labour market prospects and developments · recent labour market developments and prospects a ......

Part One

LABOUR MARKET PROSPECTS AND DEVELOPMENTS

CHAPTER I

Recent labour market developments and prospects

A. INTRODUCTION

he recovery is now well underway in nearly all OECD countries. Employment is expected to increase in all countries both in 1995

and 1996. However, unemployment rates in many countries are only expected to decline slowly. There- fore, by the end of 1996, unemployment in the OECD area is likely to remain well in excess of 30 million people.

A more detailed review of recent labour market developments and short-term prospects is provided in Section B. In the 1994 Employment Outlook, a comparison was made between the current recovery and the previous one in terms of output, productivity and employment growth for a limited number of countries. Section C extends this analysis to include those countries where the upswing in activity has been more recent. A comparison is also made of changes in labour force growth and unemployment over the current and preceding recoveries as well as the differences in the types of jobs being generated.

Section D takes the discussion further, analysing the impact of the recovery on long-term unemployment. It does so by examining the patterns of flows into and out of unemployment. It also seeks to throw light on the destinations of those leaving unemployment, namely whether they move into jobs or leave the labour force altogether.

Long-term unemployment is only one, rather crude, indicator of the concentration of unemployment or of potential problems of social exclusion and hardship. In order to complement it, Section E exam- ines the distribution of unemployment and long-term unemployment by family status and the extent to which unemployment is concentrated among households where there is no one else in employment. Section F summarises the main points.

B. SHORT-TERM OUTLOOK AND PROSPECTS

1 . Recent economic trends

With the recovery now firmly established in almost all OECD countries, there was a noticeable pick-up in activity in 1994. Across the OECD area, real GDP grew by almost 3 per cent compared with 1.2 per cent in 1993 (Table 1 . 1 ) . Growth was particularly

strong in those countries which have been longest in recovery - Australia, Canada, Ireland, New Zealand, Norway, the United Kingdom and the United States. In OECD Europe where, for most countries, the recovery in activity only became well established in 1994, output grew by 2.4 per cent compared with a small decline in 1993. In contrast, the recovery in the Japanese economy was extremely weak with growth of just over '/2 per cent being recorded for 1994.

As discussed in last year's Employment Outlook, business and consumer confidence were hampered by several negative forces in 1993: relatively high interest rates despite an easing of monetary policy; poor employment prospects; and tightened fiscal policy. However, over 1994 the easing of monetary policy gradually restored confidence and both net exports and domestic demand contributed substantially to output growth in most countries. The continued effec- tive appreciation of the yen has affected the relative competitiveness of Japanese exports and may have contributed to a delay in the recovery in that country.

2. Employment and unemployment

After two years of slight declines, OECD employment grew by just under 1 per cent in 1994 with almost all of the gains occurring in those countries where the recovery has been most advanced (Table 1.2) . Employment growth was strongest in New Zealand, followed by Australia, Luxembourg, Mexico (prior to its recent crisis), Ireland, the United States' and Canada. Jobs continued to be shed in Europe, but at a slower rate than in 1993. The prolonged and large shake-outs in employment which occurred in Finland and Sweden in recent years came to an end over the course of 1994.

Partly reflecting the general improvement in economic conditions, labour force growth also picked up in 1994, particularly in Oceania and North America (Table 1.2). In Europe, the labour force was virtually stable in 1994, following a decline of 0.5 per cent in 1993.

As a result of fewer net exits from the labour force and only weak or negative employment gains, the unemployment rate for Europe continued to rise in 1994 to over 1 1 per cent (Table 1.3). Ireland, Norway and the United Kingdom were notable excep-

4 E M P L O Y M E N T O U T L O O K

Table 1.1, Growth of

1991 Share in total OECD GDP

North America Canada Mexico United States

real GDP in OECD countriesa

Annual percentage change

Average 1984-92 I993 I994 1995 1996

Japan

Central a n d Western Europe Austria Belgium France Germany b Ireland Luxembourg Netherlands Switzerland United Kingdom

Southern Europe Greece Italy Portugal Spain Turkey

Nordic countries Denmark Finland Iceland Norway Sweden

Oceania Australia New Zealand

OECD Europe EU Total OECD

42.2 3.2 3.1

36.0

14.4

25.5 0.9 1.1 8.0 8.8 0.3 0. I 1.5 0.9 5.6

13.5 0.7 6.1 0.7 3.2 2.9

2.3 0.6 0.5 0 0.4 0.9

2.0 1.7 0.3

41.4 37.1

100.0

2.3 2.2 I .9 2.3

4. I

3.2 2.8 2.5 3.2 4.2 4.4 3.9 2.7 2.2 2.2

3. I 1.9 2.5 4.0 3.5 4.9

1.6 1.7 1 . 1 2.1 2.3 1 .3

2.3 2.7 0.2

3.1 3.0 2.9

2.9 2.2 0.8 3.1

-0.2

-0.4 -0.1 -1.7 -1.5 - 1.1

4.1 I .7 0.4

-0.9 2.2

0.1 -0.5 -1.2 -1.2 - 1.1

7.5

-0.5 1.5

-1.6 1.2 2.3

-2.6

4.1 3.9 5.1

-0.2 -0.6

1.2

4.1 4.5 3.5 4.1

0.6

3.0 2.7 2.3 2.7 2.9 6.0 2.7 2.5 2.1 3.8

I .o 1.5 2.2 1.2 2.0

-5.4

3.6 4.4 3.9 3.0 5.1 2.2

5.1 5.4 3.8

2.4 2.7 2.9

2.8 3.9

-2.9 3.2

1.3

3.0 2.8 2.7 3.0 2.9 5.8 3.1 3.1 1.7 3.4

2.9 1.9 3.0 2.9 3.0 2.8

3.6 3.4 4.8 2.5 4.8 2.5

3.8 3.8 3.8

3.0 3.0 2.7

2.5 3.4 3.0 2.3

2.3

2.9 2.3 2.6 3.2 2.7 5.0 2.9 2.7 2.3 3.0

3.3 2.3 2.9 3.2 3.2 4.8

3.0 3.0 3.9 2.4 3.5 2.4

3.4 3.5 3.1

3.0 2.9 2.7

a) Aggregates are computed on the basis of 1991 CDP weights expressed in 1991 purchasing power parities. b) Up to and including 1992, western Germany; subsequent data concern the whole of Germany

Source. OECD Economic Outlook, No. 57, lune 1995.

tions, recording significant falls in unemployment. Outside of Europe, significant declines in the unemployment rate also took place in Australia, Canada, New Zealand and the United States. For the OECD area as a whole, the unemployment rate was broadly stable at around 8 per cent, equivalent to a record unemployment total of over 34 million persons.

As discussed more fully in the next chapter, the standard definition of unemployment is not a completely adequate measure of labour slack: it does not include "involuntary part-time" workers nor potential job-seekers who have been discouraged from actively carrying out job-search. in addition, country comparisons of unemployment may be hampered by differences in institutional arrangements which affect the way job-search activity is reported by respondents to labour force surveys. One broader measure of the utilisation of labour resources which partly abstracts

from these problems is the employment/population ratio, i.e. the proportion of the working-age population in employment.

As shown in Table A of the Statistical Annex, there are wide variations across the OECD area in the employment/population ratio for all persons - partly reflecting large differences in female participation rates (Table K ) . In 1994, less than half the working-age population had jobs in Spain and Turkey compared with over 70 per cent in Japan, Switzerland. the United States and most of the Scandinavian countries. The ratios are also relatively low in Belgium, Ireland, Italy and Greece. For most countries, small or negative employment gains in 1994 were translated into a fall in this ratio compared with 1993. The only countries to record an increase in the employment/population ratio in 1994 were Australia, Canada, Norway and the United States.

Table 1.2. Employment and labour force growth in OECD countriesa

Employment

North America Canada Mexico United Sta tes

Japan

Central and Western Europe Austria Belgium France Germanyb Ireland Luxembourg Netherlands Switzerland United Kingdom

Southern Europe Greece Italy Portugal Spain Turkey

Denmark Finland Iceland Norway Sweden

Australia New Zealand

OECD Eurooe

Nordic countries

Oceania

1993 1984-92 I993 I994 I995 I996

000s Average Annual percentage change

144 206.0 130176 118803

1 I9 308 2

64 496.7

100 773.1 3 565 3 3 752 0

22 256 0 35 1900

I 1459 164 0

5 925 0 3 388 4

25 386 5

58 920.5 3 720 2

20 371 8 4 223 0

118375 18 768 0

10 630.8 2 498 9 2 040 7

I23 6 2 003 9 3 963 8

9 203.8 7 707 8 I4960

170 324.5 EU I46 040.7 Total OECD 388 231 .O

2.5 1 5

1 4

1.4

1.7 1 1 0 7 0 4 1 4 0 4 1 0 2 1 0 7 0 6

1 .o 0 5 0 5 0 7 1 5 1 6

-0.2 0 2

-1 3 0 9 0 2 0

1.6 2 0

-0 3

I .4 1.4 I .8

1.6 1 4 2 9 1 5

0.2

-1.2 0 6

-1 3 -1 2 -1 8

0 6 -0 3

0 7 -2 6 -0 8

-2.2 1 0

-4 2 -2 0 -4 3

0 9

-4.0 -0 7 41 -1 I

0 -6 8

0.6 0 3 2 0

-1.7 -2.0 - 0 . 1

3.0 2 1 2 7 3 1

0.1

-0. I 0 5

-0 4 0 5

-0 9 2 6 0 9 0 6

-I 4 0 3

-2.0 1 2

-1 7 -0 1 -0 9 -4 1

-0.2 -0 I -0 8

1 1 1 5

-0 9

3.3 3 1 4 2

-0.8

0.9 -0.4

1.9 2 3 1 0 1 9

0.1

0.8 0 6 0 5 1 0 0 2 4 0 4 1 5 0 7 15

0.7 0 7 0 7 0 8 1 1 0 5

I .9 1 9 2 9 1 2 1 4 1 8

2.9 2 8 3 2

0.9 0.9 I .2

1.4 2 3 3 0 1 1

0.3

1 .o 0 5 0 9 I1 0 5 1 9 0 6 1 6 1 2 I 2

1.2 I 0 0 9 1 0 1 7 1 2

I .4 1 2 2 2 1 1 1 2 1 3

2.4 2 6 1 9

1.1 I .o 1.1

Labour force

1993 1984-92 1993 I994 1995 1996

000s Average Annual percentage change

155 017.9 I4 665 8 12 317 2

I28 034 8

66 158.2

I I 1 478.9 3 722 7 4261 0

25 202 6 38 609 0

1361 1 167 5

6 340 0

28 267 0

67 267.8 41184

22 800 5 4 470 3

15 318 8 20 559 8

I 1 911.9 2 847 8 2 484 2

I29 2 2 131 0 4 319 8

10 305.5 8 652 2 1 653 3

190 658.6 164 290.8 422 140.2

3 548 0

2.4 1 5

1 4

1.3

1.7 I 1 0 3 0 5 1 1 0 4 1 0 1 4 0 9 0 5

I .o 0 5 0 7 0 1 1 2 1 6

0.3 0 4

-0 2 I 1 0 6 0 3

2 .o 2 3 0 5

1.3 I .3 1.7

1.1 1 3 3 6 0 8

0.6

-0.1 1 3 0 6 0 3

-0 5 0 9 0 2 1 9

-0 6 -0 5

-I .o 2 1

-5 3 -0 6

1 1 1 8

-1.2 0 5

-0 7 0 3 0

-3 3

0.6 0 6 1 1

-0.5 -0.8 0.3

2.3 1 1 2 9 2 3

0.4

0.2 0 7 0 3 1 3

-0 1 1 5 1 5 1 7

-1 2 -0 8

-0.5 1 2

-1 0 1 2 0 9

-1 8

-0.4 -0 3 -0 2

1 5 1 0

-1 2

I .9 1 7 2 7

- 0 . 1 0.1 0.9

1.5 I .4 1 2 1 9 2 6 3 0 1 5 1 2

0.4 0.3

0.2 0.4 0 5 0 4 0 3 0 2 0 6 0 5

-0 3 0 2 1 2 1 6 0 2 0 5 1 4 1 5 0 1 0 6 0 3 0 5

1 . 1 0.9 1 0 1 0 0 5 0 2 0 7 0 6 1 0 0 8 1 8 1 8

0.7 0.4 0 2 0 2 0 5 0 4 I 0 1 0 0 8 0 7 1 2 0 5

1.8 I .7 1 7 1 7 2 2 1 6

0.6 0.6 0.4 0.4 0.9 0.9

a) Tor sources and definitions, see OECD Economic Ouiiook, No 57, june 1995 bJ Up to and including 1992. western Germany, subsequent data concern the whole of Germany

Not available

b E M P L O Y M E N T O U T L O O K

Onin0 OI. 0 r U l n r U i - N u \ N Q qbu\Ml ' .N MMLCI - M 00'- Y O N z--0" - = 0 0 M M 0 0 0 0 N O I O N O M N - 00000 - 00 - 0 1 - N - e

*. r- - m u \- O10'co - - a --

E

Table 1.4. Business sector labour costs in OECD countriesd

Percentage changes from previous period

North America Canada Mexico United States

lapan

Central and Western Europe Austria Belgium France Germany b Ireland Netherlands Switzerland United Kingdom

Greece Italy Portuga I Spain Turkey

Denmark Finland Ice la lid Norway Sweden

Australia New Zedland

Southern Europe

Nordic countries

Oceania

Compensation per employee

1981-91 1992 1993 I994 I995 I996

7.5 5 6

49 8 4 5

3.7

5.6 5 2 5 5 6 4 3 8 8 2 2 6 5 0 8 1

17.7 I7 7 10 3 16 I 9 3

59 4

8.0 6 1 8 8

7 5 8 4

7.5 7 4 7 8

9.5 7.2 7.7

6.5 3 2

23 9 5 5

1.1

6.4 5 3 6 0 3 8

10 3 6 2 4 7 5 5 4 9

16.9 10 5 6 2

I8 4 9 8

69 2

3.9 3 8 4 8 0 9 3 4 3 7

4.0 4 1 3 0

9.5 6.8 6.9

4.0 2 0

1 1 0 3 7

0.7

3. I 3 5 4 1 2 1 4 3 6 1 3 2 3 1 2 3

14.9 7 9 3 6

7 3 74 I

3.5 2 9 3 6 2 4 1 0 5 1

3.0 3 3 1 0

6.8 3.8 4.6

7 8

3.6 2 0 9 3 3 4

1.2

2.6 3 5 2 5 1 2 3 7 4 9 1 7 2 6 2 6

16.3 1 2 5 4 4 5 6 3 5

87 I

4.0 3 8 2 6 I 1 3 1 5 4

2.0 2 0 1 7

6.9 3.3 4.5

4.4 2 5

25 0 2 9

2.5

3.3 5 1 2 7 2 6 3 9 4 8 2 0 2 1 3 6

14.9 10 0 4 8 4 8 3 9

76 3

4.6 4 0 5 2 3 8 3 3 5 3

3.7 3 8 3 5

6.9 3.9 5.1

5.0 3 0

24 0 3 7

2.5

3.9 4 9 2 8 3 3 4 7 5 0 2 0 2 7 4 4

11.1 7 8 5 1 4 6 4 5

47 6

4.3 4 2 5 5 4 3 3 8 3 9

4.3 4 5 3 1

6. I 4.3 5.1

a) Aggregates are computed on the basis of 1991 GDP weights expressed in 1991 purchasing power parities b) Up to arid including 1991, western Germany. subsequent data concern the whole of Germany and the whole economy c) Countries shown

