Unemployment and the Composition of Labour Slack: An International Comparison

The present statistical apparatus allows us to construct a single indicator of the degree of non-utilisation of labour resources that mitigates the shortcomings of the traditional unemployment rate. This paper defines a method to measure aggregate labour slack, and applies it to post-1973 data for four countries: Canada, the Netherlands, Sweden and the U.S.A. The estimates take into account non-utilised labour resources due to unemployment, to changes in the number of hours actually worked and to changes in registered labour force participation. Since changes in and the manipulation of working time schedules on the one hand, and of labour supply on the other, have become more frequent over the last few decades, it is highly relevant to investigate international and intertemporal differences in the non-utilisation of labour resources by means of a ratio that accounts for these changes. Unemployment is ill-suited for this purpose, and therefore a labour slack estimate is constructed, which takes working time developments and changes in labour force participation into consideration. The estimate is cyclically more sensitive and more internationally comparable than the traditional unemployment rate.     

Inter‐temporal and Inter‐industry Effects of Population Ageing: A General Equilibrium Assessment for Canada

Abstract. This paper examines the inter‐industry and labour market occupational effects of future demographic changes in Canada, using a computable overlapping‐generations model. In addition to the impact of slower labour force growth, the model captures the shift in sectoral composition of final demand of older individuals. The simulation results indicate that the growth in real GDP per capita could decline by nearly one percentage point between 2006 and 2050. The results also suggest that the equilibrium unemployment rate is likely to decline by more than two percentage points in the long run. However, the impact varies significantly at the occupational level.     

Do Women Cause Unemployment? Evidence from Eight OECD Countries

ABSTRACT: In this paper the authors present the results of preliminary estimates on the effects of changes in the composition of labour forces throughout eight OECD countries during the period 1966-1986. The analysis proceeds in two steps. First, the effect of changes in the distribution of the labour force on group unemployment is computed. Second, the impact of this effect is combined with the direct effect of changes in the distribution of participation on total unemployment rates, to calculate a hypothetical unemployment rate which corresponds to what would have occured had there been no compositional changes. The paper challenges the thesis which sustains that alterations in the age-sex composition of the labour force have exerted an upward pressure on the aggregate unemployment rate.     

Unemployment Components in the G7 Countries

The increase in unemployment rates in the G7 countries is broken down into both labour supply and labour demand components. In no case is there a dominant source. Real GDP generally ranks first but does not account for more than a third of the overall changes. This finding shows that unemployment cannot be equated to negative employment since the labour force is generally increasing and volatile, mostly because of rising participation rates. Another reason why unemployment is not a reliable indicator of macroeconomic performance is that labour hoarding reduces employment response to output changes; this is especially true for Japan and Europe.     

Pathways to productivity improvement

A study of productivity in the Machine Tool industry has just been published by the Engineering Employers Federation (EEF). As a member of the Productivity Steering Group, information was available to one of the authors, in an unusually detailed and validated form for the twenty or so individual companies, (though they remain anonymous). It was thought worthwhile to apply methods developed in the Economics and Statistics Department of British Aerospace to this data in order to give pointers to the factors explaining productivity differences. The particular methods referred to were those of the Diagnostic Chart, though considerably simplified to match the data available, and multiple regression analysis. Particular care is necessary in applying the latter technique in productivity analysis if spurious results are to be excluded. The conclusions were as follows: the most favoured path to improved productivity is via increased turnover; changes in productivity are reflected mainly in changes in the ‘profit’ element of value added rather than in the labour cost element; the major factor distinguishing low from high productivity companies is an excess of the manual work force in relation to turnover; increased fixed assets favours increased labour productivity; increased commitment to R & D favours increased labour productivity; these conclusions are, of course, deduced from a study of the machine tool industry in particular, but may well be of applicability to other industries.     

