Unemployment Spells Research Articles

Impact of the COVID-19 pandemic on employment and social benefit receipt in Finland

AbstractThe COVID-19 crisis tested welfare states’ resilience in protecting citizens against sudden health-related and economic shocks. However, the crisis’ effects and responses to it vary substantially across countries. Using administrative registers of the Social Insurance Institution of Finland, we evaluate the impact of the COVID-19 crisis on various socio-economic groups by examining the receipt of social benefits and length of benefit spells. Furthermore, we analyse the duration of unemployment and social assistance spells that started during the outbreak of the COVID-19 pandemic and the probabilities of receiving social assistance among different socio-economic groups during the crisis. The results of our analysis show that in 2020, the receipt of unemployment and social assistance benefits was highest among young people and particularly among women. However, extending the analysis to 2021 we found that unemployment spells were shorter among young people than among older age groups. Thus, while the youngest age groups were hardest hit by the crisis in terms of the increase in the number of recipients, they seem to have recovered from it faster than the older age groups. Our findings indicate that the Finnish social security system succeeded fairly well in mitigating the negative impacts of the crisis for vulnerable groups and those who faced job loss since small adjustments to the benefits maintained the income of these groups.

Labor displacement effects over inter-temporal earnings mobility

I study how involuntary job loss affects workers' inter-temporal labor earnings mobility. I use Panel Study Income Dynamics (PSID) 1973-2017 survey waves to construct transition probability matrices and compute ordered logistic regression estimates. I find that being displaced increases downward mobility compared to never displaced workers. The reduction of hours worked, large spells of unemployment and the destruction of firm-specific human capital depreciate the market value of a displaced worker generating significant labor income losses.

Health-related selection into employment among the unemployed

BackgroundSuccessful transitions from unemployment to employment are an important concern, yet little is known about health-related selection into employment. We assessed the association of various physical and psychiatric conditions with finding employment, and employment stability.MethodsUsing total population register data, we followed Finnish residents aged 30–60 with an unemployment spell during 2009–2018 (n = 814,085) for two years from the onset of unemployment. We predicted any, stable, and unstable employment by health status using Cox proportional hazards models. The data on specialized health care and prescription reimbursement were used to identify any alcohol-related conditions and poisonings, psychiatric conditions and self-harm, injuries, and physical conditions. We further separated physical conditions into cancer, diabetes, heart disease, and neurological conditions, and psychiatric conditions into depression, anxiety disorders and substance use disorders.ResultsThe likelihood of any employment was lower among those who had any of the assessed health conditions. It was lowest among those with alcohol-related or psychiatric conditions with an age-adjusted hazard ratio of 0.45 (95% confidence interval 0.44, 0.46) among men and 0.39 (0.38, 0.41) among women for alcohol-related and 0.64 (0.63, 0.65) and 0.66 (0.65, 0.67) for psychiatric conditions, respectively. These results were not driven by differences in socioeconomic characteristics or comorbidities. All the included conditions were detrimental to both stable and unstable employment, however alcohol-related and psychiatric conditions were more harmful for stable than for unstable employment.ConclusionsThe prospects of the unemployed finding employment are reduced by poor health, particularly alcohol-related and psychiatric conditions. These two conditions may also lead to unstable career trajectories. The selection process contributes to the health differentials between employed and unemployed people. Unemployed people with health problems may therefore need additional support to improve their chances of employment.

Subjective Well-Being Scarring Through Unemployment: New Evidence from a Long-Running Panel

Abstract Scarring effects of unemployment on subjective well-being (SWB), i.e., negative effects that remain even after workers reenter employment, are well documented in the literature. Nevertheless, the theoretical mechanisms by which unemployment leads to long-lasting negative consequences for SWB are still under debate. Thus, we theorize that unemployment can have an enduring impact mainly through (1) the experience of unemployment as an incisive life event and (2) unemployment as a driver of future unemployment. In the empirical part, we focus on one important dimension of SWB: overall life satisfaction. Based on advanced longitudinal modeling that controls for group-specific trends, we estimate scarring through unemployment using the German Socio-Economic Panel (SOEP). Our results consistently show a large negative effect of unemployment on life satisfaction as well as significant scarring effects that last at least 5 years after reemployment for both men and women as well as for short- and long-term unemployment spells. Further analyses reveal that repeated periods of unemployment drive these effects and cause even longer lasting scarring, implying that there are hardly any adaptations to unemployment that buffer its effect on life satisfaction. We conclude that scarring effects mainly work through repeated episodes of unemployment. Regarding policy implications, our findings suggest that preventing unemployment, regardless of its duration, is beneficial for individual well-being not only in the short term.

Couples' early career trajectories and later life housing consequences in Germany: Investigating cumulative disadvantages.

