Discouraged Worker Effect Research Articles

Discouraged Worker Effect among Indian Women: Evidence from FLFP Survey

Discouraged Worker Effect among Indian Women: Evidence from FLFP Survey

The labour market dilemma of young urban women in India: An outcome of family welfare optimization

This paper uses a theoretical model to explain the patterns and determinants of labour market participation behaviour of young urban women in India. Based on the National Sample Survey (NSS) data and through probit regression results, it argues that the labour market participation decision of young women is an outcome of the joint utility maximization behaviour of their family. The standard of living of the family, market wage, other family characteristics, including the number of children, adult women in the family, elderly members, and occupation, and gender of the head, etc., are significantly determining their labour market participation; apart from women’s individual characteristics like age (experience) and level of education and training. The empirical result also reflects that the “discouraged worker effect” is stronger than the “added worker phenomenon”. Hence, measures to create jobs in modern services could help boost the stagnant female labour force participation in urban India.

Decoding the Variations in the Female Labour Supply in Rural India: Empirical Evidences Based on Previous NSSO Datasets

The female labour force participation rate (LFPR) in India has been persistently declining and has exhibited an unusual pattern over the years, which deviates from the discourse of a U-shaped relationship between female LFPR and economic growth. The article is an attempt to provide some of the empirical foundations to the female LFPR in rural India, and further delves into a comprehensive understanding of the effects of different factors like household, social, economic and personal factors, empirically through previous NSSO data sets. The data sets used in the study are from NSSO 50, that is, from 1993-94 to NSSO 66, that is, 2009-10, to ascertain the factors that were significant over the years in determining the female LFPR in rural areas. These variables were tested to gain an understanding on the variations in female labour supply in rural India. Being cognisant and by problematising some of the significant factors that affected the female LFPR in the past, the article demands the state to exercise policies beyond its neoliberal framework and the ‘Keynesian welfare-state’ model of ‘superficial’ social security. Methodologically, three models were further created based on the NSSO 66 data set to showcase the perennial discouraged-worker effects among the females in LFPR in rural India. The article further empirically tests Jacob Mincer’s theory: ‘substitution effect dominating the income effect’ in the decision of females entering the labour market in rural India and shows empirically how it does not hold in the Indian context, thereby an attempt on debunking the mainstream theory. JEL Codes: J10, J21, J64, C18

The Effect of Parental Occupation and Family Arragements on Occupational Choices among Brazilian Youth

This paper estimates the added worker effect and discouraged worker effect for young people in metropolitan Brazil. Its main contribution is to reveal how the transition to unemployment by the household head impacts labor supply among youth, considering the demographic changes – especially the size and composition of family arrangements – that Brazil has undergone in recent decades. We designed multinomial probit models (with and without correction of sample selection bias) covering the main metropolitan regions of the country using data from Brazil’s Monthly Employment Survey (PME) for the years 2002 to 2015, which compiles information on monthly transitions in the Brazilian labor market. Our findings point to evidence of a greater transition of young men and women to activation in the labor market, specifically from inactivity to unemployment, in periods when the household head became unemployed. On the other hand, there is no evidence of a statistically significant discouraged worker effect impacting these individuals. Furthermore, the parents’ occupational situation seems to have little effect on the transition to activation of young males in low-income families, unlike those belonging to wealthier families.

Gender Segregation at Work over Business Cycle—Evidence from Selected EU Countries

In this paper, we investigate whether gender employment rate responses to upward and downward fluctuations in the business cycle are symmetric and whether these responses differ depending on gender employment segregation in sectors and on different type of welfare states using the Esping-Andersen’s classification. We use the VAR model both in linear and non-linear (asymmetric) specification of GDP shocks and impulse response function. We find no convincing evidence of discouraged worker effect as it occurs in neither country fully, which suggests not hidden unemployment but rather the phenomenon of involuntary part-time workers becoming more common with the increase of precarious employment. Furthermore, we find that the pattern of gender employment adjustments to GDP fluctuations indicates that the gender sectoral segregation is a deeply entrenched feature within given economic sectors (construction, education, and accommodation) in all studied countries (Germany, Poland, and Portugal). Hence, this stagnation of gender segregation contributes to the preservation of gender pay differentials in spite of many years of equal pay legislation in the EU members.

