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Duration Dependence and Composition in Unemployment Skills

Labor markets have improved since the Great Recession, but the average duration of unemployment, which is an indicator of labor market health, remains high. In their Review article “Duration Dependence and Composition in Unemployment Spells,” James D. Eubanks and David Wiczer set out to discover why this is happening. They focused on explaining these two common theories:

  • Some workers are able to find jobs more quickly because they have more-valuable skills or are more efficient at searching for jobs.
  • Duration has a direct effect on the job-finding rate. For example, a worker’s skills may deteriorate during unemployment or employers may be reluctant to hire workers who’ve been unemployed for a long time.

Eubanks and Wiczer found out a few things:

  • Workers who’ve been unemployed for a longer time still find jobs more slowly than those who’ve been unemployed for a shorter time, even when variables such as age, gender and occupation were removed.
  • ·During the Great Recession, workers with the slowest job-findings rates found jobs at slower rates than before the downturn; but job-finding rates for workers with the fastest job-finding rates remained constant.

The job-finding rate of the slowest job finders has been slow to recover to its pre-recession level, resulting in the still-high unemployment duration even as the labor market has recovered.

Read the full academic paper here.