The Dynamics of Youth Unemployment: An Analysis of Recurrent Unemployment

Abstract

In this paper we focus on recurrent unemployment using the Australian Longitudinal Surveys. Earlier studies on recurrent unemployment include Heckman and Borjas (1980), OECD (1985), Hui (1986a,b), Corcoran and Hill (1985), Stern (1986), Trivedi and Alexander (1986, 1989), and Adena (1989). The aim of this paper is to determine whether there are some people who are more likely to face recurrent spells (defined as those people who have more than one spell in a calendar year) and whether they are more likely to have had prior spells of unemployment, i.e. whether there is occurrence dependence, or scarring. We study whether people who come from poor socio-economic and poor educational backgrounds enter into secondary labour markets with low wages and insecure employment and hence face recurrent unemployment or spells in the not-in-the-labour-force (NILF) category. Our results show that there is clearly a problem of recurrent unemployment faced by a sub-set of the youth labour market and that there some is evidence for occurrence dependence. Those people who have recurrent spells account for a large proportion of the total weeks of unemployment experience, as well as facing a cumulatively large number of weeks of unemployment. Section 2 briefly outlines some theories; Section 3 describes the data we have used from the Australian Longitudinal Surveys, the methods used, and some results; and Section 4 concludes the paper.