Unemployment and labor force participation in Canada

ABSTRACT We examine the long run relationship between labour force participation and unemployment rate in Canada using data from 1975M01 to 2019M12. A cointegration analysis is conducted at the aggregate, across gender, and by age. Support is found for an added worker affect for males and a discouraged worker effect for females. Findings by age reveal that the working age females exhibits the discouraged effect. However, we cannot confirm the added worker effect for any male age groups.

Labour force participation and unemployment rate: does discouraged worker effect hypothesis or unemployment invariance hypothesis hold in Africa?

PurposeThe purpose of this study is to examine the existence of discouraged worker effect hypothesis and unemployment invariance hypothesis in Africa, including its five regional groups. Specifically, the study tests the existence of co-integration between different categories of labour force participation and unemployment rate, total male and female labour force participation and the unemployment rate for age brackets 15–24, 15–64 and 15+, respectively.Design/methodology/approachThe study uses the data of 52 countries in Africa which cover the period from 1991 to 2018. Three co-integration estimation techniques namely, the Kao co-integration test, Pedroni co-integration test and Westerlund co-integration test are used to validate the existence of co-integration between the labour force participation and unemployment rate. The dynamic ordinary least square is further used to explore the impact of the unemployment rate on labour force participation, while the pooled ordinary least squares (POLS) that accounts for individual country and time effects is employed for robustness check.FindingsExcept for Southern Africa, it is found that the discouraged worker effect hypothesis holds in Africa and the rest of its regions. This suggests that there is a long-run relationship between labour force participation rate and unemployment rate irrespective of age group and gender classifications. To some extent, the authors discover the existence of cross-sectional dependence in the panel. There is also an inverse relationship between labour force participation and the unemployment rate. This implies that when the unemployment rate is high, labour force participation tends to decline. The results are, however, sensitive to the choice of estimation method.Research limitations/implicationsThe study is limited to the examination of linear co-integration between labour force participation and the unemployment rate in Africa and its five regions. The future study can investigate the possibility of a nonlinear or an asymmetric relationship between labour for participation and the unemployment rate.Social implicationsThus, a policy framework that would generate employment creation is greatly required in Africa.Originality/valueTo the best of the authors’ knowledge, this is a pioneer work that addresses the issue of co-integration between labour force participation and unemployment rate for Africa and its five regions taking into consideration gender and age brackets of labour force participation and unemployment.

The great Indian lockdown 1.0: exploring the labour market dynamics

ABSTRACT This article examines the impact of nationwide lockdown on the Indian labour market, restricted to the first wave of the Covid-19 pandemic. As a result of lockdown, both labour supply and labour demand contracted sharply; moreover, we find evidence of discouraged worker effect. An analysis of the demand side of the labour market shows an unequal impact of lockdown on different segments (region, gender, and caste) of the workforce. There is also a marked deterioration in the quality of employment and wages/income. In this context, we found the policy response of the Union government inadequate and far from satisfactory; as a result, labour market recovery was uneven and stunted.

Beyond the added-worker and the discouraged-worker effects: the entitled-worker effect

This paper identifies and analyses a new effect related to the cyclical behaviour of labour supply: the Entitled-Worker Effect (EWE). This effect is different from the well-known Added-Worker Effect (AWE) and Discouraged-Worker Effect (DWE). The EWE is a consequence of one of the most important labour institutions: the unemployment benefit (UB). We develop a model with uncertainty about the results of the job-seeking and transaction costs linked to such a search process, showing that a kind of moral hazard appears. This creates new incentives for workers and produces an additional counter-cyclical pressure on aggregate labour supply, but with a different foundation from that of the AWE. We present empirical evidence supporting the EWE for the Spanish case. As a forward-looking conclusion, policymakers should rethink their political actions in the future as unemployment might be overstated, particularly in those countries with generous UB systems.