Using data on couples from the German Socio-Economic Panel (1995-2018), this study investigates how couples' early career trajectories affect housing outcomes in early adulthood and how this effect is mediated by couples' joint cumulative income. We apply a life course perspective by identifying dynamic treatments consisting of couples' consecutive employment statuses and examining their longer-term effects on homeownership and income shares spent on rent. Using multichannel sequence and regression analysis, we find that couples in which both partners have insecure employment trajectories, characterized by frequent spells of fixed-term employment and unemployment, are 25 percentage points less likely to own a home in early adulthood compared to couples with more secure career trajectories. Surprisingly, the couples' cumulative income does not remarkably mediate this effect, explaining less than one-fifth of the total effect. For couples who do not own their home but rent, we find that couples with insecure careers spend between 2 and 5 percentage points more of their joint income on rent compared to couples where both partners have secure career trajectories. Cumulative income disadvantages mediate the effects on shares of income spent on rent and reduce the effect sizes by 30-40%. Our findings indicate that inequalities caused by early career patterns can accumulate not only over time but also within couples and transfer to other areas of life, exacerbating housing and wealth inequalities in the longer run.

The Role of Observed and Unobserved Heterogeneity in the Duration of Unemployment Spells

<ns2:p>This paper studies the degree to which observable and unobservable worker characteristics account for the variation in the aggregate duration of unemployment. I model the distribution of unobserved worker heterogeneity as time varying to capture the interaction of latent attributes with changes in labor-market conditions. Unobserved heterogeneity is the main explanation for the duration dependence of unemployment hazards. Both cyclical and low-frequency variations in the mean duration of unemployment are mainly driven by one subgroup: workers who, for unobserved reasons, stay unemployed for a long time. In contrast, changes in the composition of observable characteristics of workers have negligible effects.</ns2:p>

Distribution regression in duration analysis: an application to unemployment spells

Summary This article proposes inference procedures for distribution regression models in duration analysis using randomly right-censored data. This generalizes classical duration models by allowing situations where explanatory variables’ marginal effects freely vary with duration time. The article discusses applications to testing uniform restrictions on the varying coefficients, inferences on average marginal effects, and others involving conditional distribution estimates. Finite sample properties of the proposed method are studied by means of Monte Carlo experiments. Finally, we apply our proposal to study the effects of unemployment benefits on unemployment duration.

Employer-to-Employer Transitions and Time Aggregation Bias

The rate at which workers switch employers without experiencing a spell of unemployment is one of the most important labor market indicators. However, Employer-to-Employer (EE) transitions are hard to measure in widely used matched employer-employee datasets such as those available in the US. We investigate how the lack of the exact start and end dates for job spells affect the level and cyclicality of EE transitions using Danish data containing daily information on employment relationships. Defining EE transitions based on quarterly data overestimates the EE transition rate by approximately 30% compared to daily data. The bias is procyclical and is reduced by more than 10% in recessions. We propose an algorithm that uses earnings and not just start and end dates of jobs to redefine EE transitions. Our definition performs better than definitions used in the literature.

The Unemployed with Jobs and Without Jobs

Potential workers are classified as unemployed if they desire to work but are not working. The unemployed population contains two groups–those with jobs and those without jobs. Those with jobs are on furlough or temporary layoff. They wait out periods of non-work with the understanding that their jobs still exist and they will be recalled. We show that the resulting recall-unemployment dissipates quickly following a shock. Those whose jobs no longer exist constitute what we call jobless-unemployment. Shocks that elevate jobless-unemployment have much more persistent effects. The unemployed without jobs often circle through short-term jobs, spells of unemployment. and spells out of the labor force, before finding stable employment. Historical major adverse shocks, such as the financial crisis in 2008, created mostly jobless-unemployment and consequently caused extended periods of elevated unemployment. The pandemic starting in March 2020 created a large volume of recall-unemployment, most of which dissipated by August. It also created a bulge in jobless-unemployment, which is lingering.

Understanding the Reallocation of Displaced Workers to Firms

We investigate the cost of job displacement using administrative data from France that covers employer and employee over both employment and unemployment spells. We find that displaced workers experience earnings losses both because of a decline in hours worked (especially in the short run) and because of lower re-employment hourly wages. In line with an active literature, we find that loss in employer-specific wage premium drives most of earnings losses in the long run. However, displaced workers tend to be re-employed by more productive firms. This result contrasts strikingly with the strong positive correlation between firms' productivity and wage premium in the cross-section. We further show that the re-employment firms also display lower labor shares. Overall, our results show that the commonly estimated loss in wage premium following job displacement does not reflect a reallocation toward low productivity firms. Instead they are most consistent with a loss in bargaining power and reallocation towards low-labor share firms.