Not available Source OECD Economic Outlook. No 57, liine 1995

U n i t labour costs

1981-91 I992 I993 I994 1995 1996

6.7 4 2

48 9 3 7

0.7

3.3 3 0 3 3 3 9 1 6 3 8 0 9 3 8 5 7

15.1 15 7 8 3

14 1 6 6

54 3

5.9 3 8 5 5

6 1 6 6

6.2 6 2 6 1

7.1 5.0 6.0 ____

4. I 1 6

23 7 28

1.1

3.6 5 5 3 3 1 2 5 9 L O 4 3 3 2 3 0

13.3 1 1 3 4 1 7 0 6 5

60 9

0.5 2 6

0 -3 7

0 3 -0 4

1.3 1 1 2 9

6.4 4.0 4.5

3.6 1 0

26 4 2 1

I .2

0.8 2 5 0 3 0 4 0 6 1 3

-0 L 1 0 1 7

12.2 8 5 1 7 2 5 1 9

72 5

3.5 2 2 3 6 2 5 2 1 5 0

2.9 2 9 3 1

4.5 I .4 3.6

3.7 2 0

22 3 2 4

0.3

1.8 2 9 1 0 I 1 2 2 1 8 0 2 1 5 2 6

8.6 6 2 2 9 2 3 3 0

42 5

3.0 2 4 3 8 3 1 2 7 3 1

3.4 3 6 1 9

4. I 2.3 3.3

2.7 1 2

I 1 0 2 3

1 .o 2.3 4 4 4 5 1 8 3 5 1 9 2 7 1 1 0 4

11.5 9 7 1 8 6 8 3 4

63 2

-0.8 -0 7 -2 4 -0 4 -I 7

0 4

-1 .o -0 8 -2 2

4.9 2.3

I .9

6 9 1 8

0.6

-0 6

-0.7 1 0

-0 3 -1 5 -0 7

1 4 -1 3 -1 3 -0 1

13.6 12 2 0 1 3 9 0 3

89 5

0.1 -1 5 -2 0 -1 0

0 6 1 8

0. I -0 3

2 5

3.7 -0.2

3.3 2.4


3. Wages, labour costs and inflation

In general, wage growth was even more moderate in 1994 than in 1993. This moderation was widespread, occurring even in those countries experiencing falls in unemployment (Table 1.4). Across the OECD area (excluding Turkey), the growth in compensation per employee in the business sector declined from just under 3 % per cent in 1993 to just over 3 per cent in 1994. An even larger decline occurred in unit labour costs as a result of an acceleration in labour productivity growth. In Europe, where labour productivity growth was particularly strong, unit labour costs remained virtually unchanged in 1994.

In line with moderate wage growth, there was also a widespread decline in price inflation between 1993 and 1994. In most countries, inflation fell to low levels last seen in the early 1960s. The most notable exception was Turkey, where inflation rose to three-digit levels in 1994 in the aftermath of a large currency depreciation early in 1994.

4. Economic and labour market prospects

Short-term prospects for the OECD area generally appear to be encouraging, with the recovery projected to continue against a background of low inflation. For the OECD area as a whole, output is projected to grow at a rate of 2.7 per cent per annum in 1995 and 1996, marginally slower than in 1994 (Table 1 . 1 ) . For those countries which have been in recovery for a relatively long period of time - Australia, Canada, Ireland. New Zealand, Norway, the United Kingdom and the United States - real GDP is projected to grow at a slower pace than in 1994. In the rest of OECD Europe, somewhat stronger output growth is projected for 1995 and 1996 compared with 1994.

One major source of uncertainty regarding the short-term outlook concerns the recent turbulence in currency markets - most notably the persistent and large decline in the dollar. In the United States, and other countries whose currencies are closely linked to the dollar, its depreciation, if not reversed, could add to inflationary pressures. In appreciating countries, such as Japan and Germany, there has been an ero- sion of relative export competitiveness which could have an adverse impact on activity.

Despite this uncertainty, every OECD country is likely to experience rising employment over both 1995 and 1996. However, for those countries which entered the recovery relatively early, there may be some decline in the pace of employment growth in line with the projected slowdown in output growth. In contrast, an acceleration in economic activity in Europe is likely to result in employment growth of around 1 per cent both in 1995 and 1996 following declines in each of the preceding three years. For the OECD area as a

whole, employment is projected to grow by about 1’/4 per cent in 1995 and by just over 1 per cent in 1996.

The pick-up in job growth in Europe is likely to be reflected in declines in unemployment over both the remainder of this year and throughout 1996. How- ever, the unemployment rate for Europe is expected to remain well over 10 per cent throughout the pro- jection period compared with less than 6 per cent in North America. Within Europe, the largest falls in unemployment rates are projected for Finland and the United Kingdom, although nearly 15 per cent of the Finnish labour force may still be out of work at the end of 1996 compared with only 3’/2 per cent in 1990. In Spain, the unemployment rate is likely to remain well in excess of 20 per cent. Canada and Australia are likely to continue to record substantial declines in unemployment. In the United States, the unemployment rate is expected to stabilise around or just above its current level of around 5 l / 2 per cent. Mexico and Turkey could be the only OECD countries recording a rise in unemployment in 1995 and 1996. For the OECD area as a whole, the unemployment rate is expected to decline marginally over the remainder of this year and next to around 7% per cent by the end of 1996 compared with just over 8 per cent in 1994.

Despite falling unemployment in most OECD countries, only a modest pick up in wage and price inflation is projected for 1995 and 1996. Compensa- tion per employee in the business sector is expected to grow by just under 4 per cent on average in the OECD area (excluding Turkey) in 1995, and by around 4Y2 per cent in 1996. With the notable exceptions of Mexico and Turkey, most OECD countries are likely to experience price inflation (as proxied by the GDP deflator) within a narrow range either side of 3 per cent in both 1995 and 1996.

C. HAVE EMPLOYMENT PATTERNS IN THE CURRENT RECOVERY CHANGED?

1 . Output growth

As already mentioned, in a number of countries which entered into recovery relatively recently, there has not yet been a significant decline in unemployment. Employment growth was also initially sluggish in those countries where the recovery is most well advanced [OECD, (1994a)J. This has raised concerns that some countries may be experiencing a “jobless recovery”. There have also been concerns about changes in the types of jobs being created, e.g. in several countries the recovery was initially accompanied by an increase in part-time rather full-time employment. Therefore, in this section, the profile of output, labour productivity and employment growth

E M P L O Y M E N T O U T L O O K 9

during the current recovery is compared with the pattern observed in the previous upswing during the early 1980s. The types of jobs being created and developments in overall labour force growth and unemployment are also examined.

The countries which have been in recovery the longest - Australia, Canada, the United Kingdom and the United States -generally experienced slow output growth during the first year following the trough in activity, whereafter it picked up in the second year, particularly in the Australia, the United Kingdom and

the United States (Table 1.5). When averaged over the entire recovery to date, output growth has been only marginally below that in the previous recovery in the United Kingdom, while in Australia and the United States it has been just over 1 percentage point lower. The picture is different in Canada, where output growth has been only slightly more than half that experienced in the previous recovery.

Where the recovery is more recent, a similar pattern of weak growth in the first year following the upturn in activity can also be observed in France,

Table 1.5. Components of employment growth since the last two troughs in selected OECD countriesa Percentages

output Period after trough First Second ","?:r

trough year year

Australia 1991 02-1994 0 4 1983 01-1986 0 3

Canada 1991 01-1994 0 4 1982 04-1986 0 3

Finland 1993 02-1994 0 4 1981 01-1982 0 3

France 1993 01-1994 0 4 1984 02-1986 01

GermanyC

1993 01-1994 0 4 I982 04- I984 0 3

Italy 1993 03-1994 0 4 1982 03-1983 0 4

lapan 1992 03- 1994 0 4 1983 02-1985 0 3

Spain 1993 02-1994 0 4 1981 01-1982 0 3

Sweden 1993 01-1994 0 4 1983 01-1984 0 4

Switzerland 1993 02- 1994 0 4 1982 04-1983 0 2

United Kingdom 1992 01-1994 0 4 1981 02-1984 01

United States 1991 01-1994 0 4 1982 03-1986 0 2

I .8 8.9

1.4 6.5

4.6 2.4

I .3 2. I

2.2 3.4

3.8 1.9

0.4 4.9

I .8 1.3

1.6 5.3

2.4 2.3

1.4 2.4

1.6 5.1

4.9 3.8 4.5 5.2

1 .2 2.8 6.4 5.2

3.8 3.8

2.3 2.2

2.1 3.0

3.1 2.1

1 . 1 0.3 4.9 4.6

2.1 1.4

2.6 4.4

2.1 2.2

3.2 2.7 3.0 3.0

3.2 3.1 5.7 4.3

Labour productivity

First Second year year troueh

2.8 7.2

I .8 3.0

6.1 1.6

1.7 2.4

3.8 4.2

5.1 1.4

0.0 4.4

2.7 3.1

5.5 5.1

5.4 2.0

3.9 4.3

I .4 3.0

4.6 0.8

0.2 3.8

1 .1 4. I

3.0 4.3

2.1 1.9

2.6 2.2

1.7 2.2

3.4 3.0

1.9 2.0

3. I 3.3

4.6 1.6

0.2 3.9

2.5 3.0

3.8 3.6

3.3 1.7

3.2 3.5

1.8 1.7

a) Averages of annualised quarterly growth rates over each period b) Real output per employed person. c) Data refer to western Germany.

Sources: OECD. Quarterly Labour Force Statistics; OECD Economic Outlook, No. 57. lune 1995

Employment

First Second year year trough

-0.9 1.7

-0.5 3.4

-1.4 0.8

-0.5 -0.3

-1.6 -0.7

-1.2 0.5

0.5 0.5

-0.8 -1.7

-3.6 0.2

-2.9 0.2

-2. I -1.8

0.2 2.1

0.3 1 .o 3.6 3.0

1 .o 1 . 1 2.5 2.9

0.4 0.9

0.3 0. I

- 1 .o -0.3

-1.4 0.5

-0. I 0.1 0.8 0.7

-0.3 -1.5

-1 .o 0.8

- 1 .o 0.5

0.3 -0.3 -1.2 -0.3

1 . 1 1.3 3.7 2.5

E M P L O Y M E N T O U T L O O K

Chart I . I

Recoveries in output, employment and productivity

8 120 -

Australia

Output I20 8 125 -

I00

95 - 4 - 3 - 2 - 1 0 I 2 3 4 5 6 7 8 9 1 0 1 1 1 2 1 3 1 4

Employment

I I 5

I10

I05

I00

95

. . 8 120 I20

8

- II

g 115 I15 M

I10 c 110 aJ D

105 I05 1: 71 -

I00 I00

95 95 - 4 - 3 - 2 - 1 0 I 2 3 4 5 6 7 8 9 1 0 1 1 1 2 1 3 1 4

Productivity 8 120 - I,

I 00

95 .- - 4 - 3 - 2 - 1 0 I 2 3 4 5 6 7 8 9 1 0 1 1 1 2 1 3 1 4

Quarters from trough

I20

I15

I10

I05

I00

95

II G 120

J 115

.a 110

Y r

c

5 X

C 105

- I00

95

II

I00

95

8 125 - II

X

C 4 105 -

I00

95

Canada

Output I25

I20

I15

I10

I05

I00

95 - 4 - 3 - 2 - 1 0 I 2 3 4 5 6 7 8 9 1 0 1 1 1 2 1 3 1 4 1 5

Employment I25

I20

I15

I10

I05

I00

95 - 4 - 3 - 2 - 1 0 I 2 3 4 5 6 7 8 9 1 0 l l 1 2 1 3 1 4 1 5

Productivity I25

I20

I15

I10

I05

I00

95 ._ -4 - 3 - 2 - 1 0 I 2 3 4 5 6 7 8 9 10 I I 12131415


Current recovery Previous recovery j Trough 1991 Q 2 = 100 Trough 1983 Q I = 100 i 1 Current recovery Previous recovery ' Trough I991 Q I = 100 Trough 1982 Q4 = I00 __ __I --

Sources: OECD, Quorterly Lobour Force Stotistics; OECD Economic Outlook, No. 57, June 1995.


8 110 - II 108

%' 106

104

h

v 01

I:

g

f 102

$ 100

0 n

C

C - 98

96

Chart 1 . 1 (Cont.)


Finland

output

- 4 - 3 - 2 - 1 0 I 2 3 4 5 6

I10

I08

I06

I04

I02

I00

98

96

EmDlovment . . 8 110 I10 - II 108 I08

I06

I 04

h

v 01

.s 106

g

f 102 I02

zi 100 I00

2 104 (u D

c

-0 - 98 98

96 96

- 4 - 3 - 2 - 1 0 I 2 3 4 5 6

Productivity 8 I10 I10 - I II 108

z 106

$ 104 n

h

v 01

r

f 102

$ 100 C

c - 98

96

- 4 - 3 - 2 - 1 0 I 2 3 4 5 6 Quarters from trough

France

output I 05 ........................................................................................... I 05

s I

................................................. I

I P ................................................................... ......... I03

I I I ................................. I-""' I ...

................. r-.-

I02

101

I00 I

I .I. 99 99

98 98 - 4 - 3 - 2 - 1 0 I 2 3 4 5 6 7

*i* *.;" +Q

Employment g 105 T I05 - I

104 104

z 103 I03 rt.

v .s

$ 102 I02

$! 101 zi 2 - 100 I00

9

101 E

99 99

98 98 - 4 - 3 - 2 - 1 0 I 2 3 4 5 6 7

Productivity 8 105 I05 - I II 104 1 v I .c

103 rt. 5 102 n

I04

I03

I02

101

I00 ** I

99 * r 99 I -* P *

98 98 - 4 - 3 - 2 - 1 0 I 2 3 4 5 6 7


I Current recovery Previous recovery 1 1 Trough I993 QI = 100 Trough 1984 QZ = 100 1 I - _- -/

__I_

Sources: OECD, Quorterly labour Force Statistics; OECD Economic Outlook, No. 57, June 1995.

g 106 - I1 h

Y v)

z

0 y 104

t

s = 100

2 a 102

X

TJ

98

g 106 - I1 h

Y v)

4 104

r 0 6 j 102 = C $ = 100 72

98

g 106 - I1

L

h - v)

y 104

8 $ r a 102

$

= 100 D

98


Chart 1 . 1 (Cont.)


Germany'

output

-4 -3 -2 - I 0 I 2 3 4 5 6 7

Employment

-4 -3 - 2 - 1 0 I 2 3 4 5 6 7

Productivity I

I I

I

I I I

~ - 98 _ .

I06

I04

I02

I00

98

I06

I04

I02

I00

98

I06

104

I02

I00

-4 -3 - 2 - 1 0 I 2 3 4 5 6 7 Quarters from trough

Trough I993 Q I = I00

g 106 - I1 - v 4 104 0 5 2 102 L

3

$ TJ

- loo

98

Italy

output

Employment

-4 -3 -2 - I 0 I 2 3 4 5

Productivity

-4 -3 -2 - I 0 I 2 3 4 5 Quarters from trough

Previous recovery Current recovery

I06

I 04

I02

I00

98

I06

104

I02

I00

98

I06

104

I02

I00

98

o} Data concern western Germany. Sources OECD, Quarterly Labour Force Statistrcs, OECD Econornrc

Outlook, No. 57, June 1995.


