The labour market: Unemployment and workforce training

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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?

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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

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Stopping rules

• Worker wage offer gt reservation wage
• Firm expected surplus (productivity) gt
  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)

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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)

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2. Who bears the burden of unemployment?

• (a) Youths
• (b) The unqualified
• (c) Ethnic minorities
• persistence
• causes - an official view

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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

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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?

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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)