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Unemployment and Skills in Australia

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  • James Vickery

    (Reserve Bank of Australia)

Abstract

In Australia, as in many other countries, labour-market groups with higher skill levels generally enjoy lower unemployment rates. This paper investigates why this might be the case, whether this is a recent phenomenon, and whether declining demand for unskilled labour, perhaps coupled with wage inflexibility, is an important explanation for the observed increase in the Australian unemployment rate over the past three decades. We find that relative demand shifts towards skilled labour are not an important determinant of the increase in overall unemployment. The shift in demand towards skilled labour has been matched by an equivalent shift in labour supply, leaving the structure of relative unemployment rates across skill groups fairly stable. Unemployment of both skilled and unskilled labour has increased, but this appears to be for reasons unrelated to relative demand shifts across skill groups. We also discuss possible reasons for the pervasively higher unemployment rates of less-skilled workers, drawing on data on individuals from the Survey of Employment and Unemployment Patterns (SEUP). We find that the high unskilled unemployment rate is associated with a higher exit probability from employment relative to skilled workers (a high ‘separation rate’), and a lower probability of finding employment from non-employment (a low ‘matching rate’).

Suggested Citation

  • James Vickery, 1999. "Unemployment and Skills in Australia," RBA Research Discussion Papers rdp1999-12, Reserve Bank of Australia.
  • Handle: RePEc:rba:rbardp:rdp1999-12
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    File URL: http://www.rba.gov.au/publications/rdp/1999/pdf/rdp1999-12.pdf
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    References listed on IDEAS

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    Cited by:

    1. Steven Kennedy & David Hedley, 2003. "A Note on Educational Attainment and Labour Force Participation in Australia," Treasury Working Papers 2003-03, The Treasury, Australian Government, revised Nov 2003.
    2. Ric D. Herbert & Gareth D. Leeves, 2003. "Labour Market Policies and Long-term Unemployment in a Flow Model of the Australian Labour Market," Australian Economic Papers, Wiley Blackwell, vol. 42(2), pages 197-213, June.
    3. Peter Dawkins, 2000. "The Australian Labour Market in the 1990s," RBA Annual Conference Volume,in: David Gruen & Sona Shrestha (ed.), The Australian Economy in the 1990s Reserve Bank of Australia.

    More about this item

    Keywords

    unemployment; skills;

    JEL classification:

    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials
    • J40 - Labor and Demographic Economics - - Particular Labor Markets - - - General

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