Chart 1 . 1 (Cont.)


g 112

6 110

-

v .c M g 108 6 f 106

E Z 104 i - t 102

I00

911

D

V

Japan

OutDut 12

10

08

I06

104

I02

I00

911

8 112

II I10

8

_.

v .c

108

f 106 E

104

D

X

2 - 102

I00

I12

I10

I08

I06

I04

I02

I00

98 I- _-

- 4 - 3 - 2 - 1 0 I 2 3 4 5 6 7 8 9

Productivity g 112

II 110

5 108 6 f 106 E 2 104 % - c 102

I00

- v .c M

D

w

00

I12

I10

I 08

I06

I 04

I02

100

011 ," I"

- 4 - 3 - 2 - 1 0 I 2 3 4 5 6 7 8 9 Quarters from trough

Spain

output

- 4 - 3 - 2 - 1 0 I 2 3 4 5 6

Emofovment I06

I04

I02

I00

98

96 .- .- - 4 - 3 - 2 - 1 0 I 2 3 4 5 6

Productivitv g 106 - II h 2 104 Y

f 102 D

5 : 100 aJ V

- 98

I06

104

I02

I00

98

,- - 4 - 3 - 2 - 1 0 I 2 3 4 5 6


Previous recovery

Sources: OECD. Quarterly Labour force Stotistics; OECD Economic Outlook, No. 57, June 1995.


Chart I . I (Cont.)


Swedenb

output

Switzerland

OUtDUt I08

I I I I06

:c I00

I I I I

98

96 - 4 - 3 - 2 - 1 0 I 2 3 4 5 6 7

Employment

98 98

QL 96 ," - 4 - 3 - 2 - 1 0 I 2 3 4 5 6 7

Productivity

I08

I06

I04

I02

I00

8 108 - I

98

96

104

-

96 - 4 - 3 - 2 - 1 0 I 2 3 4 5 6 7


1 Trough I993 QI = 100 Trough 1983 QI = 100 - " -

I08

I06

I 04

I02

I00

- 4 - 3 - 2 - 1 0 I 2 3 4 5 6

Employment

.- - 4 - 3 - 2 - 1 0 I 2 3 4 5 6

Productivitv

I06

104

I02

I00

98

96

- 4 - 3 - 2 - 1 0 I 2 3 4 5 6 Quarters from trough

Previous recovery Trough I982 4 4 = I00

b) Break in employment series after I992 44. Sources: OECD, Quorterly Labour Force Statistics; OECD Economic

Outlook, No. 57, June 1995.


Chart 1 . 1 (Cont.)


United Kingdom

output

,- -4 - 3 - 2 - 1 0 I 2 3 4 5 6 7 8 9 1011

I"

-4 - 3 - 2 - 1 0 I 2 3 4 5 6 7 8 9 1011

Productivity 8 110

8

- 3 108

= 106

104

v .c M

n E 2 102 3 z - 100

98

96


Current recovery Previous recovery i Trough 199241 = 100 Trough 1981 QZ = 100 P

I10

I08

I06

104

I02

I00

98

96

I10

I08

I06

104

I02

I 00

98

96

I10

I08

I06

104

I02

I00

United StatesC

output 8 I20 - II

f 115 Y

2 110 n

2 108

E

5 8

D - I00

95 - 4 - 3 - 2 - 1 0 1 2 3 4 5 6 7 8 9 1 0 1 1 1 2 1 3 1 4 1 5

Employment 0 120 2 II

f 115 M

$ 110 n 5

108 m D -

I00

95

Productivity 8 120

f 115

;

5

- II h

Y

2 110 m n

108 3 -0 -

I00

95 .- - 4 - 3 - 2 - 1 0 1 2 3 4 5 6 7 8 9 1 0 1 1 1 2 1 3 1 4 1 5


I20

I15

I10

I08

I00

95

I20

I15

I10

I08

I00

95

I20

I15

I10

I08

I00

9';

I Current recovery Previous recovery I j Trough I991 Q I = 100 Trough 1982 Q3 = 100 1 I ~

c) Adjusted for the break in the employment series after 1993 44.

Sources: OECD, Quarterly Lobour force Statistics; OECD Economic Outlook, No. 57, June 1995.


Germany, Japan and Sweden. However, unlike in Australia, Canada, the United Kingdom and the United States, the 1990s trough in activity for these countries was preceded by much steeper declines in activity than occurred prior to the 1980s trough (Chart 1 . 1 ) . Thus, no simple “rebound” story appears to emerge consistently across OECD countries of steep (weak) declines in output being followed by a stronger (weaker) rebound in activity.

Among the remaining countries presented in Table 1.5 and Chart 1. I , Italy and Spain stand out as being the only ones experiencing considerably faster output growth than in the previous recovery. Finland, France and Switzerland have experienced similar rates of output growth in comparison with past experience. In contrast, the current recovery in Japan appears to be particularly anaemic.

2. Productivity per employed person

The extent to which output growth translates into gains in employment will depend on the growth in labour productivity, defined as output per worker. Typically, productivity moves pro-cyclically, initially decreasing during recessions because of labour hoarding and increasing in the initial phase of a recovery because employers often seek to increase the hours worked by their existing workforce before hiring new workers.

There are some signs that, for many OECD countries, labour productivity growth over the recovery has been relatively strong in comparison with the previous upswing. In Australia, and especially in Italy and Switzerland, productivity gains over the course of the current recovery have been much greater than during the previous upturn (Table 1.5 and Chart 1 . 1 ) . For most other countries, either comparable rates of productivity growth were recorded during both the current and previous recovery or, as in the case of Canada, productivity growth was only slightly lower than previously despite much slower output growth. Japan is a n exception, with only very modest increases in productivity being recorded so far.

3. Employment growth

Given these patterns of output and labour productivity growth, how has employment growth fared to date in comparison with the previous recovery? Employment growth typically lags the recovery in aggregate demand, although the speed of employment adjustment varies from country to country for a variety of reasons [ OECD, ( 19946) 1 .

Total employment started to increase within a year after the trough in activity in the United States. In Australia, Canada and the United Kingdom, it only began to pick-up during the second year of the

recovery, but has grown more rapidly thereafter (Chart 1.1).* However, employment growth in each of these countries has been weaker than over the corresponding period during the previous recovery. This is related to weaker real output growth (Canada and the United States) as well as, in the case of Australia, relatively strong productivity growth.

Among countries which have entered into recovery more recently there are some different trends to be noted. Employment growth in France has been faster than experienced during the previous re~overy.~ Spain’s employment performance has also been somewhat better, with smaller declines in employment being recorded than during the previous upturn. In Italy, Finland, Sweden and Switzerland, however, there has been a much more pronounced shake-out of employment than in the past, both prior to and immediately following the most recent trough in activity. In Finland and Sweden, in particular, employment only began to recover in 1994, some 4 years after the onset of the recession. As yet, there are few signs that the substantial declines in employment in Italy have come to a halt. In Japan, employment has been essentially flat.

In sum, there is some evidence that the speed of employment adjustment has been somewhat faster during the current recovery than in the previous one for a few countries such as France, Spain and the United Kingdom. Nevertheless, employment growth in most countries has been somewhat weaker over the current upswing compared with the previous recovery of the 1980s.

4. Part-time and full-time iobs

This section takes up two issues concerned with the types of jobs being generated during the current recovery: Has employment growth been predominantly in part-time or full-time work? Are there different trends across countries? The composition of employment changes over the current and previous recoveries is compared in Table 1.6 for a number of OECD countries. It should be noted that international comparisons of part-time employment should be made with considerable care because of significant differences across countries in the definition of part- time work (see the notes to Table E of the Statistical Annex).

During the 1980s, the share of part-time work in total employment increased in almost all OECD countries [OECD ( 1994b)l. The increase was most pronounced in a number of European countries, though generally starting from a low-base, and in Australia, New Zealand and japan. The rise in part- time work has generally gone hand-in-hand with rising participation rates for women (Statistical Annex, Table K) .


Table 1.6. Composition of employment growth in the last two recoveries in selected OECD countriesd, Annual averages, percentages

Australia Employment growth Full-time share Part-time share

Employment growth Full-time share Part-time share

Canada Employment growth Full-time share Part-time share

Employment growth Full-time sha re Part-time share

Fin 1 and Employment growth Full-time share Part-time share


France Employment growth Full-time share Part-time share


GermanyC Employment growth Full-time sha re Part-time share


ttalyd Employment growth Full-time share Part-time share


1992 -0 4 75 5 24 5

I983 0 2

82 5 17 5

1992 -0 I 83 3 16 7

I983 3 4

84 6 I5 4

1992

92 1 7 9

1982 1 2

92 3 7 7

I992 -0 9 87 5 12 5

1985 0 6

89 3 10 7

I992 -0 2 85 9 14 1

1983 -0 7 87 8 1 2 2

1992 -0 6 94 3

5 7 1983

0 7 95 8

4 2

- 6 8

1993 2 3

76 I 23 9

1984 2 9

82 3 I7 7

I993 1 5

82 8 I7 2

1984 2 5

84 7 15 3

I993 -4 6 91 4

8 6 I983

0 5 91 7

8 3

1993 -1 0 86 3 13 7

1986 0 2

88 5 I I 5

I993 -1 8 85 2 I4 8

1984 0 4

88 I 1 1 9

1993 -4 7 94 7

5 3 1984

0 9 95 0

5 0

1994 3 3

75 6 24 4

I985 4 8

81 9 18 1

1994 2 8

83 0 I7 0

1985 3 4

84 5 15 5

1994 1 5

91 5 8 5

1984 0 3

91 7 8 3

1994 1 2

85 2 14 8 987 0 7

38 5 1 1 5

994 -0 6

I985 1 0

87 6 12 4

1994 - I 7 94 0 6 0

I985 0 1

95 1 4 9

Japan Employment growth Full-time share Part-time share

Employment growth Full-time share Part-time sha re

Spaind Employment growth Full-time share Part-time share


Sweden Employment growth Full-time share Part-time sha re

Employment growth Full-time sha re Part-time sha re

Switzerland Employment growth Full-time sha re Part-time share


United Kingdom Employment growth Full-time sha re Part-time sha re


United States' Employment growth Full-time share Part-time sha re


I992 1 0

79 5 20 5

I984 1 0

83 6 16 4

I992 -3 4 94 3

5 7 1982 -0 5

1992 -4 1 75 7 24 3

I983 0 0

75 2 24 8

1992 -3 0 72 2 27 8

I983 0 2

I992 -2 3 77 9 22 1

I983 1 8

81 8 18 2

I992 1 0

82 5 17 5

1983 3 5

81 6 18 4

1993 0 0

78 9 21 1

1985 0 2

83 5 16 5

1993 -3 5 93 6 6 4

1983 -0 3

1993 -5 5 75 1 24 9

I984 0 0

75 4 24 6

1993 -1 6 71 9 28 I

I984 1 4

1993 0 5

77 5 22 5

I984 1 7

80 0 20 0

I993 2 0

82 5 17 5

I984 3 3

82 4 I7 6

1994 -0 3 78 6 21 4

1986 1 0

83 3 16 7

I994 0 7

93 2 6 8

I984 -3 6

1994 -0 9 75 I 24 9

I985 0 9

76 0 24 0

1994 -1 0 71 1 28 9 985

2 1

994 0 7

77 0 23 0

I985 0 5

79 6 20 4

I994 2 1

81 1 18 9

I985 2 0

82 6 17 4

- Data not available

a) Trend in employment is derived from the annual average of seasonally adjusted quarterly series b) Full-time and part-time shares for Eurostat countries exclude persons employed who did not classify themselves as full-timers or part-timers The data on

part-time employment are slightly different from those presented in Table E. Statistical Annex, full-time and part-time shares have been calculated utilising data for the age group 16-64 or 15-64. whereas part-time shares in Table E comprise workers of all ages

cj Data for FT/PT shares prior to 1992 concern western Germany only Data for employment growth refer to western Germany for all years d) Data for FT/PT shares for 1992 onwards are not directly comparable with previous data because of changes in the new European Labour Force Survey

introduced by Eurostat in 1992 e) Data for FTPT shares for 1993 onwards are not directly comparable with previous data because of a break in series f] Data for FTPT shares for 1994 are not directly comparable with previous data because of a break in series

Sources OECD, Ouarteriy Labour Force Statistics, Table E, Statistical Annex, and data provided by Eurostat


Apart from structural factors, cyclical patterns may also affect the proportion of part-time workers. As economies go into a downturn, involuntary part- time work tends t o increase, a s firms first adjust hours before resorting to layoffs (see Chapter 2 ) . Also, sectoral influences could be at work, as part-time employment is more concentrated in the service sector than in manufacturing [OECD (1994a)j. Thus, a shake-out in manufacturing jobs may lead to an increase in the employment share of part-time work during a recession and a subsequent fall during a recovery.

In t h e United States, t h e current recovery has generated both part-time and full-time jobs (1994 data are not directly comparable with previous year^),^ in marked contrast with the corresponding period in the 1980s where job growth was largely in full-time work. Over both recoveries, employment in Australia has tended to grow faster in part-time work,5 although this probably reflects a strong trend rise in the employment share of part-time work. Initially, employment gains in the United Kingdom, and to a lesser extent in Canada, were predominantly in part-time work, but this has since been reversed, with larger employment gains occurring in full-time employment than in part-time work. The United Kingdom also experienced significant part-time employment growth in the mid- 1 9 8 0 ~ whereas the share of part-time employment in Canada was relatively constant over the same period. In France, part- time employment has been growing strongly during the current recovery, partly as a result of a number of fiscal incentives introduced in 1992, and its share of total employment has increased more rapidly than in t h e previous recovery. In Germany, lapan and Sweden, the share of part-time employment has risen during the current upswing whereas it was stable or declined during the previous recovery.

In summary, it would appear that for most countries the initial phase of the current recovery was accompanied by somewhat weaker job growth than in the previous recovery. However, to a large extent this reflected slower output growth than in the past. In many countries, part-time jobs accounted for a greater share of all employment gains compared with the previous recovery. For those countries well into recovery, employment growth has subsequently accelerated - with the pick-up occurring mainly in full-time jobs. It remains to be seen whether this pattern will be repeated elsewhere.

5. Labour force patterns

The extent to which overall growth in employment leads to declines in unemployment will depend on how fast the labour force is growing. While population growth is one of the main driving forces behind increases in the labour force, changes in participation

rates also play an important role. In the short-term, decisions to participate in the labour market may vary with the stage of the cycle [Elmeskov and Pichelmann (199?)], As discussed further in the next chapter, labour force growth tends to rise during recoveries as those who previously felt that they did not have a chance of finding a job become more optimistic and start searching actively for one. On the other hand, downturns may lead some to leave the labour force, and others who might have entered it will wait until conditions improve. This cyclical responsiveness of the labour force varies greatly across OECD countries - low (high) cyclicality tends to be associated with high (low) levels of unemployment. However, most countries appear to have shared a common trend of a decline in the responsiveness of the labour force to changes in employment over time6 [OECD (19946)).

Data comparing labour force growth over the current and previous recoveries are presented in Table 1.7. With the exceptions of France and Spain, the recent growth of the labour force has been much weaker than in the previous recovery. Indeed, in Italy, Sweden, Switzerland and the United Kingdom, the labour force has even declined over the current recovery.

6. Unemployment

Typically, unemployment continues to rise until a recovery has become well established. At some point, however, a s the pick-up in employment growth gathers strength, the unemployment rate will start to decline. Thus, for countries in which the recovery is relatively recent, the decline in the unemployment rate may not yet have begun to occur,

In most countries, t h e unemployment rate increased over the first year of recovery7 (Table 1.7). Where data are available, they show that, in the second year of recovery, either the unemployment rate started to decrease (the United Kingdom and the United States) or changed little (Australia and Canada). Japan is an exception where unemployment continued to increase.

