Spell incidence, spell duration and the measurement of unemployment

The proportion of the population out of work is an unsatisfactory measure of unemployment because it is indifferent to the way in which a given amount of unemployment time is distributed across the population. This paper offers a new way of measuring unemployment which takes account of both the frequency and duration of unemployment spells. The proposed unemployment index may be interpreted as the ‘welfare equivalent’ period of unemployment, and decomposes into the product of three components: a spell incidence factor, a duration factor, and the average unemployment rate.     

The measurement of unemployment using completed durations: evidence on the gender gap in unemployment in France

This paper examines how unemployment can be measured in a normative fashion - taking into account the mean and inequality of spell lengths - and how the extent of unemployment can be estimated from cross section data of the type found in labour force surveys. The issue is not straightforward since in these surveys completed durations of unemployed individuals are not observed yet they constitute the basis for calculating the kind of index that has been proposed to measure the extent of unemployment in a way that goes beyond the unemployment rate. The index proposed by Shorrocks has robust normative foundations and has an equivalent representation in terms of average complete duration and the density of completed durations. Building upon earlier work applied in the United States for estimating the average completed duration, we present a method that enables the index to be calculated based on an estimate of the density of completed durations. The approach is illustrated in the context of comparing male-female unemployment differences in France, where historically female unemployment has been higher than that of males.     

The duration of unemployment in the construction industry

This paper examines the duration and frequency of unemployment contingent on personal characteristics using multinomial logit techniques. Both are important, since unemployment is the product of the duration and frequency of unemployment. The key result of this paper is that union and nonunion unemployment experiences are very different. Nonunion construction workers’ duration and frequency experiences depend on personal characteristics. In the union sector, in spite of rules which appear to favor experienced workers, duration experiences do not differ greatly by demographic group; only the probability of unemployment varies with personal characteristics. The report was prepared for the Employment and Training Administration. U.S. Department of Labor, under Research and Development Grant No. 91-42-77-33. Since grantees conducting research and development projects under Government sponsorship are encouraged to express their own judgment freely, this report does not necessarily represent the official opinion or policy of the Department of Labor. The grantee is solely responsible for the contents of this report. I have benefited from comments by Robert E. Hall, Franklin M. Fisher, Lester C. Thurow, James Medoff, Dennis Carlton, and especially Jerry Hausman. James Medoff supplied the CPS tape used in the study. Martin VanDenburgh gave expert programming advice.     

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)     

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)     

The Effect of Unemployment Duration on National Suicide Rates: A Time Series Analysis, 1948–1982

Abstract

Periods of increasing unemployment are associated with increases in suicide rates. Unemployment increases suicide among laid off persons, new entrants, reentrants to the labor market, and groups indirectly affected—the underemployed, those fearing unemployment, the families of the unemployed, and even those suffering from falling real wages, a condition endemic in major recessions. The present investigation deals with a neglected unemployment measure: the duration of unemployment, a condition known to be critical to the generation of extreme behavior such as suicide. Controls are introduced from alternative perspectives on the problem including the incidence of divorce. The data analyzed refer to yearly measures of the variables over a 31 year period. The results of a Cochrane-Orcutt iterative regression analysis indicate that the greater the duration of unemployment the greater the suicide rate. Using ex post forecasting techniques it is estimated that increases in unemployment during the Reagan administration have been associated with at least 929 additional deaths from suicide. The duration of unemployment increases suicide rates for both males and females. The model explains between 59 and 88 percent of the variance in suicide.     

Dynamic Discrete-time Duration Models: Estimation via Markov Chain Monte Carlo

Discrete-time or grouped duration data, with one or multiple types of terminating events, are often observed in social sciences or economics. In this paper we suggest and discuss dynamic models for flexible Bayesian nonparametric analysis of such data. These models allow simultaneous incorporation and estimation of baseline hazards and time-varying covariate effects, without imposing particular parametric forms. Methods for exploring the possibility of time-varying effects, as for example the impact of nationality or unemployment insurance benefits on the probability of reemployment, have recently gained increasing interest. Our modeling and estimation approach is fully Bayesian and makes use of Markov Chain Monte Carlo (MCMC) simulation techniques. A detailed analysis of unemployment duration data, with full-time job, part-time job and other causes as terminating events, illustrates our methods and shows how they can be used to obtain refined results and interpretations.     