Separating aggregate discouraged and added worker effects: the case of a former transition country

Research background: We analyse the added worker effect (AWE) and the discouraged worker effect (DWE) from an aggregate perspective. The first effect refers to an increase in labour force participation in response to a decrease in the wage rate. The second effect refers to the decision by workers who have been unsuccessful in their job search to leave the labour market or to decrease their labour force participation. For our analysis, we use the case of Poland, a country with a persistently low labour force participation rate.
 Purpose of the article: While previous studies focused on the net of the two effects, we aim to analyse the two effects both separately and simultaneously. We propose a new approach for analysing the two effects. We generalise and model them as resulting from different shocks: (i) the AWE as the result of a negative wage income shock, and (ii) the DWE as the result of a positive job search time shock. The underlying assumption is that both shocks have at least a transitory effect on the labour force participation rate. However, we also track the potential long-lasting effects of these shocks, and we analyse the reactions of gender and age groups to them. While this approach demonstrates the robustness of our results, it also provides the range of the sensitivity, as it shows that there are large differences in the magnitude of the AWE and the DWE for different labour market cohorts.
 Methods: We use the multivariate unobserved component model to extract the AWE and the DWE, and we then use VAR models, applying sign and exclusion restrictions to model the underlying shocks. We use quarterly data for Poland in 1995?2019. Most of these data come from the Labour Force Survey, while the rest come from Statistics Poland.
 Findings & value added: In contrast to previous literature, which analysed only the net effect of the two effects, we model the AWE and the DWE separately. Contrary to the findings of previous research, our approach seems to confirm that both effects are simultaneously present in the labour market, and both effects influence the labour force participation rate. Thus, we find that both effects are significant. Specifically, we show that the AWE is stronger, but transitory; while the DWE is weaker, but long-lasting.

Discouraged Worker Effect and Labor Market Behavior of Urban Married Women

The study investigates the importance of poor local labor market conditions in explaining the labor market behavior of married women in urban India. Using nationally representative employment data, we empirically test for the existence of a discouraged worker effect arising from either of two mechanisms: (i) unexplained gender wage gap, or (ii) degree of underemployment. A three-stage, district-level analysis of female labor market behavior was undertaken, and selectivity bias was controlled for by using censored probit in the second stage and trivariate probit with Geweke–Hajivassiliou–Keane smooth recursive simulator technique in the third stage of this multilevel framework. We find evidence that the wage gap discourages women from participating in the labor market and the prevalence of underemployment, in terms of overqualification by occupation, discourages them from exploring better job opportunities by making on-job search efforts.

Unemployment invariance hypothesis and structural breaks in Poland

We study the long-run relationship between unemployment and the labour force participation rate while accounting for potential non-linearities. We explore two sources of non-linearities: structural breaks (as we allow the relationship to be time-varying) and differences by gender groups. We apply a novel approach, as we extend the cointegration analysis by combining it with structural break tests. The model is applied to Poland, which is a suitable case for study because it allows us to illustrate how this relationship operates in a developed country that was formerly centrally planned. The results qualify previous findings by providing mixed evidence for the invariance, the discouraged worker, and the added worker hypotheses. In particular, in the past, a positive and cyclical relationship – i.e., an added worker effect – could be observed, albeit with differences by gender and age group. For the current regime, we can provide evidence of a discouraged worker effect among Polish men only.

Spatial variations and clustering in the rates of youth unemployment and NEET: A comparative analysis of Italy, Spain, and the UK

AbstractWe investigate the “determinants” of spatial variations in youth unemployment and NEET rates, and the presence of spatial clusters, for Italy, Spain and the UK. We aggregate Labour Force Survey data for the period 1993–2018 to a “regional” level. We find that youths are sensitive to aggregate labor market conditions and a discouraged worker effect. In the UK and Spain, temporary jobs are more likely to be preferred to part‐time jobs, whereas in Italy the opposite occurs. There is evidence of spatial clustering of youth unemployment and NEET rates. We discuss the implications for place‐based regional and labor market policies.

