Changes in Unemployment Duration and Labor Force Attachment

This paper accounts for the observed increase in unemployment duration relative to the unemployment rate in the U.S. over the past thirty years, typified by the record low level of short-term unemployment. We show that part of the increase is due to changes in how duration is measured, a consequence of the 1994 Current Population Survey redesign. Another part is due to the passage of the baby boomers into their prime working years. After accounting for these shifts, most of the remaining increase in unemployment duration relative to the unemployment rate is concentrated among women, whose unemployment rate has fallen sharply in the last two decades while their unemployment duration has increased. Using labor market transition data, we show that this is a consequence of the increase in women's labor force attachment.

Length of Service, Terminations and the Nature of the Employment Relationship

This paper presents new survey evidence that relative protection against job loss grows with length of service, independent of their net value to the firm. This protection makes good sense given that at most companies employees appear to earn less than their value marginal product in the early part of their tenure and more than their value marginal product in the latter part; without job protection policies for senior employees, the firm would have an incentive to terminate them when their "spot" earnings went above their "spot" value marginal product. In particular, we find that a very large percentage (over 95 percent) of hourly union members outside of agriculture and construction are covered by protective policies for senior workers and, that a somewhat smaller, but still substantial, percentage (about 85 percent) of comparable nonunion hourlies also have some protection against jobloss in their senior years. The potential reasons for these findings are briefly discussed.

Labor Adjustment Under Different Institutional Structures: A Case Study of Germany and The United States

Like most Western European countries, Germany stringently regulates dismissals and layoffs. Critics contend that this regulation raises the costs of employment adjustment and hence impedes employers' ability to respond to fluctuations in demand. Other German labor policies, however, most especially the availability of unemployment insurance benefits for those on short time, facilitate the adjustment of average hours per worker in lieu of layoffs. Building on earlier work, we compare the adjustment of employment, hours and inventories to demand shocks in the German and U.S. manufacturing sectors. We find that, in the short run, whereas U.S. employers rely principally on the adjustment of employment levels to respond to demand shocks, German employers rely principally on the adjustment of average hours per worker. The adjustment of overall labor input is generally similar in the two countries. Short-time work makes a very important contribution to short-run hours adjustment in Germany. We find little evidence that inventories help to buffer demand fluctuations in either country. Our findings suggest that, given appropriate supporting institutions, strong worker job security can be compatible with employers' need for flexibility in staffing levels.