In Australia, Canada and the United States, the unemployment rate had fallen below its level at the trough in activity after about 3 years, slightly longer than in the previous recovery. In the United Kingdom, the decline in unemployment during the current recovery has been much deeper and more rapid than in the previous one. In contrast, the rise in unemployment rates during the current recovery in France, Germany and Italy have been much greater than in the past. Finally, in Finland, while unemployment has begun t o decline recently, this needs t o be placed in t h e context of an unpreceden ted rise of around 16 percentage points in its unemployment between 1990 and 1994.


Table 1.7. Development of labour force and unemployment rates since the last two troughs in selected OECD countriesa

Percentages

Period after trough

Labour force

First year Second year Average Since trough

Australia 1991 02-1994 04 1983 01-1986 0 3

Canada 1991 (21-1994 04 1982 Q4-1986 0 3

Finland 1993 0 2 - I994 04 1981 01-1982 0 3

France 1993 01-1994 04 I984 02- I986 0 I

Germany 1993 01-1994 04 1982 04-1984 0 3

Italy 1993 03- 1994 04 1982 03-1983 04

fapan 1992 03-1994 04 1983 02-1985 0 3

Spain 1993 0 2 - 1994 04 1981 01-1982 0 3

Sweden 1993 01-1994 04 1983 01-1984 04

Switzerland 1993 02-1994 Q4 I982 0 4 - 1983 0 2

United Kingdom 1992 01-1994 0 4 1981 02-1984 01

United States 1991 01-1994 04 I982 0 3 - I986 0 2

0 5 13

03 1 7

-0 I 1 9

0 6 0 2

00 0 1

-0 4 1 5

0 8 0 6

1 8 0 9

-2 5 0 1

-2 5 0 5

-1 2 -0 3

1 0 1 4

0 4 I 1 2 4 2 5

1 1 0 9 2 5 1 9

0 1 1 4

0 9 0 4

-0 2 0 1

-0 4 1 6

0 4 0 6

0 4 0 6

1 0 I0

-0 9 0 6

-1 0 0 8

-0 6 -0 7 0 1 0 6

0 8 1 0 1 6 1 7

Unemployment rate

First year Second year Average Since trough

1 3 -0 2

0 7 -1 5

10 0 9

1 0 0 5

1 4 0 7

0 7 0 5

04 0 1

2 0 2 2

10 -0 I

0 4 0 2

I I 1 3

08 -0 6

0 1 -0 3 -1 .o -1 4

0 1 -0.6 -0 1 -3 1

-0 3 08

0 9 0 5

1 6 0 8

1 1 08

0 5 0 7 -0 1 00

1 4 3 2

0 2 -0 3

-0 2 0 5

-0 7 -0 2 1 0 2 0

-0 2 -1 0 -1 9 -2 8

a) For the labour force averages of annualised quarterly growth rates over each period for the unemployment rates total change over the period in percentage points

bj Data refer to western Germany Sources OECD Ouarterly Labour Force Statistics OECD Economic Outiook No 57 June 1995

D. DURATION OF UNEMPLOYMENT AND UNEMPLOYMENT FLOWS

section begins with a brief discussion of both recent and longer-run developments in long-term unemployment (LTU) by age and sex. However, the dynamics of

So far, the discussion of unemployment has only labour markets are only partially captured by an anal- examined changes in aggregate levels and has ysis of changes in the stock of unemployment and ignored changes in the composition of unempioy- LTU. Underlying these changes are much larger flows ment by duration or by age and sex. Therefore, this between the three labour force states of employment,


unemployment and out of the labour force. Therefore, the section also looks at “proxy” flows into and out of unemployment, and how they change over the cycle. It concludes with an analysis of matched flow data for a smaller number of countries, with a particular focus on the probability of leaving unemployment and the destinations of those who d o manage to exit from unemployment.

1 . Indicators of long-term unemployment

In many OECD countries, the overall rise in unemployment since the mid- 1970s has been associated with an increase in long-term unemployment (LTU). As shown in Table 1.8, the LTU rate (LTU as a percentage of the labour force) varies considerably across countries. While currently in the 1 to 4 per cent range in most countries, it is particularly high in Italy, Ireland and Spain (between 6 and 1 1 per cent). Since the beginning of the 1980s, the rate in these three countries has been in the 5 to 12 per cent range - levels usually associated with total unemployment rates in most other countries.

In the majority of countries, youths tend to have the highest LTU rates but this often reflects high overall rates of unemployment for youths. On the other hand, the incidence of LTU (LTU as a percentage of total unemployment) for youths is generally much lower than for the older age groups, except in Greece and Italy and, to a lesser extent, in Ireland and Spain. Thus, while large numbers of youths enter unemployment, most exit that status relatively quickly (see below). In many countries, older workers (those aged 55 and over) appear to be particularly a t risk of long spells of unemployment following job loss.

Has the most recent recession and recovery changed these patterns? Despite a much larger rise in overall unemployment rates, the LTU rate in Sweden has only risen modestly t o around l’h per cent of the labour force during the past few years. In contrast, the substantial rise in Finnish unemployment in the early 1990s has been reflected in a large rise in its LTU rate, to over 5 per cent. In France, Japan and Italy, the rise in the LTU rate has also been modest (comparing 1983 and 1993). For those countries which have been in recovery for a relatively long period of time, the patterns are divergent. In Australia and Canada, the LTU rate rose to a higher level than during the previous recovery (comparing 1983 and 1993), although there was a fall in LTU in Australia during the course of 1994, whereas for the United Kingdom and the United States it was slightly lower. In New Zealand, the problem of relatively large numbers of LTU has only emerged since the beginning of the 1990s.

What has been the relationship between the incidence of long-term unemployment and changes in the overall unemployment rate? Not surprisingly,

countries with the lowest unemployment rates across the OECD area tend t o have a low incidence of LTU (Chart 1 .2 ) as well a s low LTU rates. However, the relationship is not particularly strong.8 For example, unemployment rates are slightly lower in Australia than in Canada, but the Australian incidence of LTU is about 20 percentage points higher.

A somewhat stronger relationship appears t o exist by gender. Typically, with the main exception of the Netherlands, in countries where unemployment rates are much higher for women than for men, the incidence of LTU for women also tends to be higher. The most notable examples are Belgium, France, Greece, Italy, Portugal and Spain. The opposite also appears t o be the case, most notably in Ireland and the United Kingdom. In a number of countries, such as Australia, Canada, Japan, New Zealand, Sweden, the United Kingdom and the United States, it also appears that changes over time in both unemployment rates and in the incidence of LTU have been smaller for women than for men.

2. “Proxy” flows into and out of unemployment

Examining the flows into and out of unemployment can help explain variations in unemployment and in long-term unemployment. For example, changes in the size of the unemployment stock are caused by either changes in the inflows, changes in the outflows or both. This subsection, following previous presentations in the Employment Outlook (1990, 1993), attempts to illuminate the current unemployment problem by examining these flows, and consid- ering how they differ across countries and over the business cycle.

To generate actual flow data requires following individuals over time and recording any change in labour force status. As this information is not readily available in many countries, “proxy” flow data have been constructed for most OECD countries. Flows into unemployment are proxied by stock data on those unemployed for one month or less; outflows are calculated by an identity linking changes in the stock of unemployed to inflows and outflows (see Box for a discussion of measurement and methodological issues and the notes to Table 1.9 for further details of how these data are constructed). As shown in Table 1.9, inflow and outflow rates are widely divergent across the OECD area. In particular, in most of Continental Europe inflow rates are low in comparison with those in North America. Similarly, outflow rates also tend to be higher in North America, most of the Scandinavian countries and Japan, and lower in the rest of Europe. These differences, in turn, are reflected in differences in long-term unemployment. Low and declining flows out of unemployment could indicate that employers are becoming more cautious about hiring new personnel; in Europe, this change in employers’ behaviour may be related to the size of


Table 1.8. Long-term unemployment rates in selected OECD countriesa

Australia I979 1983 1985 I993 1994

Belgium 1983 1985 1993

Canada 1979 I983 1985 1993 1994

Denmark 1983 1985 1993

Finland 1980 1983 1985 1991 1993

France 1979 1983 1985 1993 I994

Germanye

1983 1985 1993

Greece I983

I993 Ireland

1983 1985 1992

1983 1985 I993

1979 1983 I985 I993 1994

1983 1985 1993

1985

ltalye

Japan

Netherlands

Total M e n W o m e n 15-24O 25-54c 55+" Total Men W o m e n 15-24b 25-54c 55+d

1 0 2 3 2 2 3 6 3 3

7 5 7 7 4 3

0 2 0 9 0 8 1 3 1 3

4 2 2 6 2 7

1 2 1 0 I 1 0 7 5 4

1 7 3 4 4 7 3 8 4 7

2 7 3 3 3 1

2 6 3 4 4 8

5 2 1 1 0 9 0

5 5 6 9 6 0

0 3 0 3 0 3 0 4 0 5

5 7 6 0 2 9

0 8 2 5 2 6 4 1 3 6

4 7 4 7 2 8

0 3 1 2 1 1 1 7 1 6

3 6 2 1 2 4

I 1 1 1 1 3 0 9 6 6

I 1 2 4 3 5 2 9 4 0

2 5 2 9 2 4

1 3 1 9 2 5

6 4 1 2 7 9 6

3 5 4 4 4 3

0 4 0 4 0 4 0 5 0 6

5 1 5 7 2 4

1 2 2 4 1 7 2 9 2 9

I2 3 12 8 6 4

0 4 1 3 1 3 1 7 1 7

5 0 3 3 3 0

1 3 1 0 0 9 0 5 4 0

2 6 4 7 6 3 4 8 5 6

3 0 3 9 4 0

5 0 6 2 8 5

2 9 7 6 7 9

9 3 I I 4 8 8

0 3 0 1 0 2 0 4 0 4

6 8 6 7 3 6

1 9 3 7 3 3 5 1 4 4

1 1 7 1 2 5 6 3

0 3 1 2 0 8 0 8 0 9

7 0 3 3 1 8

0 5 0 9 0 2 0 5 4 9

2 8 6 4 9 6 4 5 5 9

3 7 3 3 1 8

7 6 10 4 13 6

5 7 I3 3 10 5

I7 6 22 4 179

0 2 0 3 0 1 0 3 0 6

8 2 7 9 2 6

0 7 2 1 2 0 3 3 2 9

6 9 7 1 4 1

0 2 0 8 0 8 1 3 1 3

3 7 2 6 2 8

1 1 1 1 1 1 0 6 5 2

1 3 2 5 3 8 3 6 4 6

2 5 3 3 3 0

2 1 2 7 3 9

5 1 10 5 9 1

2 6 3 5 4 0

0 4 0 3 0 3 0 4 0 4

5 2 5 9 3 0

0 5 0 6 1 8 3 0 4 2

3 8 4 2 2 7

0 0 0 9 0 9 1 4 1 4

2 7 1 8 3 4

2 8 1 4 2 1 1 5 6 8

1 8 3 5 4 1 4 1 4 7

2 0 3 3 5 1

0 5 0 8 1 1

4 6 8 5 5 0

4 2 0 8 0 8

0 5 0 7 0 7 0 7 0 7

3 6 2 5 2 3

New Zealand I986 1993 I994

Norway 1979 1983 1985 I993 1994

Portugal I986 1993

Spain 1979 1983 1985 I993 I994

Sweden 1979 I983 1985 1993 1994

United Kingdom e 1983 1985 I993

United States I979 1983 1985 1993 I994

North America I979 1983 I985 1993 I994

OECD Europee g

1979 1983 1985 I993 I994

OECDe g 1979 1983 1985 I993 1994

0 3 3 2 2 9

0 0 0 1 0 1 0 8 1 3

4 2 2 3

2 5 8 9

1 2 0 1 1 4 13 4

0 1 0 4 0 3 0 9 1 4

5 0 5 7 4 4

0 2 1 3 0 7 0 8 0 7

0 2 1 2 0 6 0 8 0 7

0 9 4 1 5 1 4 7 6 6

0 4 2 1 2 4 2 3 1 8

0 0 3 8 3 1

0 0 0 0 0 1 0 8 1 5

2 9 1 8

2 1 7 6

10 6 8 1 9 7

0 1 0 4 0 3 1 2 1 7

6 1 6 5 5 8

0 3 1 6 0 8 I 0 0 9

0 3 1 6 0 9 1 2 1 1

0 7 3 6 4 5 4 1 5 3

0 4 2 1 2 3 2 2 1 8

0 2 2 3 2 4

0 0 0 1 0 1 0 7 1 2

6 0 3 1

3 5 12 0 15 5 I7 2 I9 8

0 2 0 3 0 3 0 6 0 9

3 4 4 6 2 5

0 2 0 9 0 5 0 6 0 6

0 2 1 0 0 6 0 8 0 8

1 3 4 8 6 0 5 6 8 3

0 5 2 3 2 6 2 5 2 1

0 2 4 1 3 3

0 0 0 0 0 0 1 9 1 1

9 5 4 1

6 0 I9 9 24 5 18 3 2 1 0

0 1 0 2 0 1 1 3 19

8 1 7 5 5 6

0 3 1 3 0 7 0 6 0 8

0 3 1 2 0 6 0 6 0 7

1 9 8 7

10 I 8 0

1 1 7

0 7 4 1 4 5 3 4 2 6

0 3 2 9 2 8

0 0 0 2 0 2 1 4 1 4

3 1 2 1

1 5 6 3 9 0

10 5 12 4

0 1 0 2 0 1 0 8 1 2

4 1 5 1 3 9

0 2 1 3 0 7 0 8 0 7

0 2 1 2 0 7 0 8 0 7

0 6 3 1 4 0 4 2 6 1

0 3 1 7 1 9 2 1 1 8

0 0 2 8 2 4

0 0 0 0 0 2 0 8 0 8

0 7 16

1 2 1 7 5 3 6 4 7 3

0 4 1 1 1 4 I I 1 7

4 2 5 4 5 0

0 3 I I 0 7 0 9 0 8

0 3 0 9 0 6 0 9 0 8

1 0 2 6 3 5 4 3 4 6

0 5 1 4 1 7 2 0 1 5

a) Unemployed for o n e year a n d over a s a per cent of t h e labour force bi 16-24 in Norway, Spain, Sweden, t h e United Kingdom a n d t h e United Sta tes c) 25-44 in Canada, 25-49 in France di 45+ in Canada, 50-t in France, 55-64 in Finland a n d Sweden, 55-74 in Norway ei Break in series af ter 1991 d u e t o changes in dehnition introduced in to t h e 1992 European Labour Force Survey fi Up to and including 1990. western Germany only

g ) Weighted average for above countries a n d years only Sources Tables 0. R. S, Statistical Annex, OECD. Labour Force Statistics. a n d data supplied by Eurostat


Chart 1.2

Incidence of long-term unemploymenta and the unemployment rate by gender Percentages

40

35

30

25

20

15

Australia

40

35

30

25

20

15

20

18

16

14

12

10

Austria

20

18

16

14

12

10

80

75

70

65

60

55

4 6 8 10 12 Unemployment rate

Belgium

18 16

14

12

10

8

6

4

2

0 4 6 8 10 12 14 16 18 20

unemployment rate

3 55 I; b 50 W

5 45

40 0

35

30

25

20

15

2.6 2.8 3.0 3.2 3.4 3.6 3.8 4.0 4.2 Unemployment rate

Canada

6 7 8 9 10 / I 12 13 Unemployment rate

Denmark

55

50

45

40

35

30

25

20

15 2 4 6 8 10 12 14

Unemployment rate

01 Persons unemployed 12 months and over.

Sources Tables R and S, Statistical Annex, and OECD, loboor Force Statistics, Part 11.