Asymmetry and Non-linearity in Discouraged and Added Worker Effects

ABSTRACTWe examine whether discouraged and added worker effects are state-dependent, business cycle phase-dependent, or change stochastically. We use quarterly LFS data for the 1995–2016 period for Poland. Labor force participation rate behaves non-linearly. The change is rapid and connected to the stable value of the cyclical unemployment rate. An unemployment rate higher than 13% implies a discouraged worker effect. Policy actions should aim to prolong the labor market activity (added worker effect) of females and older workers. Workers may be encouraged to reenter the labor market if their probability of finding a job is improved through active economic policy measures.

Education, Employment and Economic Growth with Special Reference to Females in Kerala

Human development is considered to be the ultimate objective of development, with economic growth as a means to achieve it (Ranis et al. in World Dev 28(2):197–219, 2001). Development stands to be justified when it is equipped with good employment opportunities. Employment provides the means for meeting the income and subsistence needs of the individuals and their families, which fulfils the goal of overall and equitable development (Mathew in Int Labour Rev 154:497–518, 2015). Employment levels would rise when there is sufficient and efficient human capital. Human capital establishes an interconnection between employment and development. The relationship between education and employment is better understood through the labour market, which has a mediating role in influencing educational choices and employment prospects. Against this background, this paper tries to examine the interlinkages between human development, economic growth and employment situation in India with special reference to females in Kerala. Using secondary data, this paper tries to address primarily two objectives: firstly, to examine the relationship between educational attainment, employment and economic growth in India and secondly, to explore the trends and pattern in female employment state-wise with the main focus on Kerala. There exists a huge mismatch between the demand and supply gap among labour force in all Indian states. Employment trends in India, and in particular, women’s employment, have been an issue of considerable discussion in scholarly writings over the last few years. Extensive literature review and data suggest that though there has been a constant rise in the educational level of women in India, the employment rates have not raised at a similar pace. Kerala, the most literate state of the country, shows an identical picture among higher educated women where unemployment rate is as high as 20–30%. Women’s individual job preferences, overall high unemployment in the economy, family constraints, lack of adequate skills and discouraged worker effect are some of the probable reasons for high unemployment among females. The study concludes that “Kerala model of development,” on the basis of its impressive historical accomplishment in social and human development indicators, is definitely praiseworthy but not to be replicated. It is so because though the model has surpassed every state in terms of human development indicators, it showed a development trajectory by fostering unemployment rates, especially in terms of female participation. Therefore, the study suggests that in order to achieve holistic development, there is an urgent need to understand the basic requirement of a particular state. Considering female employment, the study evokes creation of an environment that promotes women to join workforce and thereby attain economic growth. States such as Kerala which have a large pool of educated women must develop policies which aim towards enhancing their employability skills so that the benefits of human capital can be obtained.

Whiteness, Migration and Integration into the British Labour Market

This paper explores the situation of new groups of immigrants by focusing on various categories within the heterogeneous group of individuals which comprise the White population. We combine information on country of origin, ethnicity and religion derived from the UK Labour Force Survey (LFS) to subdivide the White-British, White-Irish and White-Other categories into nine groups, each of which comprises at least 0.1% of the LFS sample. The analyses contrast the recent labour market experiences of eight of these with those of the Christian White-British majority (who form 73.6% of the LFS sample studied). We then investigate labour market outcomes such as over-qualification, unemployment, longer-term unemployment, discouraged worker effects, part-time working and forced part-time work. The participation of the Christian Eastern European group is markedly different to the other categories in terms of likelihood of working part-time either through choice or because they were unable to find full-time work, and they are less likely to become discouraged workers. We suggest that this is because their motivation in migrating to the UK is work related and they are unlikely to remain if the desired employment is unavailable.

