Labour Market Matters - July 2013

How does time off from work affect an individual’s job prospects? A study by CLSRN affiliates Kory Kroft (University of Toronto), Fabian Lange (McGill University) and Matthew J. Notowidigdo (University of Chicago) entitled “Duration Dependence and Labor Market Conditions: Theory and Evidence from a Field Experiment†(CLSRN Working Paper no. 101) examines the role of employer behavior in generating “negative duration dependence†– the adverse effect of a longer unemployment spell on individual reemployment prospects . The main finding is that the likelihood of getting a callback requesting an interview significantly decreases with the length of a worker’s unemployment spell prior to a job application. The labour market in the U.S., Canada, and many European countries has been characterized by dramatic structural changes in recent decades, partly due to technological change, globalization, and the shifting economic environment. In addition to these ongoing sources of adjustment, high unemployment rate and weak economic activities persist in many countries as they slowly recover from the “Great Recession†of 2008–09. Thus, whether unemployed workers are able to adjust efficiently to adverse employment shocks has become increasingly important for both individuals’ labour market success and the efficiency of the overall labour market. A paper by CLSRN affiliates Craig Riddell (University of British Columbia) and Xueda Song (York University) entitled “The Impact of Education on Unemployment Incidence and Re-employment Success: Evidence from the U.S. Labour Market†investigates the impact of formal education on transitions between labour force states, especially the transition from unemployment to employment. The study shows that education at both the secondary and post-secondary levels increases the probability of re-employment among the unemployed. Additional post-secondary education reduces the likelihood of becoming unemployed. Additional secondary education, however, does not have a significant influence on the likelihood of becoming unemployed.