Chart I .2 (Cont.)

Incidence of long-term unemployment" and the unemployment rate by gender Percentages

Finland France

3 !i L

8 0

C E -

35

30

25

20

15

10

5 0 5 10 15 20

Germanyb

Unemployment rate

55

50

45

40

35

30

25

3 55 !i

50

g 45

L

C 0

9 -

40

35

30

25

3 60 !i L

QJ

50 TI C -

40

30

20

4 6 8 10 12 14 Unemployment rate

Greece

55

50

45

40

35

30

25

5 6 7 8 9 10 I I 2 4 6 8 10 12 14 16 Unemployment rate Unemployment rate

Ireland

Unemployment rate

Men a) Persons unemployed 12 months and over b) Up to 1990, data refer t o western Germany, thereafter t o the

whole country c Women Sources Tables R and S, Statistical Annex, and OECD, lobour Force

Statistics, Part I I


Chart I .2 (Cont.)


I taly Japan

_I -- 4 6 8 10 12 14 16 18 20

Unemployment rate

Netherlands

2.0 2.2 2.4 2.6 2.8

New Zealand

Unemployment rate

4 6 8 10 12 14 16 Unemployment rate

2 4 6 8

N o w a y

10 12 Unemployment rate

I 2 3 4 5 6 7 Unemployment rate

a) Persons unemployed 12 months and over.

Sources: Tables R and S, Statistical Annex; and OECD, Labour --c- Women

Force Statistics, Part 11.


Chart I .2 (Cont.)


Portugal

2 4 6 a 10 12

Sweden

Unemployment rate

3 14 14

12

10

8

6

4

2 2 2 4 6 8 10

Unemployment .rate

3 18 5 Yj 16

E 14 x a,

= 12

10

a

6

4

2

Spain

70 0 88

3 70 3 . L

d 60

P a5 91

50

40 40 79 .

30 30

79

20 I _ -

-

20 5 10 15 20 25 30

Unemployment rate

United Kingdom

3 60 60 5

z E 50 P

50

86 92 40 83O.84

91 30 .

- 20

(7.' L

- 90

40

30 8 9 . b

92 b

20

United States

4 6 a 10 12 14 Unemployment rate

i a

16

14

12

10

a

6

4

7 4 5 6 7 a 9 10-

Unemployment rate

a) Persons unemployed 12 months and over.

Sources: Tables R and 5, Statistical Annex; and OECD, labour * Women Force Statistics, Part II.


Flow data: methodological and measurement issues

Proxy unemployment flow data

The "proxy" inflows into unemployment refer to those who are unemployed for less than a month (see notes to the Table 1.9). These figures will be biased downwards as they do not include those who move in and out of unemployment within the reference month. Also, they will be biased downwards if the survey week in a continuous labour force survey (e.g. Spain) is not the first week of the month andthe survey determines duration of job-search in months rather than weeks. In addition, the calculated rate will be biased if "incorrect" job-search responses are given by the unemployed. Analysis of U.S. data indicate that about one-fourth of the unemployed at month t + I who were employed in month t were classified with a duration greater than one month [Bowers and Horvath ( 1984) J .

The proxy outflow is estimated as the difference between the average monthly level of inflows and the monthly average change in unemployment over one year. This is clearly different from the true outflow rate, defined as those who leave the unemployment stock within a certain period of time. Despite these problems, they are useful measures to capture some of the dynamics of unemployment and broad differences across countries.

Perhaps the most important limitation of these rates is that they cannot take into account the source and the destination of the flows. That is, they do not indicate whether someone entered unemployment from outside the labour force or by leaving or losing a job. Similarly, the data on outflows reveal nothing about whether an unemployed person has subsequently found a job (and what type), or has left the labour force.

Matched data from labour force surveys

Tables 1.10 and 1 . 1 1 show, with the exception of the United Kingdom (retrospective data), flow data based on the matching of records of respondents to labour force surveys. In the American survey (CPS), each household is interviewed for four consecutive months, dropped for eight months and re-interviewed for four final months. The CPS data are matched from one month in a year to the same month in the previous year and summed-up over twelve months. The Spanish data refer to one quarter in 1992 matched to the same quarter in 1993. The Australian data refer to the period between September and December 1993 which may lead to picking up some seasonal influences. The Dutch data refer to two surveys of a panel once in two years. Data for the United Kingdom refer to the survey of Spring 1993 and, retrospectively, to Spring 1992.

The impact of these different sample intervals on observed flow rates can be illustrated using monthly flow data for Australia and the United States. In Australia, some 32 per cent of the unemployed in November 1993 had found a job or left the labour force one month later (ABS (1993)l. However, as shown in Table 1 . 1 1 , this exit rate rises to around 47 per cent when transitions over a three-month period are taken into account. For the United States, the corresponding monthly outflow rate between November and December of 1993 was 43 per cent lcalculated from data presented in Barkume and Horvath (1995)l. This outflow rate rises to around 75 per cent when measured over a 12 month period between 1992 and 1993 (Table 1 . I 1 ) . Thus, outflows tend to be higher when measured over a longer interval of time. Up to and including 1992, western Germany; subsequent data concern the whole of Germany. However, while outflow rates for Australia would be substantially higher if also measured over 12 months, the monthly comparison suggests they would still be lower than in the United States.

Apart form these differences in sample periods, there are a number of more general problems with matched data. Sample attrition is one, i.e. people who stop responding (e.g. because they move) are lost to the sample. "Movers" are often considered more likely than "stayers" to have a more marginal labour force status and to change status more often. There will also be errors in the classification of labour force status which tend to lead to more measured movement as opposed to "real" changes. Also, some respondents give inconsistent answers. For example, in the Australian September-December match, some persons were classified as full-time employed in September and long-term unemployed three months later. Similar problems have been found with other matched data. While such problems tend to cancel each other out in the net published data, interpreting the flows is not easy. Retrospective data may be affected by recall bias (respondents may not accurately remember their former labour market status). Another drawback is that, being based on two points-in-time, they do not capture changes of labour force status between them. Thus, neither a full account of flows into nor flows out of unemployment can be examined.

The available data relate to sizeable samples, except for the Netherlands where there is an "underrepresenta- tion" of the unemployed. Therefore, the data for the Netherlands should be interpreted with particular caution.


Table 1.9. Monthly flows into and out of unemploymenta

Australia 1979 1983 1985 1993 1994

Belgium 1983 1985 1993

Canada 1979 1983

1993 1994

Denmarkf

1983 I985 1993

1980 1983 1985 1991 1993

France 1979 1983 1985 1993 I994

1983 1985 1993

Greece 1983 1985 1993

Ireland 1983 1985 1992

1983 1985 1993

1979 1983 1985 1993 1994

I 985

Finland

Germany" g

ltaiy f

Japan

Inflows [per cent of source population) b

Total Men Women 15-24< 25-54d 55+e

0.65 0.67 0.73 0.79 0.87

0.23 0.14 0.42

1.95 2.49 2.47 2.40 2.25

0.33 0.29 1.75

1.19 1.75 1.49 2.04 2.83

0.30 0.29 0.32 0.34 0.37

0.22 0.25 0.57

0.42 0.32 0.30

0.68 0.35 0.55

0.15 0.14 0.41

0.26 0.40 0.33 0.38 0.37

Netherlands 1983 0.37 1985 0.28 1993 0.24

0 62 0 65 0 75 0 86 0 83

0 25 0 14 0 43

2 03 2 73 2 64 2 61 2 43

0 46 0 32 191

128 1 88 147 2 44 3 57

0 30 0 31 0 34 0 35 0 37

0 26 0 24 0 64

0 59 0 41 0 30

0 87 0 39 0 60

0 18 0 13 0 44

0 32 0 40 0 33 0 44 0 45

0 47 0 31 0 28

0.68 0.66 0.71 0.73 0.91

0.22 0.14 0.41

1.66 1.66 1.85 1.76 I .68

0.20 0.27 1.61

1.10 1.59 1.47 1.61 2.09

0.30 0.28 0.30 0.34 0.38

0.19 0.25 0.51

0.27 0.24 0.30

0.43 0.25 0.52

0.12 0.15 0.38

0.2 I 0.43 0.34 0.32 0.30

0.27 0.24 0.19

165 I65 193 2 11 1 89

0 68 0 43 0 93

3 46 4 43 4 37 4 38 4 1 1

0 98 0 55 3 45

2 22 3 07 2 90 3 33 4 20

0 67 0 61 0 60 0 44 0 48

0 52 0 64 0 76

126 i 03 0 95

1 16 0 60 0 89

0 32 0 28 o 82

0 45 0 68 0 66 0 80 0 75

0 78 0 72 0 41

0 67 0 78 0 75 0 83 0 66

0 19 0 13 0 53

1 59 2 24 2 26 2 33 2 20

0 28 0 34 2 09

I 0 5 154 117 2 04 2 99

0 21 0 26 0 30 0 41 0 44

0 22 0 24 0 79

0 38 0 26 0 31

0 54 0 28 0 49

0 1 1 0 1 1 0 33

0 21 0 35 0 24 0 32 0 30

0 37 0 23 0 29

0 05 0 03 0 07 0 10 0 26

0 02

0 02

0 99 115 119 1 29 1 18

0 05 0 07 0 35

0 28 0 54 0 90 0 56 0 74

0 1 1 0 08 0 1 1 0 09 0 10

0 02 0 04 0 16

0 06 0 05 0 02

0 26 0 15 0 19

0 04 0 02 0 04

0 19 0 22 0 25 0 18 0 19

0 04 0 03 0 02

outflows [per cent of source population] 0

Total Men Women 15-24c 25-54d 55+e

21 8 10 8 16 7 11 6 14 4

2 7 8 6

34 5 25 5 29 4 25 6 27 5

6 3 21 4

30 7 43 6 36 7 17 4 13 9

61 4 8 3 7 3 4 3 0

61 9 0

7 8 4 7

3 0 3 8

1 8 9 5

19 5 23 1 16 6 17 1 14 4

6 8 6 4

20 6 7 8

14 5 9 6

12 7

3 6 9 2

33 7 23 4 27 7 24 3 25 8

8 2 21 6

28 4 44 1 38 6 15 2 14 1

7 2 6 0 4 1 3 1 2 9

5 9 9 3

10 4 5 6

2 0 2 8

2 2 8 9

17 4 19 9 13 0 16 2 14 3

7 0 6 5

23 1 14 4 20 2 14 7 16 7

2 1 8 0

33 3 22 0 26 6 23 3 24 6

4 9 21 4

33 2 42 3 34 7 20 8 13 6

5 3 3 9 3 3 3 6 3 0

6 3 8 8

5 7 4 0

4 8 5 7

1 5 I0 0

23 2 29 9 22 6 18 4 14 5

6 4 6 3

19 8

18 5 15 5 17 0

1 1 8

4 8 1 1 7

37 1 29 1 36 9 36 9 36 4

7 4 29 4

38 9 49 3 56 6 24 7 22 6

7 3 5 0 4 5 4 4 4 4

12 0 13 9

9 6 6 1

4 7 5 5

1 3 9 6

32 6 53 I 28 3 33 8 25 5

10 4 1 1 4

25 0 10 7 16 6 9 9

13 3

1 7 7 7

32 2 23 6 26 0 23 2 25 5

5 9 19 3

28 9 43 2 31 0 16 2 12 8

6 0 5 4 3 5 3 2 2 7

4 3 9 0

6 2 3 8

1 9 3 0

2 4 9 3

17 7 19 0 16 1 17 0 12 8

4 7 5 1

18 3 3 4 5 0 5 1 9 4

0 0 3 3

32 8 21 4 23 2 I8 3 21 7

4 7 16 7

16 6 26 5 16 4 6 8 4 8

3 4 2 7 1 8 2 5 1 7

0 4 4 4

1 1 2 2 3

2 5 3 8

8 2 9 8

7 3 4 2 6 0 2 1 6 4

10 4 0 0

2% E M P L O Y M E N T O U T L O O K

Table 1.9. Monthly flows into and out of unemploymenta (Cont.)

Inflows (per cent of source popuiationjb


New Zealand 1986 1993 1994

Norway I979 1983 1985 1993 I994

Portugal' 1986 1993

1979 1983

1993 1994

Sweden 1979 I983 1985 1993 1994

1983 1985 I993

1979 1981 I985 1993 1994

Spain

I 985

United Kingdom '

United States

0 94 107 1 06

0 28 0 47 0 32 0 45 0 68

0 07 0 34

0 27 0 29 0 35 0 56 0 56

0 60

0 66 125 114

0 48 0 51 0 67

2 18 2 59 2 45 2 06 173

0 78

1 10 1 09 1 09

0 27 0 51 0 27 0 51 0 82

0 08 0 37

0 48 0 47 0 52 0 71 0 44

0 56 0 76 0 67 143 125

0 52 0 49 o 82

2 I ? 2 70 2 46 2 18 183

1 00 105 I 04

0 28 0 43 0 38 0 39 0 59

0 07 0 31

0 08 0 14 0 20 0 42 0 67

0 63 0 81 0 64 1 08 I02

0 44 0 53 0 53

2 23 2 50 2 43 1 94 163

189 2 1 1 2 33

126 1 86 1 60 173 117

0 16 0 63

0 58 0 65 0 75 107 1 06

169 1 98 158 2 58 2 26

141 1 44 1 70

4 75 5 35 5 16 4 85 3 78

0 70 0 86 0 80

0 27 0 54 0 32 0 69 0 62

0 06 0 31

0 21 0 22 0 29 0 52 0 52

0 40 0 57 0 47 1 10 1 00

0 45 0 49 0 72

145 1 94 185 155 I 3 1

0 00 0 24 0 12

0 21 0 45 0 00 0 00 0 25

0 02 0 05

0 I 1 0 14 0 12 0 12 0 10

0 17 0 26 0 28 0 41 0 44

0 07 0 08 0 14

0 81 1 04 0 99 0 81 0 91

outflows (per cent of source popuiationjb


25 I 14 4 I7 7

40 8 25 0 42 3 19 1 21 6

3 2 I5 3

3 7 1 8 1 7 1 8 2 7

35 6 24 5 28 5 1 1 6 18 4

6 1 9 3

47 4 34 7 41 4 37 4 37 6

19 2 I 2 4 I5 4

35 6 24 0 41 3 18 0 19 8

4 3 18 3

5 0 2 4 2 1 2 0 2 9

36 1 22 5 27 1 10 6 I7 7

4 6 7 8

43 7 30 I 37 6 34 5 35 8

33 2 17 2 20 8

46 4 26 2 43 3 20 9 21 7

2 4 12 6

1 1 0 8 1 0 1 5 2 4

35 1 26 6 29 9 13 2 19 5

8 4 1 2 4

51 3 41 2 45 9 41 2 39 7

27 5 18 2 21 5

39 7 31 8 47 5 27 5 38 8

3 8 19 2

2 9 1 7 2 1 2 8 3 9

45 8 33 0 39 7 I8 1 28 2

8 9 I 1 4

53 4 42 9 49 6 50 8 46 4

24 I 12 2 15 9

46 7 198 37 0 15 5 17 3

2 8 13 8

4 7 1 4 1 4 1 2 2 0

33 5 23 7 28 4 9 8

16 5

4 8 9 1

42 3 29 7 36 4 32 0 33 9

0 0 9 9 7 6

20 8 20 8 37 5 12 1 6 7

0 0 7 8

4 3 7 7 2 1 1 2 2 3

146 8 4

1 1 1 4 5 7 8

2 8 5 0

38 4 28 5 34 5 26 4 27 4

Data not available aj inflows refer to those unemployed for less than one month (two months in the case of Finland)