The Discouraged Worker Effect and the Added Worker Effect within the Framework of European Debt Crisis

The debt crisis experienced in Europe has had several adverse effects on economies of countries. Employment is one of the adversely affected areas. The relationship between the labor force participation rate and unemployment is essentially examined within the framework of two hypotheses. These hypotheses are “The Discouraged Worker Effect” and “The Added Worker Effect”. The discouraged worker effect anticipates that workers looking for employment for extended periods of time will withdraw from the labor market due to losing hope in periods of economic recession. According to this hypothesis, it is expected that the labor force participation rate will increase once the unemployment rate decreases and vice versa. The added worker effect anticipates that if the worker who provides the livelihood of the family becomes unemployed, other members of the family will participate in the labor market. According to this hypothesis, it is expected that the labor force participation rate will decrease once the unemployment rate decreases and vice versa. This study aims to test whether these two effects apply to selected Euro zone countries (PIIGGS-Portugal, Ireland, Italy, Greece, Great Britain, Spain) during the European Debt Crisis .

Unemployment invariance hypothesis, added and discouraged worker effects in Canada

PurposeThe purpose of this paper is to explore the long-run relationship between unemployment rate (UR) and labor force participation rate (LFPR) for men and women in Canada. Given that there are differences in the URs and participation rates of men and women, the authors perform separate analysis for them also.Design/methodology/approachThe authors use co-integration analysis to investigate the existence of a long-run relationship between UR and LFPR in Canada using time series monthly data for the past 40 years.FindingsThe finding that there is long-run relationship between UR and LFPR leads the authors to doubt the pertinence of the unemployment invariance hypothesis for Canada. The authors further find evidence for added-worker effect for men and discouraged-worker effect for women in Canada and the authors elaborate on the possible explanations for this seemingly contradictory finding.Practical implicationsThe lack of support for the unemployment invariance hypotheses implies that changes in the participation rate which may be due to aging population, policies of early retirement or constraints on working time will affect the UR in the long run.Originality/valueThis paper investigates the unemployment invariance hypothesis in Canada to come up with policy implications about long-run UR. The authors further elaborate on the possible explanations for the added-worker effect for men and the discouraged-worker effect for women that the authors find in this study.

The Empirics of Hidden Labor Force Dynamics in Germany

Abstract The unemployment rate is the core indicator when researchers and policy-makers assess the level of underemployment in an economy. However, accumulating evidence suggests that the unemployment rate is biased and underestimates the true level of underemployment. Closing this gap is especially important because the distortion systematically changes along the business cycle and affects the various subgroups of the population differently. Neglecting these effects when setting up policies might flaw its effectiveness and result in unexpected outcomes. Although the existence of these effects is widely agreed upon only little is known about the magnitude of these effects across various subgroups. Using a highly disaggregated dataset from Germany, this study examines the dynamics in labor force participation that go beyond the unemployment rate. Ample evidence is found that the discouraged and the added worker effect significantly affect particular subgroups in the German labor market. In addition, the discouraged and the added worker effect are generally found to be very symmetric in economic upturns and downturns. Moreover, the labor market reforms in Germany between 2003 and 2005 are found to have reduced the discouraged worker effect on average by 25%, leaving the added worker effect unchanged.

The “Discouraged Worker Effect” in Public Works Programs: Evidence from the MGNREGA in India

Summary This study investigates the consequences of poor implementation in public workfare programs, focusing on the Mahatma Gandhi National Rural Employment Guarantee Act (MGNREGA) in India. Using nationally representative data, we test empirically for a discouraged worker effect arising from either of two mechanisms: administrative rationing of jobs among those who seek work and delays in wage payments. We find strong evidence at the household and district levels that administrative rationing discourages subsequent demand for work. Delayed wage payments seem to matter significantly during rainfall shocks. We find further that rationing is strongly associated with indicators of implementation ability such as staff capacity. Politics appears to play only a limited role. The findings suggest that assessments of the relevance of public programs over their lifecycle need to factor in implementation quality.