EMPLOYMENT DYNAMICS OF IMMIGRANTS VERSUS NATIVES: EVIDENCE FROM THE BOOM‐BUST PERIOD IN SPAIN, 2000–2011

This article studies whether the durations in unemployment and employment for immigrants and natives respond differently to changes in economic conditions and to the receipt of unemployment benefits. Using Spanish administrative data for the period 2000–2011, we estimate multi‐spell duration models that disentangle unobserved heterogeneity from true duration dependence. Our findings suggest that immigrants are more sensitive to changes in economic conditions both in terms of unemployment and employment hazards. The effect of the business cycle is not constant but decreases with duration at a higher rate among immigrants. We provide evidence that the higher job separation rates and lower capital‐labor complementarity of immigrants are mechanisms that are possibly compatible with these results. We also find evidence of a disincentive effect of unemployment benefits on unemployment duration, which is stronger for immigrants, but only at the beginning of the unemployment spell, especially under good economic conditions. Finally, unemployment benefits increase job match quality only for native workers with temporary contracts. (JEL J64, J61, C23, C41, J65)     

Unemployment duration and personality

This paper focuses on the role personality traits play in determining individual unemployment duration. We argue that a worker’s job search intensity is decisively driven by her personality traits, reflected in her propensity to motivate and control herself while searching for a job. Moreover, personality traits, in as far as they can be signaled to a potential employer, may also enhance the probability of receiving and accepting a job offer.For our econometric duration analysis, we use the well-accepted taxonomy “Big Five” to classify personality traits. Based on individual unemployment data taken from the German Socio-Economic Panel (SOEP) our empirical findings reveal that the personality traits Conscientiousness and Neuroticism have a strong impact on the instantaneous probability of finding a job, where the former has a positive effect and the latter has a negative effect. The direction of the effect on the subsequent employment duration is the opposite. We do not find any significant effects of the personality traits Extraversion and Agreeableness on the duration of unemployment. The personality trait Openness eases finding a job only for female unemployed workers and workers with migration background.     

Gender Differences in Unemployment Dynamics and Initial Wages over the Business Cycle

Using administrative data from Spanish Social Security for the period 2002–2013, we explore differences between unemployed men and women in: their probabilities to find a job, their initial wages if they find a new job, and the likelihood to fall back into unemployment. We estimate bivariate proportional hazard models for unemployment duration and for the consecutive job duration for men and women separately, and decompose the gender gap using a non-linear Oaxaca decomposition. Gender differentials in labour market outcomes are procyclical, probably due to the procyclical nature of typically male occupations. While a higher level of education protects women in particular from unemployment, having children hampers women’s employment and initial wages after unemployment. There are lower gender gaps in the public sector and in high technology- firms. Decompositions show that the gender gaps are not explained by differences in sample composition. Indeed, if women had similar characteristics to men, the gender gap would be even wider.     

Job queues, discrimination, and affirmative action

If employers have different Becker-type discrimination coefficients for different demographic groups, then the implementation of affirmative action may have a differential impact on those groups. We estimate two vector autoregressive models of the U.S. economy, including the unemployment rates of four demographic groups. We find that a job queue existed before the implementation of affirmative action and that affirmative action changed the ordering of the job queue in manner that had a negative impact on nonwhite males. We find evidence that affirmative action may have increased the unemployment rate of nonwhite males by increasing their duration of unemployment.     

DO UNEMPLOYMENT BENEFITS AFFECT ON‐THE‐JOB SEARCH? EVIDENCE FROM LABOR TURNOVER BEFORE ESTABLISHMENT CLOSURES

We develop a job search model that predicts that potential job losers would reduce on‐the‐job search (OTJS) effort and job‐to‐job transitions before layoffs, in response to an increase in the potential duration of unemployment benefits (UB). To test this prediction, we exploit changes in the maximum potential duration of benefits in Germany to analyze how it affected labor turnover before establishment closings. The evidence supports the model prediction that workers with longer potential benefit duration are more likely to remain with their establishments until closure and to enter nonemployment. These findings indicate that the effects of UB on the OTJS decisions of potential job losers should be considered in the optimal design of the parameters of unemployment insurance systems. (JEL J63, J64, J65)     

