Assessing labour market dynamics

Abstract

"The paper is about labour market dynamics and participates in the employment sector's efforts to establish a knowledge base on labour market functioning. This terminology might sound unfamiliar to those who are not experts in labour economics. It is true that most statistics of the labour market are rather static and give a snapshot of the problems at a given point in time or show yearly averages. It is the unemployment rate of country x at time y which attracts attention. Such figures (called cross sectional in the terminology of statistics) when compared over time, also indicate labour market dynamics and movements but only show the surface of the real dynamics of the labour market: to give but one example: In Denmark, while the yearly average number of unemployment is around 160,000 in 1999, some 600,000 persons are affected by unemployment during the same year. The number of those having unemployment spells (flow) is much larger than the average yearly number of unemployed (stock) because the stock is only the balance between all flows in and out of unemployment. A given unemployment rate can either be composed of many short time spells of unemployment or by a fewer number of long spells. This has implications for labour market policy: while short spells of unemployment (frictional unemployment) are part of the normal working of the labour markets in a market economy, long spells are not, and should thus be the main focus of labour market policies. Knowledge of the flows in the labour market is therefore important for finding the right labour market intervention. In the present paper two methods for a flow analysis of the labour market are presented and their results compared. One is the user data base of the European Community household panel which allows the analysis of flows in yearly and monthly intervals and the other is the quasi flows distilled from the European Labour Force Survey. It shows that depending on the method, results diverge. It appears also that yearly information cannot capture the true extent of mobility which is much larger, as is revealed by monthly data." (Author's abstract, IAB-Doku) ((en))

Cite article

Kruppe, T. (2001): Assessing labour market dynamics. European evidence. (International Labour Office. Employment paper 2001/15), Geneva, 15 p.