Labour Markets and Organisational Change: Future Working Structures for an Ageing Work Force

Flexible manufacturing systems, team work with decentralisation of decision-making, integration of tasks and multiple allocation across functional barriers demand a skilled work force prepared for continuous learning and adaptation. It is common to see a younger, well-educated and trained work force as being required for such a production environment. A closer empirical look at most of the internal labour markets in this study shows that existing labour market structures do not match this image. Existing labour markets consist very often of an older (and ageing) labour force with relatively low skills and with resistance to continuous training. These structural features have, over the last ten years — despite the existence of costly early retirement measures and new entries into internal labour markets — not much improved, and in many cases have even deteriorated. While age-related exit measures have contributed to maintaining sound corporate cultures in offering socially cushioned exit options and have also prevented internal labour markets from growing older too rapidly, they have — in the “lean employment environment” of mature industrial sectors — not led to a sustained restructuring of internal labour markets. The ending of many of the age-related exit measures owing to their impact on public and company budgets could lead to a growing mismatch between the structure of demand and the structure of supply in internal labour markets. This could have negative effects on company performance and increase the probability of unemployment for workers if no proactive policies for managing the age problem are introduced. Such proactive policies might consist of appropriate age-related training, age-related flexible working time and work organisation patterns. This revised version was published online in July 2006 with corrections to the Cover Date.     

Empirical Analyses of Causal Relationships among Estimated Aggregate Unemployment Duration and Some Properly Chosen Economic Variables

ABSTRACT: The paper is concerned with estimating and analysing the duration of unemployment, that is the length of time people spend on average looking for work. The first issue of the paper is to estimate unemployment duration using data from the survey on labour force done quarterly in Italy by ISTAT, the National Institute of Statistics. The survey data on the duration of unemployment measure duration so far, that is the average length of unemployment spells in progress up to the date of the survey, but they don't provide any information about completed duration of unemployment experimented by people before finding a job or leaving the labour force. In order to estimate the average length of completed unemployment spells, we would have to use data on cohorts of people followed from the time of entry to the time of exit from the labour market. As longitudinal data is not available, the problem becomes rather complex. One way to get round this is to use data on flows to firstly estimate probabilities of leaving unemployment within a particular period. The available data refer to quarterly flows and yearly flows. This makes it possible to estimate short-term unemployment (less than six months) and long-term unemployment (more than twelve months). In another paper we have analysed the nature of the bias introduced by estimating short-term and long-term unemployment in the way we do, and we have come to the conclusion that the bias is approximately a constant, which can be very easily estimated and eliminated. The second issue of the paper is to analyse the estimated short-term and long-term unemployment in relation to cyclical changes in the economic system and with trend changes in the number of unemployed people seeking the first job. In particular, we want to establish the extent of causal relationships between the chosen explanatory variables and the dependent variable. These causal analyses are done separately for the male and female population, and cover the period from the first quarter of 1979 to the last quarter of 1986.     

Cost of Childcare and Female Employment in the UK

Abstract. Mothers of young children may be prevented from working because of the high cost of available, formal childcare. In the UK, the typical cost of a nursery place is more than the average household spends a year on either food or housing. This study examines the extent to which female labour force participation is affected by the cost of formal childcare. The results suggest that childcare price subsidies have a modest impact both on labour force participation and on the use of formal childcare.     

Manpower and unemployment in the U.K.

The subject of the changing pattern and levels of unemployment in the United Kingdom is a matter which has been receiving much attention. This paper examines some of the underlying trends and the related factors which have been creating those trends. The author does not only concentrate on the economic factors but also on the educational and social factors which have led to changes in the supply of and demand for labour. Indeed, some of the more interesting aspects of the relationship between the public and the private sector and the relative patterns of demand and supply of labour, and the causes of that supply are also examined. The author places the study in an international context and, albeit rather gloomily, does show us that this is not a problem unique to the U.K. Finally, the paper examines some of the possible remedies to the situation and outlines the need for examining rather more clearly the balance between capital and labour and, perhaps more fundamentally, the growing problem of the concentration of British industry. This paper does not aim to answer all the questions created by a relative economic decline and the growing problems of unemployment, particularly amongst the under-25 age group, but it does set out the problem and some possible solutions.     

