The persistence of labour market states in Australia

Abstract

PurposeThe study investigates persistence of individuals' labour market activity with a focus on examining whether and to what extent there is genuine state dependence in six labour market states: not-in-labour-force, unemployment, self-employment, casual employment, fixed term contracts, and ongoing employment, and how the persistence and genuine state dependence of the labour market states change with education levels.Design/methodology/approachA dynamic multinomial logit model that accounts for observed and unobserved individual heterogeneity is estimated, using the first 19 waves of the Household, Income, and Labour Dynamics in Australia Survey.FindingsWhile observed and unobserved individual heterogeneity plays an important role in the persistence of each of the labour market states examined, genuine state dependence is found to be present for all the states. It is also found that the persistence and genuine state dependence of unemployment is larger among those with a low education attainment than among those with higher education.Practical implicationsThe existence of genuine state dependence of labour market states calls for early interventions to prevent people from losing jobs.Originality/valueEarlier studies often focus on persistence of a particular labour market state such as unemployment, while this study examines the persistence simultaneously of six labour market states.