Modeling Unemployment Duration in Slovenia using Cox Regression Models

This paper applies the semi-parametric Cox regression approach to model unemployment duration in Slovenia. The empirical analysis is based on a comprehensive dataset that consists of all unemployment spells in Slovenia from 2002 to 2005. The impact of the variables age, gender, level of education, and region on the hazard ratio is discussed. It takes longer for female and older unemployed persons to find a job and on average the duration of unemployment decreases with increasing level of education. Surprisingly, unemployed persons with a professional college degree or a bachelor’s degree are better off than unemployed persons with a master’s degree. A comparison of the Cox proportional hazards model and the Cox regression model with a time-dependent covariate reveals that the more appropriate model with a time-dependent covariate places greater emphasis on higher levels of education.

Who benefits from labor market institutions? Evidence from surveys of life satisfaction

This paper investigates the welfare effects of labor market institutions, placing an emphasis on how the institutions’ effects are differentiated by socio-demographic subgroups. We study how life satisfaction is affected by employment protection and the level and duration of unemployment benefit payments. Using data for almost 370,000 individuals in ten European countries, 1975-2002, we find that more employment protection and a higher benefit replacement rate increase the life satisfaction of the average citizen. At the subgroup level, different segments of the population are affected differently by the two categories of labor market institutions. While employment protection is valued especially by employed persons of intermediate age, it is less beneficial for women/housewives and for older persons. More generous unemployment insurance is valued especially by these latter subgroups and by the unemployed.     

A unionist’s perspective on the future of American unions

In summary, I do not see a major change in American unions over the next decade. The exception is further consolidation of national unions through mergers and affiliations which will change the makeup and increase the effectiveness of the unions involved. It behooves us all who love freedom and democracy to do what we can to assure strong and viable unions in America. We in the labor movement do not believe that we can have a free society and a high standard of living without free and effective unions. In this regard, I conclude with a statement made in 1945 by my first boss, Philip Murray, president of the United Steelworkers of America and the Congress of Industrial Organizations: “American democracy cannot survive in an atmosphere of insecurity, joblessness, and poverty. When people are at work at high wages, prosperity is continuous. To return to an era of low wages is to invite unemployment and catastrophe from which no segment of the population, no matter how apparently secure, will escape. We dare not allow mass misery and unemployment to overtake us again.”     

Self-Employment or Government Work? Blacks’ and Whites’ Responses to Long-Term Joblessness during the Great Depression

Investigations of survivalist entrepreneurship often fail to adequately examine displaced workers who suffer exceptionally long unemployment spells. The present study addresses this oversight by analyzing Census data on large northern cities during the Great Depression, exploring how unemployment duration is related to two presumably competing responses to joblessness: self-employment and government relief work. The analysis shows that among persons looking for work two years or more, blacks’ unemployment is positively associated with the odds of self-employment, whereas whites’ unemployment is positively associated with the odds of public emergency work. These findings accord with the theory that when resource-disadvantaged minorities face extraordinary labor market obstacles, they are more likely to become survivalist entrepreneurs than are majority-group members, who have a wider variety of options in the mainstream economy. Yet the results also imply that survivalist entrepreneurship was a viable option for only a small number of displaced black workers.     

Explaining differences in the political meaning of unemployment across time and space

