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Aggregate Unemployment and Labour Slack as Indices of Labour Utilisation

In: Working Below Capacity

Author

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  • Chris Neubourg

Abstract

Although in previous studies I preferred the use of multiple indicators to analyse the situation in the labour market and a thorough study of ‘the dough, the doughnut and the hole’ (de Neubourg, 1983, 1985), it makes sense to investigate whether the actual statistical apparatus allows the construction of a single indicator of the degree of non-utilisation of labour resources, that (partly) avoids the shortcomings of the traditional unemployment rate. This chapter defines a method to measure ‘aggregate labour slack’ on the basis of detailed labour market accounts and applies it to the post-1973 data for five countries. The estimates take into account the non-utilised labour capacity due to unemployment, due to changes of the number of hours actually worked and due to changes in registered labour force participation. This exercise does not imply that the application of other indicators—including the traditional ones—is not useful. It should rather be seen as the recognition that a single indicator is sometimes needed in econometric modelling, forecasting and policy evaluation; moreover the aestheticism of summary statistics is appealing.

Suggested Citation

  • Chris Neubourg, 1987. "Aggregate Unemployment and Labour Slack as Indices of Labour Utilisation," Palgrave Macmillan Books, in: Derek Bosworth & David F. Heathfield (ed.), Working Below Capacity, chapter 8, pages 246-275, Palgrave Macmillan.
    • Handle: RePEc:pal:palchp:978-1-349-08649-8_8
    DOI: 10.1007/978-1-349-08649-8_8
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