Structural unemployment. An analysis of recruitment and selection mechanisms based on panel data among Danish long‐term unemployed

Abstract

The perception of structural unemployment – summarised in the notion of ‘Eurosclerosis’– became almost hegemonic during the 1990s. Policy makers all over Europe tried, by means of supply‐side policies, to counteract the lack of incentives in the developed European welfare states, the lack of qualification on the post‐industrial labour markets and the personal decay due to long‐term unemployment. However, based on the critical case of Denmark, this article challenges the perception of structural unemployment and suggests an alternative business cycle/barrier perception. At the macro level it is difficult to explain the Danish decline in unemployment from 1994 to 2000 within the structure perception. The lack of explanatory power of the structure perception is further highlighted in micro‐level analyses conducted on a panel study of long‐term unemployed. Based on the unemployed's own assessments, we find no indications of supply‐side problems. These results are supported by analyses of actual labour market integration of the long‐term unemployed in the period between 1994 and 1999, which show that education level and previous unemployment had no noteworthy influence on labour market integration, whereas age had a decisive influence. These surprising results further undermine the perception of structural unemployment and the supply‐side policies rooted in this ‘mistaken’ problem definition.