This article is a first attempt at theorizing the differences in the political meaning of unemployment and how governments create these differences. It first reviews existing explanations about why unemployment is an especially pressing political threat to those in power. In lieu of a an existing literature on the sources of variation in this threat, the next section puts forward four alternative explanations based on related arguments about politics and the economy. These are the approaches of power resources, protest mobilization, deprivation, and ideology. Guided by the promises and pitfalls of these respective theories, the subsequent section argues for an alternative institutional-constructivist approach. Starting with the historical observation that the category of unemployment was invented alongside particular social institutions and employment practices, this approach seeks to explain how variation in these institutionalized practices is responsible for differences in the political salience of unemployment. The section that follows discusses how government policies can reconstruct the meaning of unemployment by reconfiguring the available set of institutional choices in the labor market and by designating what kinds of choices constitute involuntary joblessness. It is argued that “unemployment” is defined against institutionalized norms of what kinds of work constitute “employment.” Changes in the boundaries of the concept of unemployment come about through changes in the ways that governments hold certain kinds of work as exemplary while granting other forms of work lesser recognition. The final section considers how this reciprocal relationship between the construction of unemployment and employment both imposes political constraints for governments and creates opportunities. Governments face numerous conflicting incentives whether to expand or restrict the institutionalized definition of unemployment. While they must retain semblance with inherited conceptions of unemployment; they can redefine the problem of unemployment through the institutionalization of new solutions.     

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).     

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.     

HYSTERESIS IN A NEW KEYNESIAN MODEL

This paper provides a simple, tractable way of incorporating “hysteresis,” in which persistent unemployment takes on structural characteristics, into a macroeconomic model. Hysteresis is modeled as deterioration in labor market matching efficiency as the average duration of unemployment increases. This is embedded in a basic New Keynesian macro model. A decline in labor market matching efficiency would be consistent with the observed rightward shift of the Beveridge curve since the 2007–2009 recession. Hysteresis is shown to lead to larger and more persistent responses of the unemployment rate and unemployment duration to productivity, intertemporal preference, and monetary shocks. Hysteresis also generates an increase in the natural rate of unemployment. (JEL E24, J64, E32)     

Turkish Migrants and Native Germans Compared: The Effects of Inter‐Ethnic and Intra‐Ethnic Friendships on the Transition from Unemployment to Work

In this paper, we analyse whether having inter‐ethnic and intra‐ethnic friendships can be associated with a shorter duration of unemployment, comparing Turkish migrants and native residents in Germany. This allows us to examine the degree to which the returns from bridging and bonding social capital differ for the two groups. On the basis of the German Socio‐Economic Panel (GSOEP) data, we find that for native Germans, intra‐ethnic friendships shorten the duration of spells of unemployment, whereas inter‐ethnic friendships do not. For the Turkish migrants, inter‐ethnic friendships reduce the duration of unemployment, whereas intra‐ethnic friendships do not. In other words, only friendships with German natives facilitate the transition to employment, but in particular for Turkish migrants. This effect is largest for migrants with a low level of education.     

The effect of unemployment duration on national suicide rates: a time series analysis, 1948-1982

The relationship between unemployment and suicide in the United States is examined. Data for the period 1948 to 1978, primarily from the U.S. Public Health Service, are used to examine the effect of the duration of unemployment on suicide. "The results of a Cochrane-Orcutt iterative regression analysis indicate that the greater the duration of unemployment the greater the suicide rate. Using ex post forecasting techniques it is estimated that increases in unemployment during the Reagan administration have been associated with at least 929 additional deaths from suicide."     

On multidimensional indices of poverty

The contribution of recent “multidimensional indices of poverty” may not be as obvious as one thinks. There are two issues in assessing that contribution: whether one believes that a single index can ever be a sufficient statistic of poverty, and whether one aggregates in the space of “attainments,” using prices when appropriate, or “deprivations,” using weights set by the analyst. The paper argues that we should aim for a credible set of multiple indices rather than a single multidimensional index. Partial aggregation will still be necessary, but ideally the weights should be consistent with well-informed choices by poor people.     

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.     

Measuring disproportionality,volatility and malapportionment: axiomatization and solutions

The measurement of disproportionality, volatility and malapportionment often employ similar indices. Yet the debate on the issue of adequate measurement has remained open. We offer a formal and rigorous list of properties that roughly subsume those of Taagepera and Grofman (Party Polit 9(6):659–677, 2003). One of these properties, Dalton’s principle of transfers, is formalized in a manner that resolves the ambiguity associated with it in previous studies. We show that the cosine measure satisfies all the properties. We also show how the Gallagher index can be modified to satisfy all the properties. The cosine measure and the modified Gallagher measure are co-monotone.