The labour market: Unemployment and workforce training
Outline
1. How does the labour market work?
2. Unemployment: Who bears the burden?
3. Are ALMPs (e.g. YTS, New Deal) successful?
1. A two-sided search model Agents have imperfect information
Search is costly
Search decisions (I) Choice of search technology (ii) Choice of search intensity (iii) Stopping rule
Stopping rules Worker: wage offer > reservation wage Firm: expected surplus (productivity) >
reservation surplus
Meeting & matching (I) Firms: arrival rate of applicants (ii) Workers: arrival rate of firms (I) + (ii) = contact rate (c) (meeting) Outcome: match or not (probability m)
The hiring rate (h) h = mc
h = mc(U, V) Derive the Beveridge curve
Causes of unemployment? 1. Macro factors - shift the beveridge curve 2. Micro factors - affecting Pr(o) & Pr(a)
2. Who bears the burden of unemployment?
(a) Youths
(b) The unqualified
(c) Ethnic minorities persistence causes - an official view
Official view “Factors which may explain the persistently higher
rates of unemployment among ethnic minorities, apart from a) the younger age profile… include [their] b) generally low level of qualifications and c) their industrial and d) regional distribution.”
Alternative views discrimination enclaves - a taste for isolation
3. Have ALMPs been successful? What are ALMPs?
I) Job Centers/Employment Offices (ii) Services for the disabled (iii) Training programmes
How do we evaluate their impact? On what?
Evaluation On what?
A) Subsequent wages - before & after B) Employment probability
How? Counterfactual question partial analysis v. cost-benefit analysis
Successful? Youth training - no wage effect, small
effect on pr(employment)