Neighborhood effects of high unemployment rates: Welfare implications among different social groups

This study analyzes spillover effects of high unemployment rates on well-being using cross-sectional data for Germany. Context effects among the employed arise due to the informational character of high unemployment rates. Using data on job security perceptions as well as regional unemployment rates the paper shows that high unemployment rates cause negative externalities among the employed. In addition, subjective perceptions of job security depend on local labor market conditions indicating the informational value of employment data. For unemployed persons we cannot find any welfare gains owing to a social norm effect. Thus, the existence of a public bad is not more enjoyable the more people suffer from the public bad.     

The Influence of Temporary Employment on Unemployment Exits in a Competing Risks Framework

Using Spanish longitudinal data from the period 1992–2004, this paper examines labour market transitions of the newly unemployed in order to investigate the determinants of unemployment duration in a competing risks framework with four destination states: temporary employment, permanent employment, self-employment and inactivity. Special emphasis is placed on the influence of previous job variables. We find that individuals who become unemployed due to the end of a temporary contract are more likely to exit unemployment by finding another temporary job and less likely to exit through permanent jobs, self-employment or inactivity. However, long tenures in temporary jobs enhance the probability of finding a permanent employment. Moreover, the length of the previous job, when it terminates due to a layoff, hinders the probability of moving to employment (either permanent or temporary).     

Family challenges created by unemployment

The detrimental effects of job loss and unemployment are not limited to the unemployed worker but ripple out to affect those closest to him or her. These ripple effects most notably impact the unemployed worker’s family, including a spouse or partner and/or children. Previous research related to the impacts on marital or partner relationships and families and the particular effects of unemployment on children is explored. Financial or economic stressors and strain brought about by job loss; the effects of stress and reduced mental health among unemployed workers and their spouses; and protective resources for coping with job loss are also discussed. The impact on children, in particular their mental health, development, and educational/human capital attainment are outlined. Implications for future interventions and unemployment policy are highlighted.     

INVOLUNTARY, EMPLOYMENT IN CONTRACTS WITH RISKY JOB SEARCH

The implication of partially insurable job search risk for incentive compatibility in a standard contracting framework are explored. When unemployment spells provoke job search, workers face risk in spell duration and reemployment wages. When search effort is not variable, contracts including unemployment insurance will yield involuntary employment. When search effort is diminished by UI benefits, firms shift some compensation back to wages, increasing the relative attractiveness of employment. The analysis begins with a theorem on incomplete insurance by Imai, Geanakoplos and Ito [1981] for which a simple proof and economic intuition are provided.     

BAYESIAN INFERENCE FOR HIERARCHICAL AGE-PERIOD-COHORT MODELS OF REPEATED CROSS-SECTION SURVEY DATA

This study applies methods of Bayesian statistical inference to hierarchical APC models for the age-period-cohort analysis of repeated cross-section survey data. It examines the impacts of small sample sizes of birth cohorts and time periods and unbalanced data on statistical inferences based on the usual restricted maximum likelihood–empirical Bayes (REML-EB) estimators through Monte Carlo simulations. A full Bayesian analysis using Gibbs sampling and MCMC estimation is developed to assess the robustness of REML-EB inferences when this extra uncertainty is taken into account and the numbers of higher-level units are small. For a substantive illustration, it applies cross-classified random effects models to vocabulary test data from the General Social Survey (1974 to 2000). It is concluded that the decline in verbal ability for birth cohorts born after 1950 was correlated with the levels of newspaper reading and television watching. Avenues for future research on mixed APC models are discussed.     