The number of outflows is estimated as the difference between the average monthly level of inflows and the monthly average change in unemployment over one year, that is outflows = [(Ijt) + l(t - 1))/21 - I(C(tj - C(t - 1))/12] where I(t) and l(t - 1 j are the monthly inflows and

C(t) and C(t - l j the level of unemployment for years t and t - I respectively For Canada, Italy, Norway. Spain, Sweden and the United States, inflows and outflows have been constructed using annual averages of monthly or quarterly data for both total unemployed and those unemployed for one month or less For other countries, both inflows and unemployment are based on single readings taken one year apart The years used in estimation were 1978/79 (1980/82 for Finland), 1982/83. 1984/85 (1983/85 for Netherlands. 1986/87 for Portugal and New Zealand), 1992/93 (1991/92 for Ireland and 1989/91 and 1991/93 for Finland). 1993/94

bj Working-age population ( 1 5-64) iess the unemployed for inflows, total unemployment for outflows cj 16-24 in Norway, Spain, Sweden, the United Kingdom and the United States dj 25-44 in Canada, 25-49 in France ej 451 in Canada, 50+ in France, 55-64 in Finland and Sweden, 55-74 in Norway fj Break in series after 1991 due to changes in definition introduced into the 1992 European Labour Force Survey gj Up to and including 1990, western Germany

Sources Tables Q, R, S, Statistical Annex, OECD, Labour Force Statistics. and data supplied by Eurostat

Table 1.10. Jobless persons at time t + I distributed by their labour force status at time t

Australia 1 Sept 1993

Labour force status 1 t / Dec 1993 at time t

Labour force status at t i I

Total Unemployed NILFC

Age group 16-64 Sample size (000s) Total Full-time employment Part-time employment Unemployment

Not in the labour force

Age group 16-24 Sample size (OOOsj Total Full-time employment Part-time employment Unemployment






of which > 12 months




6 024 100 0 51 4 I5 8 7 3 2 4

25 5

1 213 100 0 40 3 I9 7 12 0 2 6

28 0

3 988 100 0 58 9 15 8 6 3 2 %

18 9

823 100 0 31 8 9 6 4 9 2 8

53 7

443 I00 0

8 9 9 1

56 7 2% 0 25 4

162 I00 0

7 6 8 8

48 2 I % 8 35 3

237 I00 0 100 10 1 60 9 26 2 19 1

44 100 0

7 7 4 5

65 3 40 1 22 6

1 510 100 0

4 0 5 3 4 6 1 6

86 1

282 100 0

3 0 7 9 7 4 1 2

81 6

778 100 0

5 2 5 7 5 3 2 1

83 8

450 100 0

2 6 3 0 1 5 0 9

92 8

~ ~~

Canada t Dec 1989

1 t I Dec 1990

Labour force status at t + I

Total Unemployed N L F C

16 966 100 0 56 6 1 1 6 5 9 0 5

25 9

3 494 100 0 42 5 20 6 8 2 0 3

28 7

1 1 150 100 0 65 4 10 0 5 6 0 5

18 9

2 322 100 0 35 3 6 2 3 4 0 4

55 2

I 027 100 0 46 5 10 0 22 4

2 3 21 2

289 I00 0 37 4 15 I 22 0

0 8 25 6

670 100 0 50 8 7 9

21 7 2 8

19 7

67 100 0 42 7

8 5 31 6

3 7 17 3

4 534 100 0

I8 5 6 3 6 3 0 6

68 9

1026 100 0 20 5 15 7 8 5 0 4

55 2

2 103 I00 0 23 4 4 7 7 4 0 9

64 4

I 405 I000

9 8 1 7 2 8 0 3

85 7

Netherlands a

t 1990 t t I 1992



2 988 100.0 48.9 16.8 4.0 2. I

30.2

. .

101 909 100 0 100 0

21 4 4 9 153 4 0 33 7 3 1 I9 5 1 8 29 7 88 0

2 343 100 0 51 6 18 1 4 1 2 2

26 1

n I(

3 < I( n Z -I

3

-I

3 3

0 -

- - -

R

J 9

Table 1.10. Jobless persons at time t i I distributed by their labour force status at time t (Cant.)

Norway t 1992 01

Labour force status t + 1 1993 01 at time t




Not in the labour force Age group 16-24 Sample size (000s) Total Full-time employment Part-time employment Unemployment








2 738 100 0 51 3 19 1 4 9 0 8

24 8

5 76 100 0 23 8 20 3

7 9 0 7

48 0

1 784 100 0 61 9 18 4 4 5 0 8

15 2

378 100 0 42 8 20 2

2 1 0 5

34 8

125 100 0 30 9 13 0 32 5

4 9 23 6

42 100 0 29 3 9 8

29 3 2 4

31 7

77 100 0 30 7 14 7 34 7 6 7

20 0

6 100 0

639 100.0

8.0 11.0 4.9 0.8

76.1

2 46 100.0

9.0 13.5 5.7 0.4

71.8

249 100.0

8.1 10.9 5.7 1.2

75.3

144 100.0

6.3 6.9 2.1 0.7

84.7

Spain d

t 1992 0 1 t t I 1993 01



7 256 100.0 45.4

2.9 10.5 4.5

40.4

I 728 100.0 29.8 2.6

15.6 5.6

49.0

4 128 100.0 56.1 3.1

10.8 5.0

29.8

1 400 100.0 33.0 2.6 3.4 1.7

61.0

928 100.0 28.1

2.3 48.9 22. I 18.5

359 100.0 24.8

2.4 43.0 15.7 24.5

520 100.0 30.3

2.3 52.5 26.0 14.6

49 100.0 29.7

1.6 53.3 27.0 15.5

2 889 100.0

4.7 0.7 4.1 2.1

90.3

75 1 100.0

2.9 0.4 4.8 2. I

91.3

1 230 100.0

4.6 1 .o 5.4 2.9

89.0

908 100.0

6.4 0.4 I .7 1.0

91.4

United Kingdom t Spring 1992

1 i I Spring 1993



34 330 100.0 53.6 14.5 7.1

25.5 . .

6 298 100.0 43.3 9.1 9.4

40.8 . .

22 525 100.0 60.5 16.0 6.8

16.9 . .

5 507 100.0 36.8 14.5 5.6

43.2 . .

2 630 100.0 28.8 4.9

48.0

18.3 . .

77 1 100.0 26.3

3.1 41.1

29.4 . .

1 578 100.0 29.9

5.6 50.1

14.4 . .

28 1 100.0 29.5 6.0

55.2

9.3 . .

8 264 100.0

6.3 4.2 4.8

84.7 . .

1891 100.0

5.7 3.2 4.2

86.9 . .

3 697 100.0

6.2 5.5 6.0

82.3 . .

2 677 100.0

6.8 3.2 3.8

86.3 . .

United States t 1992

t + 1 1993



99 685 100.0 58.9 13.1 4.9 0.4

22.7

15 077 100.0 29.7 25.3 8.5 0.2

36.1

69 093 100.0 68.6 11.0 4.5 0.4

15.4

15 515 100.0 44.1 10.7 2.8 0.4

42.4

4 221 100.0 34.7 13.5 28.8 3.0

22.9

1 109 100.0

16.2 18.0 26.0 0.8

39.7

2 771 100.0 41.4 11.7 29.6 3.8

i 7. I

34 1 100.0 40.2 13.5 31.4 3.2

15.0

23 091 100.0

8.7 7.9 5.3 0.5

78.2

4 723 100.0

5.9 14.9 7.9 0.3

71.3

1 1 043 100.0 10.0 7.4 6.0 0.6

76.6

7 325 100.0

8.5 4.2 2.3 0.5

85.0

. . Data not available. a) Sample size denoted in numbers, not in thousands b) Original data adjusted to preserve totals. CJ NlLF Not in the labour force. d ) The total sample size is not equal to the sum of full-time employed persons, part-time employed persons, unemployed persons and persons outside the labour force, as the total sample size also contains numbers

on those in military service. Sources. National submissions from Australia. Australian Bureau of Statistics, Canada. Statistics Canada: Netherlands Organisatie voor Strategisch Arbeidsmarktonderzoek: Norway. Central Bureau of Statistics;

Spain lnstituto Nacional de Estadistica; United Kingdom Employment Department, United States. Bureau of Labor Statistics.

2

rn x V r 0 4 x rn z 4

0 C 4 r 0 0 x

Table 1.1 1. Unemployed persons at time t distributed by their labour force status at time t + I

Australia t Sept 1991

t + i Dec 1993

Labour force status at t i I Unemployment by duration (months) at time t

Employed Unem- ::::; Total N I L F b Full-time Part-time ployed

Age group 16-64 Total 0-3 4-6 7-12 >I2

Age group 16-24 Total 0-3 4-6 7-12 >12

Age group 25-54 Total 0-3 4-6 7-12 >I2

Age group 55-64 Total 0-3 4-6 7-12 >I2

438 127 57

106 147

145 50 20 43 32

252 70 34 57 91

41 8 4 6

23

1000 I00 0 100 0 100 0 100 0

100 0 100 0 100 0 100 0 100 0

100 0 100 0 100 0 100 0 100 0

100 0 100 0 100 0 100 0 I00 0

14 1 23 3 13 8 14 0 6 4

I6 8 22 9 18 0 13 6 1 1 I

14 2 25 9 1 1 9 15 2 5 5

4 1 2 0 7 7 6 0 3 8

12.6 18.1 13.5 12.4 7.7

14.9 17.5 16.0 16.4 8.1

12.0 19.2 11.0 9.1 8.6

8.4 11.3 23.0 14.4 3.6

57 4 41 2 55 4 61 1 69 6

53 9 41 3 53 4 56 4 70 3

57 4 38 9 56 9 63 3 68 0

70 4 61 9 53 2 73 5 75 0

15 9 I7 4 17 3 12 6 16 3

14 4 18 2 12 7 13 6 I0 5

16 5 I6 0 20 3 12 4 18 0

17 1 24 8 16 2 6 1

176

Canada 1 Dec 1989

t i I Dec 1990


Employed ::&I," Total NILFb

Full-time Part-time ployed

996 563 183 I70 80

287 173 62 41 1 1

630 35 1 105 114 60

79 39 16 16 9

100.0 100.0 100.0 100.0 100.0

100.0 100.0 100.0 100.0 100.0

100.0 100.0 100.0 100.0 100.0

100.0 100.0 100.0 100.0 100.0

38.5 45.7 32.0 26.6 28. I

35.6 38.1 34.3 25.6 40.2

42.4 51.6 34.0 29.7 27.6

18.0 26.3 9.9 6.6

16.3

9.9 9.9

13.1 7.4 7.8

11.9 12.2 14.4 9.2 2.9

9.7 9.4

13.5 7.2 9.3

4.4 4.0 5.8 4.2 3.8

23.1 21.0 20.7 29.6 29.7

22 .1 20.4 19.2 33.9 21.7

23.1 20.5 21.5 28.1 31.7

27.0 27.9 21.7 28.8 28.9

28 5 23 5 34 I 36 4 34 4

30 5 29 4 32 1 31 3 35 1

24 9 18 6 31 0 34 9 31 9

50 6 41 8 62 6 60 4 51 0

Netherlandsa

t 1990 t i I 1992


Employed Unem- N I L F ~ ample

000s) Full-time Part-time

121 1000

97 I000

24.8 23.9 28.1

. .

. .

. .

. .

. .

24.8 23.7 27.8 . . . . . .

. . . . . .

. . . . . .

. . . . . .

23.1 . . . . . . . .

. .

. .

. .

. .

. .

23.7 . . . . . . . .

. .

. .

. .

. .

. .

m x V i-

0 4 x rn z -I

0 C -I

0 0

I-

T

W -

Table 1.1 1 . Unemployed persons at time t distributed by their labour force status at time t i I (Cont.)

Norwaya t 1992 01

t i / 1993 01


Employed Sample Unem- iooos) Total F ~ I I - Part- ploy& "LFb

time time

Unemployment by duration (months) at time t

Age group 16-64 Total 0-3 4-6 7- 12 >I2

Age group 16-24 Total 0- 3 4-6 7-12 >I2

Age group 25-54 Total 0-3 4-6 7-12 >I2

Age group 55-64 Total 0-3 4-6 7-12 >I2

133 1000 279 139 328 254 49 1000 348 130 304 2 1 7 25 I000 292 8 3 333 292 21 I000 263 158 316 263 21 I000 188 1 2 5 375 31 3

45 I000 220 146 293 341 18 1000 294 5 9 294 353 8 I000 250 125 250 375 7 I000 143 143 286 429 4 I000

80 I000 306 139 361 194 27 1000 385 154 308 154 I6 I000 286 7 1 357 286 13 1000 333 167 333 167 14 1000 250 8 3 41 7 250

8 I000 2 2 2 2 2 2 2 2 2 333 3 1000 1 I000 I I000 2 1000

Spain t 1992 01

t i / 1993 01


Emoloved

762 1000 207 3 0 595 155 189 1000 276 2 4 553 127 123 1000 21 7 3 2 594 146 121 I000 235 3 2 586 132 329 I000 152 3 1 6 2 4 183

270 I000 230 2 8 572 133 70 1000 247 2 6 578 9 7 51 I000 243 3 5 576 120 51 I000 267 I 5 546 136 97 I000 191 3 2 579 I64

445 I000 203 3 4 614 150 106 I000 304 2 5 538 133 66 I000 204 3 3 609 153 65 1000 22 1 4 9 622 108

208 I000 146 3 4 651 170

47 I O O O 109 0 4 554 333 13 1000 210 1 3 535 241 6 1000 134 0 0 577 289 5 I000 7 3 0 0 53 1 396

24 I000 5 4 0 0 564 383

United Kingdom a

t Spring 1992 t i / Spring 1993


Emoloved

' 426 1000 204 9 4 534 I69

595 1000 233 7 5 554 138

522 1000 216 104 532 148

309 1000 8 5 7 5 508 33 1

United States 1 1992

t i / 1993


Employed NILFb ;ample Unern-

(000s) Total Full- Part- pioyed time time

4854 1000 335 164 250 250 2 9 2 0 1 0 0 0 334 185 225 255

829 I000 381 135 270 2 1 2 732 I000 335 135 286 245 373 I000 244 115 335 306

I278 1000 241 240 225 292 995 1000 230 253 218 296 152 I000 296 197 270 237 97 1000 258 237 216 289 34 I000 265 5 9 2 6 5 412

3137 1000 391 135 261 213 1740 1000 403 150 228 220

591 1000 426 113 274 184 536 1000 38 I 1 1 8 293 209 270 I000 256 1 1 5 389 2 4 1

439 I O O O 214 150 244 392 185 I000 249 151 238 362 86 1000 221 174 244 360 99 1000 162 131 313 394 69 1000 188 145 159 507

a) Original data adjusted t o preserve totals b) NILF Not in the labour force

Sources See Table I 10


hiring and firing costs [OECD, (1993a)j. It may also be a reflection of differences in the relative generosity of unemployment and related social benefits [ OECD ( 19946) I .

The data on outflows refer to all flows out of unemployment, whether into employment or out of the labour force. Flows out of unemployment into jobs would be expected to increase once employment starts to grow during a recovery. On the other hand, the flow from unemployment to out of the labour force may decrease during a recovery. For countries which do not have pronounced cyclical labour force patterns (e.g. France), outflows in a recovery will be dominated by the exit from unemployment into employment. In a downturn, flows from unemployment to employment are likely to decrease, whereas flows from unemployment to out of the labour force may rise. A similar pattern would also be expected for inflows.

