Abstract
AbstractThis paper looks at the effects of changes in the age composition of the labour force on aggregate male and female unemployment rates. While it has been common to look at aggregate participation rate changes in terms of a weighted average over age groups this seems not to be the case for unemployment. We show in this paper that changes in the age composition of the labour force (driven mainly by changes in the age distribution of the population) has affected the aggregate unemployment rates in a systematic and, with hindsight, predictable manner. Amongst other things, we show that in the past decade or so, policy makers have benefited from a not inconsequential “free lunch” in that changes in the age composition of the labour force have been pulling the aggregate unemployment rates down below what it would otherwise be by around one percent of the labour force. We also show that this free lunch is now coming to an end.
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