Underemployment and depression: longitudinal relationships

We conceptualize employment status not as a dichotomy of working versus not working but as a continuum ranging from adequate employment to inadequate employment (involuntary part-time or low wage) to unemployment. Will shifts from adequate to inadequate employment increase depression as do shifts from employment to unemployment, and to what extent does prior depression select workers into such adverse employment change? We analyze panel data from the National Longitudinal Survey of Youth for the years 1992-1994 for the 5,113 respondents who were adequately employed in 1992. Controlling for prior depression, both types of adverse employment change resulted in similar, significant increases in depression. These direct effects persisted despite inclusion of such potential mediators as changes in income, job satisfaction, and marital status. Marital status buffered the depressive effect of both types of adverse change, but education and job dissatisfaction amplified the effect of unemployment on depression. Prior depression did not predict higher risk of becoming inadequately employed but did predict increased risk of unemployment, particularly for those with less education. These results confirm that both unemployment and inadequate employment affect mental health, and they invite greater efforts to monitor the extent and impact of underemployment.     

Reservation Wages and the Unemployment of Older Workers

Our purpose is to examine the level of reservation wages among older unemployed (45+), and investigate what happens to the level of reservation wages as the length of unemployment increases. Using data from questionnaires completed by unemployed, we examined the reservation wages of 364 individuals and asked whether they would be willing to compromise in terms of their occupation, profession or geographic location to find a job. 112 of the participants responded to two questionnaires over a three-month period to determine the changes in their expectations over time. Additionally, we conducted qualitative interviews with 10 unemployed. We found that older people experienced longer periods of unemployment, and had a greater willingness to reduce salary expectations. The study establishes an innovative connection between older unemployed, reservation wages and the duration of unemployment, showing that higher reservation wages among older unemployed is the cause of prolonging their unemployment.     

Job security and unemployment in an efficiency-wage model

Job security and its effects on unemployment are controversial issues. I investigate the effects of job security in an efficiency-wage model of unemployment. Though efficiency-wage ideas have wide appeal and provide strong foundations of involuntary unemployment, not much has been written about the ramifications of job security in these scenarios. I show that job security creates wage and unemployment effects when efficiency-wage aspects are relevant, because employment guarantees shift the burden of workers' effort attraction to the wage mechanism. These effects are further enhanced when workers have some bargaining power. My results, therefore, suggest a trade-off between employment stability and employment: High employment security leads to smaller employment (or larger involuntary unemployment). I thank Ron Oaxaca and participants at the W.E. Upjohn Conference on Unemployment Insurance for useful comments.     

MULTIVARIATE DECOMPOSITION FOR HAZARD RATE MODELS

We develop a regression decomposition technique for hazard rate models, where the difference in observed rates is decomposed into components attributable to group differences in characteristics and group differences in effects. The baseline hazard is specified using a piecewise constant exponential model, which leads to convenient estimation based on a Poisson regression model fit to person-period, or split-episode data. This specification allows for a flexible representation of the baseline hazard and provides a straightforward way to introduce time-varying covariates and time-varying effects. We provide computational details underlying the method and apply the technique to the decomposition of the black-white difference in first premarital birth rates into components reflecting characteristics and effect contributions of several predictors, as well as the effect contribution attributable to race differences in the baseline hazard .     

Unemployment classifications and subjective well-being

Further research on the impact of unemployment on workers and their families requires greater refinement and more precise measurement of the concept. While previous studies have indicated the effects of unemployment on a wide range of variables, such as health and well-being, many of these studies suffer from imprecision by conceptualizing unemployment too narrowly and by using too strict a dichotomy between currently employed and currently unemployed workers. This research effort attempts to broaden and refine the concept of unemployment by defining it in terms of two job dimensions: current employment status and previous job loss. Using this conceptualization, the authors find that current unemployment after other job losses may have more devastating effects on well-being than losing one's job for the first time. Similarly, among the currently employed, those who have lost jobs in the past may experience more emotional difficulties than those who have never lost their jobs.     