Analysis of Managerial Experience: Integrating Career Analysis with Labour Market Dynamics

The article argues that there is a need for a greater emphasis on information relating to the quality of labour supply, particularly the nature of managerial experience. The rationale is based on the organizational and industry changes which alter patterns of experience and create new forms of human capital. At the heart of the argument is the valuation of stable labour market dynamics, that is, patterns which remain constant. This is contrasted with the ethos of change which, it is suggested, contains a dangerous element of exaggeration. An attempt is made to integrate qualitative career analysis with new forms of labour market analysis. Two models of learning by experience are introduced and examples of relevant techniques of measurement are described.     

Sources of Job and Worker Flows: Evidence from a Panel of Regions

Abstract. This study explores the structure and the dynamics of regional job and worker flows. The measures of job and worker flows are related to economic fluctuations, demographic factors and industry structure by employing the data of 85 Finnish regions over the period 1988–97. It is shown that labour market dynamics differ markedly between regions. As in previous analyses of linked employer–employee data, job and worker flows are shown to behave cyclically. In addition, the results indicate that observable differences in regional productivity, in‐migration, demographics and industry structure help to explain the prevailing disparities in regional labour markets.     

The Cassa Integrazione Guadagni

ABSTRACT: The purpose of this paper is to provide an analytical survey of the historical and normative evolution of the Italian Cassa Integrazione Guadagni (hereafter Earnings Integration Fund or EIF) through examination of the prevalent economic and juridical models during the 40 years of the EIF's existence. The evolution of the EIF in the periods examined is classified according to five theoretical models, so as to bring out the many different standards accumulated during the administration of the EIF, and the many measures adopted by Public Authorities in response to the various requirements which have arisen over time. The result is an overall reference framework for the EIF's present administration, which is characterised by the presence of both the need for various reforms and alterations, and an equal number of ways of carrying them out; from the development of an ever more direct link between crisis situations and specific EIF requirements, and the evident need to bring the institution within a normative framework correlated to a global labour policy. A verification of the different methods of utilising the EIF is therefore, for the authors, utilizable in defining suitable solutions for modern situations, which require effective EIF models to be worked out in conjunction with an appropriate mix of active labour policies.     

The Effect of Having More Children on Women's Labour Force Participation in Korea: An Analysis Using Instrument Variables

The objective of this study was to examine the causal relations between having more children and women's labour force participation using Korean data. Given the strong preference for sons in Korea, variables regarding the number of daughters were used as instrument variables for having more children. The results using 1980s data showed that having a third child had a significantly positive impact on women's labour force participation in the ordinary least squares analysis, whereas the coefficient value was significantly negative in the two‐stage least squares analysis. Such results imply that, unlike in the western societies such as the USA and the UK, the ordinary least squares analysis results might underestimate the negative correlations between having more children and women's labour force participation in a developing country such as Korea.     

