Youth unemployment in Belgium: diagnosis and key remedies

In Belgium youth unemployment is structurally higher than the European (EU27) average, in particular for the low educated. In this study we set a diagnosis of the main structural factors and advance key remedies. We analyze the system of employment protection, education and passive and active labor market policies. A high minimum wage, a strict separation between school and work, and a vertically segmented schooling system with high retention rates and too early tracking are identified as main causal factors. Strict employment protection legislation is only concern for high-skilled youth. Reducing labor costs at low wages and a fundamental schooling reform that aims at dismantling the strict barrier between school and work are proposed as key remedies. In addition, youth should be entitled as of the start of unemployment to a low benefit based on the principle of “mutual obligation”. Very intensive and durable guidance is to be targeted to the low educated

Do youths graduating in a recession incur permanent losses?

In flexible labor markets, low-educated entrants are harmed by economic downturns, but the penalties are short-lived. High-educated youth are less adversely affected, but the penalties persist longer. It takes about ten years for young cohorts that enter the labor market during a downturn to catch up to cohorts that did not. In rigid labor markets, however, while low-educated entrants are better shielded in the short term, both low- and high-educated workers never make up their earnings losses. Macroeconomic stabilization policies should be complemented by policies that aim at combining more job flexibility with job security

Are Short-Lived Jobs Stepping Stones to Long-Lasting Jobs ?

This paper assesses whether short-lived jobs (lasting one quarter or less and involuntarily ending in unemployment) are stepping stones to long-lastinc jobs (enduring one year or more) for Belgian long-term unemployed school-leavers. We proceed in two steps. First, we estimate labour market trajectories in a multi-spell duration model that incorporates lagged duration and occurrence dependence. Second, we simulate them to find that (fe)male school-leavers accepting a short-lived job are, within two years, 13.4 (9.5) percentage points more likely to find a long-lastng job than in the counterfactual in which they reject short-lived jobs to search longer for more stable positionsEvent history model; transition data; state dependence; short-lived jobs; stepping stone effect; long-lasting jobs

Is the Notification of Monitoring a Threat to the Unemployed? A Regression Discontinuity Approach

In July 2004, the Belgian government intensified monitoring within the Unemployment Insurance scheme. Workers claiming unemployment benefits for more than 13 months are notified that past job-search behavior will be monitored 8 months later. In one region the target group is counselled shortly after the notification, while in others not or only once the monitoring has taken place. We exploit the discontinuity in the treatment assignment at the age of 30 to evaluate the threat effect of the notification on the probability of employment. We find that the effect is heterogeneous and critically depends on whether and when notified workers are counselled.evaluation, monitoring job-search, threat effect, regression-discontinuity

Are Short-Lived Jobs Stepping Stones to Long-Lasting Jobs?

This paper assesses whether short-lived jobs (lasting one quarter or less and involuntarily ending in unemployment) are stepping stones to long-lasting jobs (enduring one year or more) for Belgian long-term unemployed school-leavers. We proceed in two steps. First, we estimate labour market trajectories in a multi-spell duration model that incorporates lagged duration and lagged occurrence dependence. Second, in a simulation we find that (fe)male school-leavers accepting a short-lived job are, within two years, 13.4 (9.5) percentage points more likely to find a long-lasting job than in the counterfactual in which they reject short-lived jobs.event history model, transition data, state dependence, short-lived jobs, stepping stone effect, long-lasting jobs

The Exhaustion of Unemployment Benefits in Belgium. Does it Enhance the Probability of Employment ?

In Belgium unemployment insurance benefits can only exhaust for one category of workers : partners of workers with (replacement) labour income (mostly women) may loose their entitlement after an unemployment duration ranging from two to eight years, depending on individual characteristics. We contrast three propensity score matching estimators of the impact of benefit exhaustion on the probability of employment : a standard, a before-after and a IV matching estimator. We conclude that benefit expiration is anticipated as from the moment at which the worker is notified, three months in advance, and that it gradually increases the employment rate up to 25 percentage points 14 months after benefit withdrawal.Unemployment insurance, benefit exhaustion, programme evaluation, before-after estimator, nonparametric methods

IIs the Notification of Monitoring a Threat to the Unemployed ? A Regression Discontinuity Approach

In july 2004, the Belgian government intensified monitoring within the Unemployment Insurance scheme. Workers claiming unemployment benefits for more than 13 months are notified that past job-search behavior will be monitored 8 months later. In one region the target group is counseled shortly after the notification, while in others not or only once the monitoring has taken place. We exploit the discontinuity in the treatment assignment at the age of 30 to evaluate the threat effect of the notification on the probability of employment. We find that the effect is heterogeneous and critically depends on whether and when notified workers are counseled.evaluation; monitoring job-search; threat effect; regression-discontinuity

Scarring Effects of Remaining Unemployed for Long-Term Unemployed School-Leavers

This study investigates whether and to what extent further unemployment experience for youths who are already long-term unemployed imposes a penalty on subsequent labor market outcomes. We propose a flexible method for analyzing the effect on wages aside of transitions from unemployment and employment within a multivariate duration model that controls for selection on observables and unobservables. We find that prolonging unemployment drastically decreases the chances of finding employment, but hardly affects the quality of subsequent employment. The analysis suggests that negative duration dependence in the job finding rate is induced by negative signaling and not by human capital depreciation.scarring effect of unemployment duration, employment quality, wage in multivariate duration model, selectivity

Vocational Training: Does it speed up the Transition Rate out of Unemployment ?

In this paper we estimate, for the 1989-93 period in Belgium, the effect of vocational classroom training on the rate of transition out of unemployment. We show that rationing of the demand for training increases the unemployment duration of non-participants, an effect neglected in programme evaluations. We propose a “control function” estimator accounting for variable treatment effects and identifying the average treatment effect on the treated by means of exogenous sub-regional variation in the training capacities. During participation, the transition rate decreases by 27%. Afterwards it increases by 62%. Making training available for a broader population would, however, reduce the effectiveness of the programme.Vocational training; evaluation; transition models; job-search

Duration and Calendar Time Dependence of the Exit Rate out of Unemployment in Belgium. Is it True or Spurious?

In this paper, we investigate what causes the aggregate exit rate out of unemployment estimated in Wallonia (Belgium) to decline over duration and to vary over calendar time. For that purpose, we specify a mixed proportional hazard (MPH) model where the mixing distribution depends on seasons and business cycle at the time of entry. Given its too restrictive nature, we relax the proportionality assumption in three ways. First, we allow the baseline hazard to vary non-proportionally between a boom and a recession in order to test the ranking hypothesis. Second, the variance of the mixing distribution needs not to fluctuate proportionally to its mean over calendar time at entry. Finally, we allow for random deviations from the MPH framework by introducing random cohort-specific business cycle effects at the time of exit. We estimated our model by Minimum Chi-Squares on quarterly data of male workers entering unemployment between June 1989 and February 1994. We find that the negative duration dependence of the aggregate exit rate is largely spurious. Moreover, for prime-aged, but not for young male workers, true duration dependence varies over the cycle, a finding consistent with employers ranking candidates according to unemployment duration in their recruitment decision. Changes in the composition of workers entering unemployment explain an important part of the seasonal variation of the exit rate, but not of its variation over the business cycle.Unemployment duration; ranking; heterogeneity; business cycle; seasons