Who Picks Up the Slack? Understanding Spousal Responses to Unemployment Spells

Who Picks Up the Slack? Understanding Spousal Responses to Unemployment Spells

Worker Heterogeneity, Selection, and Unemployment Dynamics in a Pandemic

AbstractWe employ a new Keynesian model with random search in the labor market and endogenous selection among heterogeneous workers to investigate the impact of a pandemic‐induced recession on the distribution of unemployment across workers. In such a recession, workers whose unemployment spells in normal times are inefficiently frequent and long are disproportionately affected. This remains true even when the pandemic initially causes mass layoffs that affect workers broadly or if many separations represent temporary layoffs. Monetary policy that responds to labor market variables affects unemployment for all workers but does relatively little for the distribution of unemployment across workers types.

The association between unemployment trajectories and alcohol consumption patterns. Evidence from a large prospective cohort in The Netherlands.

Unemployment is expected to influence alcohol consumption, but studies show mixed results, partly because most studies concentrate on current employment status. However, unemployment could be particularly consequential if it is part of a trajectory of employment precariousness. Moreover, the association between unemployment and alcohol consumption may not be homogeneous across the population, but differ by subgroups (e.g. socioeconomic status). This study longitudinally analyses the association between different employment trajectories and alcohol consumption, and examines if the association is moderated by socioeconomic status (SES), partner status, age and gender. Four waves of data of the Lifelines Cohort study are used. Sample consists of individuals from 18-50 years old, active in the labor market (n = 104,766) from the northern provinces of the Netherlands. Employment trajectories are defined by employment status in each wave, duration of unemployment, and number of exposures to unemployment. Drinking patterns are divided into "abstainers", "moderate drinking" (<1.5 drinks/day), "heavy drinking" (≥1.5 drinks/day) and "binge drinking" (≥5 drinks/occasion; 4 for women). The associations are estimated with multinomial logistic regression models. Results show that recent, long-term unemployment (≥ 6 months) is associated with higher rates of heavy drinking (RRR = 1.26 [95 % CI 1.03-1.54]), whereas short-term unemployment does not show any association with the outcome. Being continuously unemployed throughout the observation period shows a strong association with binge drinking (RRR = 1.43 [95 % CI 1.06-1.93]), as well as reporting 2 or more long unemployment spells (RRR = 1.49 [95 % CI 1.21-1.83]). The group of abstainers (77.95 % women) have significantly lower SES, and poorer health than their peers. For some individuals, recent unemployment increases the likelihood for abstinence (RRR = 1.23 [95 % CI 1.00-1.51]). Evidence suggests that length of unemployment is key in order to grasp its effects in terms of changing drinking patterns.

Evidence on Job Search Models from a Survey of Unemployed Workers in Germany

Abstract The job-finding rate of unemployment insurance (UI) recipients declines in the initial months of unemployment and then exhibits a spike at the benefit exhaustion point. A range of theoretical explanations have been proposed, but those are hard to disentangle using data on job finding alone. To better understand the underlying mechanisms, we conducted a large text-message-based survey of unemployed workers in Germany. We surveyed 6,349 UI recipients twice a week for four months about their job search effort. The panel structure allows us to observe how search effort evolves in individuals over the unemployment spell. We provide three key facts: (i) search effort is flat early on in the UI spell, (ii) search effort exhibits an increase up to UI exhaustion and a decrease thereafter, (iii) UI recipients do not appear to time job start dates to coincide with the UI exhaustion point. A standard search model with unobserved heterogeneity struggles to explain the second fact, and a model of storable offers is not consistent with the third fact. The patterns are well captured by a model of reference-dependent job search or by a model with duration dependence in search cost.

Labor market effects of COVID-19 in Sweden and its neighbors: Evidence from administrative data.

This paper studies the labor market effects of non‐pharmaceutical interventions (NPIs) to combat the COVID‐19 pandemic. We focus on the Nordic countries which showed one of the highest variations in NPIs despite having similar community spread of COVID‐19 at the onset of the pandemic: While Denmark, Finland and Norway imposed strict measures (‘lockdowns’), Sweden decided for much lighter restrictions. Empirically, we use novel administrative data on weekly new unemployment and furlough spells from all 56 regions of the Nordic countries to compare the labor market outcomes of Sweden with the ones of its neighbors. Our evidence suggests that the labor markets of all countries were severely hit by the pandemic, although Sweden performed slightly better than its neighbors. Specifically, we find the worsening of the Swedish labor market to occur around 2 to 3 weeks later than in the other Nordic countries, and that its cumulative sum of new unemployment and furlough spells remained significantly lower (about 20–25%) during the time period of our study (up to week 21 of 2020).