More Jobs Through Less Employment Protection? Evidence for West Germany

ABSTRACT: In reaction to growing criticism of the allegedly negative employment effects of job protection regulations (lay-off and dismissal restraints), the West German government in 1985 introduced new legislation facilitating the conclusion of temporary (i.e. fixed-term) work contracts in order to stimulate employment growth (‘Employment Promotion Act 1985‘AZPA). The research unit ‘Labour Market and Employment‘ at the WZB has evaluated the employment and labour market impact of the new legislation for the period 1985-1988, and apart from providing a detailed analysis of the socio-economic and institutional diversity of job arrangements covered by the category of temporary (i.e. fixed-term) employment, the project‘s focus has been on the impact of minor changes in the institutional frame- work as effected by the EPA on firms‘ employment policies, as well as on the overall level of employment. Results show that like in most other European countries the temporary work force in Germany has considerably grown over the past years in both absolute and relative terms, this increase, however, being largely due to cyclical factors as well as medium-term structural changes on the supply and demand side of the labour market rather than to changes in the regulatory framework as effected by the EPA. The impact of the new regulations on firms‘ hiring decisions and on the overall number of hirings in the total economy have to be regarded as rather modest, in fact amounting to not more than an estimated 25,000 additional hires per year or roughly 0.5|X% of all employment contracts concluded in the private sector. This marginal positive impact on firms‘ employment decisions, however, is counterbalanced by unintended substitution effects and an increase in involuntary quits arising from them when labour demand declines. Even under the overall positive employment development given in the period under investigation the net employment effects of the EPA temporary work legislation thus are shown to be at best marginal. In case of a deterioration of the overall economic situation, however, the increase in temporary job arrangements supported by the new legislation is likely to lead to accelerated workforce adjustments by firms and thus over time to result in a depression of the overall level of employment. From a theoretical point of view, the findings suggest that measures aiming at de-regulating labour relations such as the EPA largely fail to modify essential behavioral parameters of economic actors in economic environments which for decades have adjusted to a relatively high level of welfare state regulation, as has been the case in Western Germany.     

The Effect of Trade on Employment and Wages in Italian Industry

The paper analyses the labour market impact of international trade on the Italian manufacturing sector. Using data for a panel of manufacturing industries the effects of trade‐induced changes in sales on employment and wages are investigated. The evidence suggests that the industry adjustment to demand shocks took place mainly through employment changes. However, increased exposure to foreign competition had a small effect on the Italian labour market, while technological change seems to have a major role in explaining the increase in unemployment.     

Wage Determination in Post-War Italy

ABSTRACT: A bargaining model is proposed and tested in order to explain the irrelevance of the general labour market conditions to wage settlements in the post-war Italian economy. The model is a “right to manage model”, but the solution cannot be improved, being both on the labour demand curve and on the contract curve. The reason for such an outcome is that both firms and unions have priorities, and distinguish the labour force between insiders and outsiders. Different definitions of insiders are used, but in the postwar Italian economy the employees and ex-employees of the industrial sector appear to be the share of the labour force which have been better protected by both contractual parties.     

Labour Market Policy and Employment Growth in Sweden

ABSTRACT: In this paper, the author outlines the Swedish employment situation and traces the history of the labour market policy it generated, from its earliest development at the turn of the century, through to the Rehn-Meidner model, and then examines the various reactions and criticisms against it. It goes on to look at the trends and developments of the labour market in the‘80s, and concludes by making a speculative analysis on if and how the labour market policy has had an effect on the participation of various sectors of the population in the labour force, and if it has influenced unemployment in the Swedish labour market.     

Labour Force Transitions among Married Women in the USA

This paper describes the patterns of labour market transitions for a cohort of married women in the USA drawn from the National Longitudinal Survey and observed between 1968 and 1991. The empirical analysis of labour market movements is motivated by human capital theory augmented by demographic and life-cycle considerations. These movements are investigated by estimating competing risk models of labour force spell duration. The results show that the determinants of spell lengths and the determinants of the reasons for spell terminations vary across labour market states. More importantly, both the labour market state in which an individual is observed over her work cycle and the labour market state to which she moves are relevant in shaping her spell length and her tradeable characteristics in the labour market.     

Industrial Relations Agenda for Change: The Case of the United States

ABSTRACT: Over the past several decades, all of the advanced industrial societies have experienced growing pressures on the institutions governing their industrial relations systems. In this paper, the authors analyze the changes in collective bargaining, and more generally, in the entire industrial relations system in the United States. This analysis also takes into consideration the environmental pressures that have produced these changes, and the measures taken by labour and management organizations to cope with them. Underlying this analysis is the central premise that sustaining and diffusing changes in industrial relations will be necessary to achieve a