In general, the data in Table 1.9 conform to these expectations. Outflow rates generally increased after the previous trough in activity in the 1980s and declined again with the downturn in the early 1990s (Australia, Canada, Norway, Sweden, and the United States). In those countries where the current recovery is well advanced, outflows have subsequently picked up, but still remain below the rates recorded in the previous recovery. Inflow rates have also followed this cyclical pattern in many countries (Belgium, Denmark, Finland, Ireland, Japan, Norway, and Sweden ) .

As one might expect, given the build-up in long- term unemployment, there is also a structural ele- ment to these flows in some countries. When compared trough-to-trough, significant increases in inflow rates occurred in Australia, Finland, Spain and Sweden which were not entirely offset by increases in outflow rates. Clearly, in Finland and Sweden this was partly related to the particular severity of the recent recession. In Germany, Portugal and the United Kingdom, they have also increased over time, although data availability and/or breaks in the series mean that trough-to-trough comparisons are not possible. There is some indication that inflow rates may have declined over the current cycle in the United States, a fact which might be related to the decline in the use of temporary lay-offs ( U . S . Department of Labor (19946)l.

3. Where do the unemployed come from: an analysis of changes in labour force status

As already noted, the “proxy“ flow data discussed above provide no information on the sources and destinations of these flows into and out of unemployment. For seven countries, it is possible to address this issue using (matched) flow data from labour force surveys. Cross-country differences in

the sources of inflows are first analysed in this subsection followed by a decomposition of outflows by destination. In using these data, it should be noted that cross-country comparison need to be made with care because of important differences related to sample size, sample periods and the way the data have been collected (see Box).

The distribution of the unemployed and those not in the labour force (i.e. the jobless) at time t + I by their labour force status at time t is given in Table 1 . In Australia, the Netherlands, Spain and the United Kingdom, some two thirds or more of all those unemployed at time t + I were not in employment in the earlier period. In other words, it would appear that a much higher proportion of the unemployed in Canada, Norway and the United States entered unemployment as a result of job loss (whether voluntary or involuntary). This finding is consistent with the idea that labour turnover is higher in North America (and Norway) than in many European countries. It is important to stress, however, that this does not mean that North American workers are more likely than European workers to suffer job loss and become unemployed. Although not shown here, the probability of a full-time worker being unemployed one year later is under 3 per cent in the United States compared with almost 8 per cent for a Spanish worker. In all countries shown in Table 1.10, the bulk of those who were not in the labour force (NILF) at time t + 1 were also not in the labour force in the previous period and flows out of the labour force came mainly from employment rather than from unemployment. By age, young persons show considerably more “movement” across all possible labour force transitions than those in the older age groups.

There are also some differences between men and women in the pattern of flows into unemployment (data not presented). Males unemployed at time t + 1 were more likely to have been unemployed in the previous period. In addition, inflows into unemployment from out of the labour force and from part-time work are much larger for women than for men. In part, this simply reflects gender differences in the relative size of these groups (i.e. the overwhelm- ing majority of part-time jobs are held by women).

4. Do those who leave unemployment go into jobs?

Table 1 . 1 1 provides data on outflows both for all the unemployed but also for sub-categories of the unemployed disaggregated by age and duration of unemployment. The first question which can be addressed using this data concerns the probability of an unemployed person finding work from one period to the next: Does this likelihood differ greatly across countries and/or by the duration of unemployment?


Concerning the unemployed as a whole, the proportion of the unemployed at time t who were in employment at time t + 1 is around 50 per cent in Canada, the Netherlands and the United States and much lower elsewhere (between 25 to 30 per cent in Australia, Spain and the United Kingdom). Of those who went into employment, a particularly high proportion in Australia and in the Netherlands found part-time jobs. The proportion of unemployed leaving the labour force altogether is highest in North America (around 25 per cent) and around 10 to 15 percentage points lower in Australia, Spain and the United Kingdom. From the data available it is not possible to establish what proportion of those leaving the labour force in the United States represent discouraged workers (see Chapter 2 for an analysis of this issue). Thus, when taking all forms of joblessness into account, differences across countries in the proportion of the unemployed remaining out of work are much closer than indicated by the proportion remaining unemployed alone.

With respect to gender differences (data not presented), the probability of leaving unemployment for a full-time job is higher for men than for women. The opposite is true with respect to part-time employment. Unemployed women are more likely than men to leave the labour force as well as to remain outside the labour force.

For the countries presented in Table 1 . 1 1 , outflow rates for the long-term unemployed are significantly lower than for the short-term unemployed, especially in Australia and Spain. For the United States, the divergence between outflow rates by duration categories is less pronounced.1° The relatively low level of outflow rates for the long-term unemployed may be the result of several factors: a relatively low level of skills of those who are long-term unemployed; the long-term unemployed may be searching for a specific type of job; and the length of time of unemployment may itself reduce the probability of leaving.”

When the long-term unemployed do get work, it is more often than not in full-time employment. This finding is consistent across all countries and most age groups. However, part-time work is also an important source of jobs for the long-term unemployed in Australia, the United States and, most notably, Norway. This undoubtedly reflects the relatively high share of part-time work in the stock of total employment in these countries, whereas in Spain, where this share is relatively low, there are relatively few exits from unemployment into part-time work.

E. FAMILY STATUS OF THE UNEMPLOYED

High levels of unemployment represent a waste of human resources. However, their welfare implica- tions are likely to differ according to many factors. The family status of the unemployed is one key social indicator of the effects of unemployment on welfare. These effects can be particularly severe for the unemployed who live in families and/or households where there is no source of earned income. Therefore, this section addresses the following issues: How is unemployment distributed by family status? To what extent do the unemployed in general and the long-term unemployed in particular, live in households without any apparent source of labour income? How does this incidence vary by family type and, in particular, for youths?

in the following analysis, a distinction is made between those living in and outside a family. Mem- bers of a family are related by blood, marriage (including de facto marriages in some countries) or adoption; they have been classified in Tables 1.12 to 1.14 as being either spouses, youths (aged under 25) or “other” family relatives. Persons living outside a family are either living alone or in a household where they are not related to the other members.

Table 1.12 gives the distribution of unemployment among married couples, single parents, young persons living in families and those not in families for 1985 and 1993. For several countries, direct comparisons over time need to be made with care because of statistical breaks in the data.I2 Not surprisingly, given that most people live in families, most of the unemployed also do so. However, there is some variation across countries: the proportion ranges from about four fifths in countries such as Australia. Belgium, Germany, the Netherlands, the United Kingdom and the United States to well over 90 per cent in Southern Europe. Approximately one fifth of the unemployed not living in a family are young persons - this proportion rises to about 40 per cent in Australia, Ireland and Turkey.

In 1993, married couples accounted for between 30 to 60 per cent of the unemployed, and in almost half of the countries (Belgium, France, Germany, Greece, Italy, the Netherlands and Portugal), male spouses accounted for a greater share than female spouses. In Japan and most European countries, the proportion of female spouses in total unemployment rose between 1985 and 1993. In part, this may simply reflect the growing share of women in the labour force. In Australia, Canada, the United Kingdom and the United States, there was a decline in the share of unemployed female spouses in total unemployment, whereas the proportion of unemployed male spouses increased (or stabilised in the United States). For these countries, this may be partly related to the fact


Male Female

Australia (1986) 25.4 18.6 Belgium 19.4 38.8 Canada 24.3 24.1 France 19.7 27.7 Germany 18.8 24.3 Greece 18.7 22.7 Ireland 33.6 14.6 Italy 7.7 17.0 Japan c~ d. 33.7 16.0 Netherlands 22.8 15.9 Portugal (1986) 15.2 23.2 Spain (1986) 24.2 8.2 United Kingdom 28.4 21.3 United Statese 19.4 17.2

Table 1.12. Distribution of unemployed persons by family status, 1985 and 1993 a

As a per cent of all unemployed

1985

Male Female

1.1 4.1 0.7 3.0 1.3 4.7 0.6 4.2 1 .O 4.7 . . 2.1 . . 1.8 . . 1.5 . . 4.3

0.8 4.0 . . 2.3

0.4 1 .o 1 .O 3.8 1.8 7.8

In family Not in family Total (000s)

Spouse I Single parent Youth Other Total Youth Total

28 7 6 0 22 5 7 8 27 1 4 2 29 6 6 7 18 6 6 8 36 6 I 5 8 30 8 12 8 56 1 14 9

31 9 22 0 6 7 43 9 13 5 44 8 19 4 24 9 6 7

36 9

83.9 92.2 85.7 88.6 74.2 95.9 93.7 97.1 85.9 72.1 98.1 98.1 86.1 83.2

7.3 16.1 2.0 7.8 3.8 14.3 3.2 11.4 5.3 25.8 1.4 4.1 1.7 6.3 0.5 2.9

14.1 8.1 27.9 0.8 1.9 0.4 1.9 4.8 13.9

16.8

494 448

1 3 1 1 2 432 1 920

297 228

2 069 I 630

596 385

2 920 3 123 8 312

I993

In farnilv Not in family Total (000s)

Spouse Single parent Youth Other Total Youth Total

Male Female Male Female

Australia Austria Belgium Canada France Germany Greece Ireland Italy Japan c, d. e Mexico Netherlands Portugal Spain Turkey United Kingdom United Statese

27 6 15 7 31 9 25 6 15 1 27 6 25 8 22 6 24 2 33 5 25 7 35 I I 3 6 23 4 29 8 166 11 7 17 5 25 3 18 6 23 2 12 4 20 6 31 4 20 2 25 6 20 4 19 6 32 2 10 4 32 5 16 1 I 9 4 15 6

1 .o 4.8 0.7 6.8 1.4 7.4 1.7 5.4 0.6 4.7 0.7 5.0

. . 2.3

. . 3.0 0.6 1 .8

. . 2. I

22 2 7 8 14 6 8 6 16 6 1 1 5 23 1 4 9 I 6 6 8 7 7 4 7 0

36 8 19 5 25 7 13 3 42 3 23 0

38 7 42 9 12 2 18 5 4 1 32 8 I 6 3 33 I 23 1 44 4 10 2 20 0 8 2

33 4

79.0 88.3 79.6 83.7 88.3 80.8 95.5 88.4 97.0 84.5 90.7 77.8 97.9 98.1 98.8 82.2 79.2

8.0 21.0 7.2 11.7 3.8 20.4 3.2 16.3 2.1 11.7 2.3 19.2 1.4 4.5 4.7 11.6 0.4 3.0

15.5 5.7 9.3 4.3 22.2

. . 2. I 0.3 1.9 0.5 1.2 4.6 17.8

20.8

852 148 328

1 564 2 810 2 998

38 1 212

2 307 1 940 1021

436 244

3 391 1 485 2 876 8 734

. . 3.2

. . 3.0 0.2 1.6 0.7 0.8 1.1 4.4 2.6 8.2

Data not available. a) Figures in italics indicate that they are associated with relatively large sampling errors and so, should be interpreted with caution There are no 1985 data

for Austria, Mexico and Turkey. The 1985 and 1993 data for EU countries are not strictly comparable due to a change in European Labour Force Survey definitions in 1992 This break appears to have significantly affected the comparablility over time of the overall level of unemployment for Belgium, Ireland, Italy and the Netherlands.

b) 1993 data refer to the whole of Germany, whereas the 1985 data refer to western Germany only c) The category of male spouses includes male single parents d) The category "Other" includes couples living in the household of a parent ej There is no breakdown for the categories "Youth" and "Other" 0 The category "Not in family" includes other relatives

Sources Data regarding Belgium, France, Germany, Greece, Ireland, Italy, the Netherlands, Portugal, Spain and the United Kingdom were provided by Eurostat on the basis of its European Labour Force Survey Data regarding Australia, Austria, Canada, Mexico and Turkey were provided by their respective national statistical authorities. For data regarding the United States, see Employment and Earnings, lanuary 1986 and 1994. For data regarding Japan. see Report on the Speciai Survey of the Labour Force Survey, February 1986 and 1994.


Table 1.13. Unemployed persons who are in households in which no other person is employed, 1985 and 1993a As a per cent of unemployment by family status

1985

I

Spouse

Spouse

Male Female

Male Female

Single parent

Male Female Youth Other

Australia (1986) Belgi u rn France Germany b Greece Ireland Italy Netherlands Portugal (1986) Spain (1986) United Kingdom United StatesC

70 6 22 2 63 9 12 9 50 3 I8 2 53 9 I7 3 65 4 I4 9 71 9 33 7 57 9 8 2 68 3 16 5 44 2 1 1 0 66 2 33 6 65 5 19 6 42 1 I7 7

In family

Single parent

Male Female

64.8 68.3 . . 90.5

74.1 84.5 78.4 82.1

. . 78.2

. . 83.5 87.5 86.7

. . 70.3 48.8 72.3 63.1 75.9 68.6 82.5

. . 84.6

Youth Other

23 2 43 6 23 0 50 2 I9 8 41 2 16 2 52 1 22 4 42 2 25 4 50 1 174 38 3 28 1 55 1 15 I 29 0 24 7 44 I 23 4 49 2

21 6

1993

Total

41 5 31 7 31 2 34 4 33 6

23 2 44 6 21 8 40 2 41 1 32 3

47 8

Australia Austria Belgium France Germany Greece Ireland Italy Mexico Netherlands Portugal Spain Turkey United Kingdom United StatesC

65 1 32 8 32 9 19 4 63 3 12 7 47 6 20 5 45 a 22 6 57 7 I3 1 64 4 28 9 62 I 16 7 45 4 10 4 51 8 I4 6 32 1 1 1 4 58 9 22 2 66 5 I6 9 57 9 27 5 33 6 17 2

66 3 73 7 36 4 70 0

100 0 100 0 88 3 85 5 54 6 79 0

76 6 85 3

63 7 80 4

73 2 82 6

59 0 73 9 53 9 73 1 76 0 83 7 73 2 83 9

23 3 49 3 7 4 49 6

26 9 44 6 21 8 44 4 17 9 53 6 20 4 43 8 31 8 47 9 20 8 44 0

5 7 24 I 17 3 50 6 I0 0 30 0 24 6 44 6 27 0 43 5 24 7 48 7

22 1

Total

45 9 29 1 39 5 34 5 35 9 30 0 46 5 31 9 19 0 29 4 20 5 36 9 41 1 44 6 32 0

Not in family

Youth Total Total (Yo)

38.4 56.4 74.7 80.3 60.4 79.2 72.6 85.6 65.0 83.6 67.3 81.4 81.8 91.4 76.9 82.8

. . 45.4 63.2 77.3 68.6 80.0

. . . .

43 9 35 5 36 6 47 6 35 6 49 9 25 2 55 3 22 3 40 9 46 6

Not in family

Youth Total

52.1 64.8 51.2 74.5 52.4 75.7 89.3 92.9 85.1 92.8 84.2 90.9 76.9 85.8 78.6 89.9 7.0 5.3

95.4 98.1 . . 89.5

60.8 88.5 64.8 77.1 73.6 86.4

. . . .