Unemployed fathers and their children: Implications for policy and practice

This paper reviews the literature on the family effects of unemployment in order to specify how changes in the economy might effect fathering during periods of unemployment. The purpose for doing so is to provide information to clinicians on how job loss effects family dynamics. This paper is organized around three variables that are seen as influencing the father and child relationship. These variables are: the father's reaction to job loss, the mother's reaction to job loss, and the characteristics of the child. The paper ends with a discussion of the policy and practice implications of the literature.     

The role and significance of endogenous firing costs in a matching model with endogenous job destruction

Traditional models of the labor market assume fixed firing costs. This paper explores the implications of variable firing costs, building this new assumption into a matching model with endogenous job destruction. The available evidence on the outcomes of cases brought to labor courts suggests that firing costs are negatively related with labor market tightness. In such a case, we may no longer invoke “rigidities” on labor markets as the cause of their poor performance. Our model yields three interesting results. First, labor markets may have multiple equilibria that cannot be Pareto-ordered; each with its own configuration in terms of average duration of unemployment and filled jobs, as well as employment protection. Second, the variability of firing costs produces a positive externality affecting the stability properties of these equilibria. Finally, the two externalities affect the efficiency of the social optimum, modifying the Hosios [Hosios, A.J., 1990. On the efficiency of matching and related models of search and unemployment. Review of Economic Studies 57, 279–298] condition. We use these results to interpret the recent history of European unemployment.     

Soziale Kontakte als weg aus der Erwerbslosigkeit

When the usefulness of social ties for the improvement of an individual’s labour market position is analysed, the unemployed are hardly ever considered. In this article it is shown how Granovetter’s “strength of weak ties”-theory (1973) can be modified to examine the likelihood of labour market entry of initially unemployed people with low incomes. Using longitudinal data of the German lowincome- panel (“Niedrigeinkommens-Panel”) 1998–2002, it is found that almost one third of the formerly unemployed respondents got their new job through social contacts. Event History Analyses show that a) the more strong social ties jobless have and b) the more heterogeneous their relationships are, the higher the probability that they find a job within the observed period. The significant positive effects of social network features also hold when well-known predictors for labour market performance such as duration of unemployment, health, education, gender, age and support by public employment services are controlled for.     

The Effect of Unemployment Insurance on Temporary Help Services Employment

A model with fixed effects and controls for state-specific linear time trends is developed to analyze the influence of state unemployment insurance taxes on temporary help services employment using state level panel data from the Bureau of Labor Statistics’ Quarterly Census of Employment and Wages. Prior research has shown that imperfect experience rating of unemployment insurance taxes increases temporary layoffs and that, conversely, more extensive experience rating leads to a decrease in temporary layoffs. The current analysis demonstrates that more extensive experience rating increases temporary help services agency-intermediated temporary employment. To the extent that the increase in temporary help services employment represents a substitution of temporary help services jobs for traditional direct hire jobs, it implies a negative effect on job quality. Steps to address low unemployment insurance recipiency rates by temporary help services workers may alleviate the impact of unemployment insurance tax structures on temporary help services employment.     

Befristete Beschäftigung: Chance oder Risiko?

The paper investigates whether increased labor market flexibility leads to a reinforcement of the existing segmentation of the labor market or whether it is dismantling the barriers in the labor market. Using spell data (employment and unemployment periods) from the German Socio-economic Panel (GSOEP, time period: 1984–1999) both determinants of fixed-term contracts and their consequences (renewed temporary employment, unemployment) are investigated with the help of random-effects logit-models. The results show that respondents’ characteristics (amount and type of human capital, formerly experienced periods of unemployment), structural variables (branch, firm size), and occupational characteristics (position, marginal employment) are influencing the risk of getting a temporary job. Furthermore it becomes evident that fixed-term contracts are increasing the risk of getting a temporary job again or of becoming unemployed after termination of the temporary job. These results show that fixed-term contracts above all are part of the secondary labor market, and that they especially have negative consequences for the employees in this segment. On the other hand fixed-term contracts can be seen as a chance in the way that they offer at least an alternative to unemployment. Hence, a too narrow evaluation of temporary employment would be too simplistic.