reforms and its coincidence with an economic expansion on the efficiency of matching out of unemployment. Especially focussing on searcher heterogeneity, we estimate a system of stock‐flow matching functions for short‐term and long‐term unemployment (three‐stage least squares) on the basis of administrative data. In sum, the reforms increased matching efficiency for both groups, but the effect was larger for the long‐term unemployed. The interaction of reforms and economic expansion, however, was not influential.     

Subjective well‐being and aggregate unemployment: further evidence

According to the literature, individual well‐being is negatively related to aggregate unemployment. This study examines whether the distribution of aggregate unemployment by duration affects well‐being, in addition to the level of unemployment. Different explanations are provided to indicate how the shares of short‐term (up to 3 months) and long‐term (more than 1 year) unemployed people could affect the well‐being of the employed and unemployed. Using data from almost 300,000 individuals from 11 EU countries, we find significant effects of both shares on life satisfaction. Among the unemployed, for example, we find a U‐shaped effect of the distribution of aggregate unemployment by duration on subjective well‐being, which compensates to some extent for the negative effect of the unemployment rate.     

Unemployment Benefits, Contract Length and Nominal Wage Flexibility

In a bargaining model, we show that a decrease in the unemployment benefit level increases not only equilibrium employment, but also nominal wage flexibility, and thus reduces employment variations in the case of nominal shocks. Long‐term wage contracts lead to higher expected real wages and hence higher expected unemployment than short‐term contracts. Therefore, a decrease in the benefit level reduces the expected utility gross of contract costs of a union member more with long‐term than with short‐term contracts, thereby creating an incentive for shorter contracts. Incentives for employers are shown to change in the same direction.     

Unemployment hysteresis and the natural rate of vacancies

On the basis of macro data from 10 OECD countries, I find that the job vacancy rate outperforms the unemployment rate as a reliable measure of domestic inflationary pressure. Moreover, while the rate of unemployment affects inflation primarily through its difference, the vacancy rate operates through a level effect as well. In most countries, a unique equilibrium rate of vacancies seems to coexist with a drifting equilibrium rate of unemployment. I show that this result is consistent with existing theories of unemployment hysteresis that focus on depreciation of human capital and search activity during unemployment spells. First version received: October 1997/Final version received: June 2001     

Critique of zero population growth theory

This is a critique of widely held theories concerning the relationship between population growth and economic development. "The central purpose of this paper is to critically analyse the zero population growth movement. The hypotheses of Neo-Malthusian theory or Zero Population Growth and the concept of Population Bomb will be briefly stated in Section 1. Section 2 will discuss the theory of demographic transition. Section 3 will critically examine the validity of the Neo-Malthusian theory of population growth. Our conclusions and recommendations will be stated in Section 4." The author's main contention is that overconsumption in developed countries is the major cause of the deterioration of the environment rather than overpopulation in the developing countries.     

A Sceptical View of Australia's Current Account and Debt Problem

This article puts forward the view that there are considerable benefits to be gained from foreign borrowing and that policy actions of a macro nature should be diverted towards internal balance.
In Section 2 a brief history of the evolution of approaches to the current account is set out. Recent theories imply that the current account indicates the optimal amount of foreign borrowing both by firms and households, at least with zero fiscal deficits. The present conventional Australian approach to current account issues (Section 3) would seem to be based on theories which were relevant in an era of pegged exchange rates.
In Section 4 it is suggested not only that the current account should not be a target of macroeconomic policy, but that any microeconomic policy directed at reducing it should be justified by the existence of externalities in the borrowing/debt process.     

Squandering European Labour: Social Safety Nets in Times of Economic Turbulence

This paper reviews the argument that high long‐term unemployment in Europe is caused by generous social safety nets in times of economic turbulence. We report on the empirical evidence of a more turbulent economic environment and present the theoretical arguments that establish a link between turbulence and high unemployment. We conclude that a cure to the European unemployment problem must entail a reform of the unemployment insurance system so that benefits decline over the unemployment spell. If the social consensus in Europe makes it difficult to implement declining benefits, we suggest that a complementary way of providing incentives for the unemployed would be to reduce their leisure by imposing work requirements.     

Hysteresis and sluggishness in Portuguese unemployment, 1977–88

The phenomenon of unemployment persistence led to the development of alternative theories of unemployment. Among these the ‘hysteresis’ concept by Blanchard and Summers (1987) received a wide interest. Based on this notion we developed a generalized model that nests Blanchards and Summers' theory. Using this framework we conducted an empirical investigation for the Portuguese labour market (1977–88). The results obtained point towards the existence of labour demand sluggishness, wage inertia and unemployment hysteresis. The model also suggests the existence of a rather inelastic labour demand curve.     

The NAIRU reconsidered: why labour market deregulation may raise unemployment

According to the mainstream theory of equilibrium unemployment, persistent unemployment is caused mainly by ‘excessive’ labour market regulation, whereas aggregate demand, capital accumulation and technological progress have no lasting effect on unemployment. We show that the mainstream non‐accelerating inflation rate of unemployment (NAIRU) model is a special case of a general model of equilibrium unemployment, in which aggregate demand, investment and endogenous technological progress do have long‐term effects. It follows that labour market deregulation does not necessarily reduce steady‐inflation unemployment. Theoretically, if the decline in real wage growth claims owing to deregulation is smaller than the ensuing decline in labour productivity growth and in the warranted real wage growth, then in that case steady‐inflation unemployment may increase. Empirical evidence for 20 Organisation for Economic Cooperation and Development (OECD) countries (1984–1997) indicates that the impact of labour market deregulation on OECD unemployment is zero, and possibly negative (causing a higher rate of unemployment).     

Conditions For Successful Technology Policy In Developing Countries—Learning Rents,State Structures,And Institutions

The paper develops an analysis of the economic, political, and institutional conditions for successful design and implementation of technology policy in developing countries. After a brief introduction (Section I), we discuss contending economic theories of technological change and technology policy (Section 2). It is concluded that, despite many pro-market arguments, market imperfections inherent in the process of technological change make the creation of learning and innovation rents by the state potentially very beneficial, especially in developing countries. The next section (Section 3) analyses the political and institutional factors that determine how effectively such rents can be created and managed. After an assessment of technology policy record in developing countries (Section 4) we discuss how the scope of such policy is affected by the recent changes in domestic and international policy contexts such as domestic deregulation and the emergence of a ‘liberal’ world order represented by the WTO (Section 5). The paper ends with a brief conclusion (Section 6).     

Wages,selectivity, and vacancies: Evaluating the short-term and long-term impact of the minimum wage on unemployment

Using a circular matching model (Marimon R, Zilibotti F. Unemployment vs. mismatch of talents: Reconsidering unemployment benefits. Economic Journal 1999;109; 266–291), where the wage setting is similar to Weiss (Weiss A. Job queues and layoffs in labor markets with flexible wages. Journal of Political Economy 1980; 88; 526–538), we reexamine Card and Krueger's (Card, D., Krueger, A. Myth and Measurement, the New Economics of the Minimum Wage. Princeton University Press; 1995) intuition on the impact of the minimum wage on unemployment. In the short term, a rise in the minimum wage increases the employment level by making firms less selective. In the long term, numerical simulations show that, despite the reduction of job creation, introducing a minimum wage may lower unemployment as soon as workers and jobs are sufficiently differentiated. However, beyond some limit, the wage increase raises unemployment whatever the degree of differentiation is.