Total ( % I

49 9 37 2 46 9 41 3 46 8

51 1 33 6 I7 7 44 6 21 9 37 8 41 6 52 0

32 8

Data not available a) Figures in italics indicate that they are associated with relatively large sampling errors and so, should be interpreted with caution There are no 1985 for

Austria, Mexico and Turkey The 1985 and 1993 data for EU countries are not strictly comparable due to a change in European Labour Force Survey definitions in 1992 This break appears to have significantly affected the comparablility over time of the overall level of unemployment for Belgium, Ireland, Italy and the Netherlands

b) 1993 data refer to the whole of Germany, whereas the 1985 data refer to western Germany only c) There is no breakdown for the categories "Youth" and "Other" d) The category "Not in family" includes other relatives



Table 1.14. Long-term unemployed persons who are in households in which no other person is employed, 1985 and 1993a

As a per cent of unemployment by family status

1985

Spouse

Male Female

Australia (1986) Belgium France Germany Greece Ireland Italy lapan" d, e Netherlands Portugal (1986) Spain (1986) United Kingdom

33 5 7 9

10 0 6 5 18 5 6 0

39 3 I I 2 I9 9 3 7 20 0 1 1 5 32 7 5 9 9 8 3 9

18 7 13 7 30 7 6 4

36 2 8 9

7 0

In family

Single parent Youth Other

22 2 19 8 57 2 23 5

21 6 27 1

. . 33.5

. . 14 3 54.5 34.9

. . 32.4 37.9 31.3

7 5 26 8 7 8 34 2 3 5 13 8 3 1 16 5 3 6 I 1 3 9 6 30 7 7 4 21 5

I7 3 7 2 31 2 4 8 1 1 6 8 7 20 5 5 7 27 4

1993

Total Youth Total

17.7 18.0 7.6

10.9 4.6

23. I 10.3 17.0 19.2 6.2

14.2 17.3

9.2 18.3 37.2 47.4

5. I 17.6 9.9 30.0

. . 29.1

. . 33.6 13.0

18.6 32.9

. . 25.5 17.2 33.8

. . . .

. . . .

Spouse

Male Female

Australia Austria Belgium France Germany Greece Ireland Italy lapan' d, e Mexicof Netherlands Portugal Spain Turkey United Kingdom

32.4 15.7

38.2 9.6 16.7 9.0 18.4 11.7 19.9 6.5 44.6 18.6 27.3 8.1 22.4 8.3 4.2 6.3

27.4 6.6 11.8 6.5 20.7 11.7 19.7 4.3 34.4 11.6

. . . .

In familv

Single parent

Male Female

36 0 23 1

55 4 70 7 43 5 35 7 26 2 35 0

39 6 50 4

26 2 46 0

42.0

33.4 39.6 8.2 18.0

50.7 34.5

Youth Other

9 3 28 2

I0 0 25 2 5 6 20 6 3 6 25 0 9 5 25 5

18 1 33 3 12 4 29 6

I7 3 0 7 3 8 5 5 33 0

13 4 9 6 23 0 7 5 19 4

1 1 3 28 5

Not in family t Total Youth Total I

21.7

23.9 13.3 15.8 14.2 30.4 18.2 16.5 2.8

14.6 6.3

16.1 12.4 24.0

. . 18.0 29.4

20 8 41 9 10 4 30 7 20 4 40 6

28 8 36 8 41 1

16 7 1 4 1 2

33 8 52 2 52 I 41 9

7 7 8 5 30 7 45 3

Total (96)

17.8 20.3 8.8

15.9 4.4

23.4 11.0 16.5 23. I 6.1

14.4 19.6

Total 1%)

23 3

27 5 I5 3 20 5 14 8 31 I 18 9 16 5 2 6

23 0 7 3

16 5 12 4 27 8

Data not available a) Long-term unemployed are those who have been unemployed for I 2 months and over Figures in italics indicate that they are associated with relatively

large sampling errors and so, should be interpreted with caution There are no 1985 data for Austria, Mexico and Turkey The 1985 and 1993 data for EU countries are not strictly comparable due to a change in European Labour Force Survey definitions in 1992. This break appears to have significantly affected the comparablility over time of the overall level of unemployment for Belgium, Ireland, Italy and the Netherlands

b) 1993 data refer to the whole of Germany. whereas the 1985 data refer to western Germany only c) The category of male spouses includes male single parents d) The category "Other" includes couples living in the household of a parent. e) There is no breakdown for the categories "Youth" and "Other" f) The category "Not in family" includes other relatives.



that the recovery was less advanced in 1993 than in 1985. During a recession Unemployment typically affects blue-collar - predominantly male - workers disproportionately.

In Mexico and Southern Europe, young persons living at home comprise one third t o over two fifths of the all unemployed, partly reflecting the high proportion of all youths in these countries living at home, and relatively high rates of youth unemployment. l 3 This falls t o under 15 per cent in countries such a s Austria and Germany, where the system of dual apprenticeship has been associated with low overall levels of youth unemployment. Rising school reten- tion rates and declines in the size of the youth population have been reflected in a decrease in the unemployment share of both young persons living a t home and away from home in virtually all OECD countries.14

Lone parents account for 1 1 per cent (the United States) or less of total unemployment, largely a reflection of their relatively small population share. This, however, must be sharply distinguished from the likelihood of being unemployed. In most countries, the unemployment rates of lone parents are considerably higher than those of married couples [OECD ( 1994b)].I5

In the absence of the support provided by families, persons living away from home may be more vulnerable to hardship a s a result of unemployment. On average, the proportion of the unemployed not living in a family in OECD countries was slightly above 13 per cent in 1985 and increased t o about 15 per cent in 1993.16 More than one fifth of the unemployed are not living in families in Australia, Belgium, the Netherlands and the United States. In contrast, this proportion is well below the OECD average in all the southern European countries.

Unemployment may have particularly severe con- sequences for those in households where no other member is employed, although other sources of income may be a ~ a i 1 a b l e . l ~ Table 1.13 presents the proportion of unemployed persons in households where no other member is employed. In 1993, this proportion ranged from under 18 per cent in Mexico t o around 50 per cent in Australia, Ireland and the United Kingdom,18 with those countries having a relatively low proportion of unemployed persons living outside the family a t the lower end of the range. Not surprisingly. single parents and those not in families are particularly likely t o be in a household where no other person is employed. On the other hand, young persons are much more likely to be in a household with at least one other member working. Relatively few unemployed wives live in a households where their husband or other family members are not working. In contrast, the proportion of unemployed hus- bands in this situation is much higher.

The long-term unemployed living in households where no other member has a job may face the great- est risk of all of social exclusion and economic hardship. From Table 1.14, it can be seen that, on average, this group represents 15 to 25 per cent of all the unemployed. More worrying, this proportion has risen since 1985 in virtually all OECD countries. It is relatively high in Australia, Belgium, Germany, the Netherlands and the United Kingdom, and highest in Ireland where almost one third of the unemployed fall into this category. Other countries with a high overall incidence of long-term unemployment, such a s Greece, Italy and Spain, d o not fall in this category, in part, because a relatively high proportion of the long- term unemployed in these countries are youths living at home where there is a high likelihood of at least one other family member being in work.

F. CONCLUSIONS

The recovery is now well established in nearly all OECD countries. Growth is expected to continue next year and employment is set t o rise both over the remainder of this year and next year. For the OECD area as a whole. unemployment is set to decline further in 1996 after peaking in 1994. Wage and price inflation are projected to increase only modestly from their current low levels.

In countries where the recovery started relatively early, output growth was initially sluggish in comparison with the previous recovery. For most countries, productivity has been growing in line with output and, as a result, employment growth has been relatively modest and, until recently, predominantly in part-time jobs. While employment growth has started to pick up in most European countries, it has not been strong enough yet to lead to significant declines in unemployment. However, for those countries which have been in recovery for a relatively long time, such as Australia, Canada, the United Kingdom and the United States, the unemployment rate has fallen below its level at the last trough in activity. There are indications that the increase in the long-term unemployment has levelled off in the United States. In contrast , long-term unemployment has recently emerged as a serious problem in Australia, Finland and New Zealand.

An examination of movements in proxy rates of monthly flows t o and from unemployment reveals strong cross-country contrasts. Both inflow and outflow rates tend to be considerably higher in North America compared with Europe. They also differ sys- tematically across demographic groups, being considerably higher among youths than adults.

From an analysis of matched flow data , it appears that the probability of leaving unemployment declines with the duration of unemployment. This is particularly true for older persons. Despite low exit


probabilities, when the long-term unemployed find work it is often full-time, although part-time jobs are also an important source of jobs for the long-term unemployed in Australia, Norway, the United States and, most notably for all the unemployed, the Netherlands. Relatively high overall outflow rates from unemployment in North America compared with Europe are associated with not only a relatively high rate of success in finding employment but also relatively large numbers of the unemployed leaving the labour force altogether.

The family distribution of unemployment also shows a variety of patterns across OECD countries. In general, around one-third to a half of all the unemployed are living in households where no other person has a job. This proportion has increased almost universally across OECD countries between the mid-1980s and the early 1990s. Moreover, a substantial and growing proportion of the unemployed living in these "jobless" households are long-term unemployed, a factor which may exacerbate their lack of contact with the world of work.


1. In Table 1.2, no adjustment has been made to the U.S. data on employment and labour force to allow for the break in series between 1993 and 1994 which occurred as a result of changes in the Current Population Survey and the introduction of new population benchmarks. For Chart 1 . 1 and Tables 1.5. 1.6 (except the part-time/ full-time split] and 1.7, the data for the United States have been adjusted by the Secretariat in order to allow for more meaningful comparisons to be made between the current and previous recoveries.

2. While the upswing in output in the United Kingdom began in 1992, it took until mid-1994, as measured by the (mainly] establishment data used in this chapter, for sustained employment growth to materialise. How- ever, employment data from the quarterly labour force survey indicate a somewhat steeper trend of employment growth starting from Spring 1993 ( i .e. within a year of the resumption of output growth]. Quarterly employment estimates from the U.K. labour force survey are not available prior to 1992 and so this source could not be used for the purposes of the analysis carried out in this chapter.

3. This was even more pronounced for market sector employment ( i .e . excluding general government employment) which has been growing at a faster rate during the current recovery than overall employment.

4. In addition to a change in survey design, the definition of full-time and part-time workers also changed in 1994 [U.S. Department of Labor (1994a)l. In contrast to previous practice, the classification of full-time and part- time workers is now completely based on their usual weekly hours worked. The net result of the changes in the survey design and in the definition of part-time/full- time workers was to raise the employment share of part-time work.

5. The rise in the employment share of part-time work in Australia during the current recovery is more apparent from data representing annual averages. The data in Table 1.6 for Australia refer to the month of August in each year and, because of the volatility of monthly estimates, may be less reliable as a guide to changes in the composition of employment growth than quarterly or annual averages. Based on annual averages, the employment share of part-time work rose from 22.3 to 23.6 per cent between 1991 and 1992 and then stabilised at 23.5 per cent in 1993 before rising further to 24.1 per cent in 1994.

6. It is difficult to quantify precisely the extent to which labour force patterns have been affected by cyclical or structural factors. For instance, available data suggest that participation rates have risen in the United States over the current recovery. However, this did not occur

in Canada, because of a significant decline in participation rates of younger people. In comparison with the previous recovery, participation rates of younger persons also declined in Australia and the United Kingdom. The participation rates of young people also declined in Finland, France, Norway, Spain and Sweden, but there was no equivalent drop in participation rates in the previous recession. Participation rates of older workers have also declined recently in most countries. However, this is a continuation of a long- standing trend. In general, male participation rates are declining slowly at the same time as female participation rates are edging up. Apart from participation decisions, recent labour force growth has also been affected by net immigration (e.g. Austria, Australia, Canada, Finland, western Germany, Switzerland and the United States)

7. The analysis focuses on recovery patterns. However, there could well be major differences regarding the severity of the preceding recession. For instance, the recession in the beginning of the 1990s was less severe than the previous one which is reflected by the differences in the maximum level of the OECD area-wide unemployment rate: about 8 per cent during the recent downturn compared with 8'/2 per cent during the earlier recession. Not surprisingly, therefore, the fall in the unemployment rate was more pronounced in the previous recovery period. For those countries which entered the recovery relatively early, similar observations can be made for Australia and Canada.

8. Clearly, institutional differences across countries can have an important impact on measured long-term unemployment. For instance, in Finland and Sweden, the LTU rate and the incidence of LTU have been his- torically at relatively low levels. In these two countries, the extensive use of active labour market programmes is one factor behind this. In addition, the availability of early-retirement packages and other institutional arrangements which decrease the labour force may also result in a reduction in the number of recorded long- term unemployed. For instance, one study which adjusted long-term unemployment data by an estimate of people receiving disability benefits but capable of working (including them as LTU). found that the incidence of Dutch LTU in 1990 would be increased by 14 percentage points [Adema (199311.

9. Despite the focus on unemployment, it is worth noting some findings regarding full-time and part-time employment (data not presented]. Not surprisingly, a large proportion in full-time employment at time t + 1 were also in full-time employment in the previous period. This is particularly the case for prime-age workers and even more so for those in the age-group 55-64


(over 90 percentage points in all countries). Part-time employment is less stable: only about 70 per cent (50 per cent in Spain and the United States) had the same labour market status one period earlier.

10. However, somewhat greater variation exists in exit rates from unemployment when the United States data are disaggregated by weeks of unemployment. Meyer (1990) finds that exit rates rise substantially 2 to 3 weeks prior to the expiration of unemployment benefit entitlement (typically restricted to 6 months in the United States).

1 1 . There are two explanatory hypotheses which may well be complementary. First, long-term unemployment is related to (unobserved) heterogeneity among individuals. Thus, factors such as educational attainment, abil- ity, motivation and possibly ethnicity lower the chances of getting a job. Therefore, some individuals have initially fewer chances of finding a job than others. Those job seekers with higher individual exit probabilities leave first. As a consequence, the proportion of unemployed persons with low individual exit probabilities increases with duration. Averaged over all job-seekers, one would observe a declining average overall outflow rate. Alternatively. it is argued that the duration of the unemployment experience itself reduces the chances on a job (so-called “negative state dependence”). The long-term unemployed become demoralised by their lack of success. Long spells of unemployment may be seen by employers as a bad indicator of a worker’s expected productivity. As both hypotheses lead to the same observed fact, a decline in exit rates, there is an identification problem. Many studies have tried to resolve this issue, e.g. Narendranathan and Stewart (1989). Iackman and Layard (1991), Disney et al. (1992)’ Adema (1993). While the issue is not fully resolved, there appears to be sufficient empirical evidence point- ing to duration dependence playing a complementary role to heterogeneity effects regarding the decline in outflow rates from unemployment.

12. The 1985 and 1993 data for the countries of the European Union are not directly comparable because

of a change in definitions. This break seems to have affected significantly the comparability over time in the overall level of unemployment for Belgium, Ireland, Italy and the Netherlands. In addition, the German data for 1993 refer to the whole of Germany (after unifica- tion), whereas the 1985 data refer to western Germany only.

13. It should noted that many unemployed young persons do not qualify for unemployment insurance benefit.

14. See OECD (19946) for a discussion of unemployment trends by age group.

15. In most countries, lone parents are not required to search for a job to be eligible for social assistance if their children are young. Also, the absence of suitable child-care facilities could alter the search intensity of lone parents dramatically. Thus, the level of unemployment recorded in labour force surveys for this group may underestimate the economic hardship they face [OECD (19936)l.

16. When taking into account Austria, Mexico and Turkey (for which 1985 data was not available), the OECD average was 14 per cent in 1993.

17. This may not always be the case. Some families may be worse of financially with one member in low-paid work than other families where no one is in employment but one or more family members is in receipt of unemployment benefits or social assistance.

18. Data for the United Kingdom indicate that from 1975 to 1990, with relatively unchanged aggregate employment rates, the number of households without work doubled. Among the factors underlying this increase were: an increase in the number of single adult households; an increase in the average duration of unemployment; and a change in the nature of the jobs available, i.e. an increase in the number of part-time jobs, while those in households with no working members were often looking for full-time employment [Gregg and Wadsworth (1994)].


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