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The Role of Worker Flows in the Dynamics and Distribution of UK Unemployment

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  • Michael W. L. Elsby
  • Jennifer C. Smith
  • Jonathan Wadsworth

Abstract

Unemployment varies substantially over time and across subgroups of the labour market. Worker flows among labour market states act as key determinants of this variation. We examine how the structure of unemployment across groups and its cyclical movements across time are shaped by changes in labour market flows. Using novel estimates of flow transition rates for the UK over the last 35 years, we decompose unemployment variation into parts accounted for by changes in rates of job loss, job finding and flows via non-participation. Close to two-thirds of the volatility of unemployment in the UK over this period can be traced to rises in rates of job loss that accompany recessions. The share of this inflow contribution has been broadly the same in each of the past three recessions. Decreased jobfinding rates account for around one-quarter of unemployment cyclicality and the remaining variation can be attributed to flows via non-participation. Digging deeper into the structure of unemployment by gender, age and education, the flow-approach is shown to provide a richer understanding of the unemployment experiences across population subgroups.

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Bibliographic Info

Paper provided by Centre for Economic Performance, LSE in its series CEP Discussion Papers with number dp1058.

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Date of creation: Jul 2011
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Handle: RePEc:cep:cepdps:dp1058

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Web page: http://cep.lse.ac.uk/_new/publications/series.asp?prog=CEP

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Keywords: labour market; unemployment; worker flows;

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References

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  1. Jennifer C. Smith, 2011. "The Ins and Outs of UK Unemployment," Economic Journal, Royal Economic Society, vol. 121(552), pages 402-444, 05.
  2. Gomes, Pedro, 2012. "Labour market flows: Facts from the United Kingdom," Labour Economics, Elsevier, vol. 19(2), pages 165-175.
  3. Michael Elsby & Bart Hobijn & Aysegul Sahin, 2008. "Unemployment Dynamics in the OECD," NBER Working Papers 14617, National Bureau of Economic Research, Inc.
  4. Gregg, Paul & Wadsworth, Jonathan, 1995. "A Short History of Labour Turnover, Job Tenure, and Job Security, 1975-93," Oxford Review of Economic Policy, Oxford University Press, vol. 11(1), pages 73-90, Spring.
  5. Layard, Richard & Nickell, Stephen & Jackman, Richard, 2005. "Unemployment: Macroeconomic Performance and the Labour Market," OUP Catalogue, Oxford University Press, number 9780199279173.
  6. Michael W. Elsby & Ryan Michaels & Gary Solon, 2007. "The Ins and Outs of Cyclical Unemployment," NBER Working Papers 12853, National Bureau of Economic Research, Inc.
  7. Simon Burgess & Hélène Turon, 2005. "Unemployment dynamics in Britain," Economic Journal, Royal Economic Society, vol. 115(503), pages 423-448, 04.
  8. Peter J. Kuhn (ed.), 2002. "Losing Work, Moving On: International Perspectives on Worker Displacement," Books from Upjohn Press, W.E. Upjohn Institute for Employment Research, number lwmo.
  9. George L. Perry, 1972. "Unemployment Flows in the U.S. Labor Market," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 3(2), pages 245-292.
  10. Jacobson, Louis S & LaLonde, Robert J & Sullivan, Daniel G, 1993. "Earnings Losses of Displaced Workers," American Economic Review, American Economic Association, vol. 83(4), pages 685-709, September.
  11. Shigeru Fujita & Garey Ramey, 2007. "The cyclicality of separation and job finding rates," Working Papers 07-19, Federal Reserve Bank of Philadelphia.
  12. Michael W.L. Elsby & Jennifer C. Smith, 2010. "The Great Recession In The Uk Labour Market: A Transatlantic Perspective," National Institute Economic Review, National Institute of Economic and Social Research, vol. 214(1), pages R26-R37, October.
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  1. "Strivers" vs "scroungers": a false dichotomy
    by chris dillow in Stumbling and Mumbling on 2012-12-11 14:50:45
  2. Recovery for whom?
    by chris dillow in Stumbling and Mumbling on 2013-09-16 13:50:18
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Cited by:
  1. Nordmeier, Daniela, 2012. "Worker flows in Germany: Inspecting the time aggregation bias," IAB Discussion Paper 201212, Institut für Arbeitsmarkt- und Berufsforschung (IAB), Nürnberg [Institute for Employment Research, Nuremberg, Germany].
  2. Marianna Kudlyak & Felipe Schwartzman, 2012. "Accounting for unemployment in the Great Recession : nonparticipation matters," Working Paper 12-04, Federal Reserve Bank of Richmond.
  3. Bonthuis, Boele & Jarvis, Valerie & Vanhala, Juuso, 2013. "What’s going on behind the euro area Beveridge curve(s)?," Working Paper Series 1586, European Central Bank.
  4. Jennifer C. Smith, 2011. "The Ins and Outs of UK Unemployment," Economic Journal, Royal Economic Society, vol. 121(552), pages 402-444, 05.
  5. Michael W.L. Elsby & Bart Hobijn & Aysegül Sahin, 2013. "On the importance of the participation margin for market fluctuations," Working Paper Series 2013-05, Federal Reserve Bank of San Francisco.
  6. Ieva Brauksa & Ludmila Fadejeva, 2013. "Internal Labour Market Mobility in 2005-2011: The Case of Latvia," Working Papers 2013/02, Latvijas Banka.
  7. Anna Baranowska-Rataj & Iga Magda, 2013. "Decomposition of trends in youth unemployment – the role of job accessions and separations in countries with different employment protection regimes," Working Papers 53, Institute of Statistics and Demography, Warsaw School of Economics.

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