Worker Occupational Skills and Unemployment Duration

Abstract

This paper explains differences in unemployment duration among displaced workers by differences in their skills, using the unemployed worker’s previous occupation and years of education to capture skill level. I use the cumulative incidences approach from the statistics literature, a better alternative to the standard survival analysis methods in the case of competing risks. I find that the higher the displaced worker is on the skill ladder, based on their previous occupation, the faster their exit rate to a full-time job by 55%. An extra year of education will increase the exit rate to a full-time job by 7%. The impact of education, however, on exiting unemployment is less pronounced the higher the displaced worker’s previous occupation is on the skillladder.