The effect of unemployment on couples separating in Germany and the UK

AbstractObjectiveThis article examines how unemployment affects the separation risk of heterosexual coresiding couples, depending on couples' household income and whether men or women become unemployed.BackgroundUnemployment may decrease the separation risk as a drop in resources makes separation more costly—or it may increase the separation risk if unemployment creates stress and reduces the quality of couple relations. Moreover, unemployment may be more detrimental for couples if men rather than women, or low‐earners rather than high‐earners, become unemployed.MethodThis article adopts a couple perspective and assesses heterogeneous effects of unemployment on separation based on longitudinal data—large household panels from Germany and the UK using discrete‐time event history models.ResultsFor both countries, results show that the annual separation rate almost doubles after an unemployment spell: It increases from 0.9% to 1.6% per year. This effect does not vary when men or women lose their job. The separation risk after unemployment is somewhat higher for low‐income couples than high‐income couples in the UK, but overall differences are small.ConclusionFindings show that unemployment does not strengthen unions, but makes them more vulnerable—regardless of which partner becomes unemployed and regardless of a household's economic resources.

Organised by transitions: the self-organisation of next-generation welfare professionals in Slovenia

Much is known about innovative union strategies to organise young workers, but little is known about how and why they self-organise outside of unions. Based on field research in Slovenia, we examine ‘next-generation welfare professionals’, a diverse group of students, unemployed graduates and precarious workers attempting to enter state-regulated, and relatively well unionised education and social protection professions. We argue that their self-organisation is a direct consequence of their precarious education-to-work transitions and consequent disembeddedness from the workplace and professional community. Their grievances stem from a mismatch between strict professional entry requirements and scarce paid internships, which lead to long unemployment spells, unsupportive active labour market schemes, and a fear of social exclusion. Their initial tactic was to establish communities from which a collective sense of injustices and self-organising emerged and they targeted policymakers with demands for sustainable government funded internships. Although their relations with established trade unions are not close, they do receive organisational support from the Trade Union Youth Plus that organises students, the unemployed and precarious graduates stuck in a transitional stage of ‘waithood’. Our findings show the need for unions to become more present within transitional zones that, are shaped by state policies.

The welfare effects of extending unemployment benefits: Evidence from re-employment and unemployment transfers

This paper investigates the welfare effects of extending unemployment benefits by comparing the search effort responses to income transfers when employed (i.e. re-employment bonus) and unemployed (i.e. extended benefits). Specifically, we use administrative data on the universe of unemployment spells in Taiwan from 2001 to 2011 and evaluate effects of providing a re-employment bonus and extending unemployment benefits. Our results suggest that the provision of re-employment bonus increases job-finding hazards and results in the positive fiscal externality. The behavioral costs per New Taiwanese Dollar (NTD) of initial spending on bonuses is -0.61. In contrast, extending unemployment benefits reduces the rate of unemployment exit and generates the negative fiscal externality. We integrate the estimated policy effects with a search model with liquidity constraints to identify the value of extending unemployment benefits captured by the marginal rate of substitution (MRS) between consumption when unemployed and employed. We find that the estimated MRS of extending benefits is around 1.5 to 2.5 — the marginal value of transfers when unemployed is about two times larger than that when employed. Finally, the marginal value of public fund for extending UI benefits is between 1.3 and 2, suggesting the welfare gain from benefit extension is larger than its welfare cost by more than 30%.

Dynamic evaluation of job search assistance

SummaryThis paper evaluates a job search assistance program for unemployed teachers where the assignment to the program is dynamic. We discuss the methodology of estimating dynamic treatment effects and identification conditions. In the empirical analysis, we use administrative data from a unique institutional environment in which we observe all variables determining assignment to the job search assistance program. This allows us to compare results from a dynamic discrete‐time evaluation model and a continuous‐time duration model. All approaches show that participation in the job search assistance program reduces exit rates from unemployment, in particular when starting the program early during the spell of unemployment. The discrete‐time approach makes less strict parametric assumptions, but the results are sensitive to the choice of control group and the unit of time.

Do employment opportunities decrease for older workers?

ABSTRACT Increasing the labour market participation rates of older workers is a means to secure the sustainability of public finances. However, questions about the effects of job loss of unemployed older workers and their employment prospects remain. This paper investigates why workers, aged 50 and over, have less employment opportunities. Using a competing risks model on British panel data, we examine the chances of re-employment after unemployment spells for older individuals. We find that human capital characteristics and economic incentives play an important role in their chances of getting back to work. We show that the probability of returning to employment after an unemployment spell decreases as workers get older. A decomposition analysis supports the role of age in the unemployment duration gap between ‘older’ and ‘younger’ individuals. The duration of leaving unemployment to employment of older workers would be lower if they will be treated in the same way as the younger ones, which is consistent with elderly employment barriers.