Labour Market Dynamics in Germany: Hirings, Separations, and Job-to-Job Transitions over the Business Cycle

In this paper, we provide a comprehensive overview of labour market dynamics in Western Germany by looking at gross worker flows. To do so, we use a subsample of the registry data collected by the German social security system, the IAB employment sample, for the time period 1975-2001. The latter provides daily information on 2% of the German workforce covered by social security legislation. Using these data, we are able to exactly calculate the number of transitions between the different labour market states, and between different employers over time. We first provide an overview of the cross-section and time series properties of these flows. We then study the cyclical features of gross worker flows, accessions, and separations. We find that separations are relatively flat over the cycle, while accessions are markedly procyclical, and that the increased flow into unemployment in a recession is mainly due to reduced hirings, and hence lower job-to-job transitions, rather than increased match separations. Our findings have important implications both for the way we view recessions and for the role of the labour market as a propagation mechanism for productivity shocks.worker flows, accessions, separations, business cycle, job-to-job, employer-to-employer

The Importance of Two-Sided Heterogeneity for the Cyclicality of Labour Market Dynamics

Using two data sets derived from German administrative data, including a linked employer-employee data set, we investigate the cyclicality of worker and job flows.The analysis stresses the importance of two-sided labour market heterogeneity in this context, taking into account both observed and unobserved characteristics.We find that small firms hire mainly unemployed workers, and that they do so at the beginning of an economic expansion. Later on in the expansion, hirings more frequently result from direct job-to-job transitions, with employed workers moving to larger firms. Contrary to our expectations, workers moving to larger firms do not experience significantly larger wage gains than workers moving to smaller establishments. Furthermore, our econometric analysis shows that the interaction of unobserved heterogeneities on the two sides of the labour market plays a more important role for employed job seekers than for the unemployed.Worker flows, accessions, separations, business cycle, job-to-job, employer-to-employer, linked employer-employee

Biases in the measurement of labour market dynamics

This paper analyses worker transitions on the German labour market derived from different data sources. These include the two German micro data sets which provide high-frequency observations on workers' employment and unemployment histories: the German Socioeconomic Panel (SOEP) and the IAB Employment Subsample (IABS). This exercise thus yields a comprehensive overview of German labour market dynamics. Furthermore, it highlights the differences between the results obtained from a retrospective survey, the SOEP, and a process-induced administrative data set, the IABS. In particular, our analysis shows which groups of the labour market are particularly affected by measurement error. We also show which role measurement issues play when establishing the stylised facts about the cyclicality of labour market dynamics. --gross worker flows,SOEP,IABS

The Impact of International Outsourcing on Labour Market Dynamics in Germany

Using an administrative data set containing daily information on individual workers’ employment histories, we investigate how workers’ labour market transitions are affected by international outsourcing. In order to do so,we estimate hazard rate models for match separations, as well as for worker flows from employment to another job, to unemployment, and to nonparticipation. Outsourcing is found to have no significant impact on overall job stability in the manufacturing sector, but it is associated with increased job stability in the service sector. Furthermore, the effect of outsourcing varies strongly across skill levels and age groups.This is especially the case in the manufacturing sector, where the hazard of transiting to nonemployment rises with international outsourcing for medium-skilled and older workers.Job stability, labour market transitions; worker flows, outsourcing,duration analysis

The importance of two-sided heterogeneity for the cyclicality of labour market dynamics

Using two data sets derived from German administrative data, including a linked employer-employee data set, we investigate the cyclicality of worker and job °ows. The analysis stresses the importance of two-sided labour market heterogeneity in this context, taking into account both observed and unobserved characteristics. We find that small firms hire mainly unemployed workers, and that they do so at the beginning of an economic expansion. Later on in the expansion, hirings more frequently result from direct job-to-job transitions, with employed workers moving to larger firms. Contrary to our expectations, workers moving to larger firms do not experience signi¯cantly larger wage gains than workers moving to smaller establishments. Furthermore, our econometric analysis shows that the interaction of unobserved heterogeneities on the two sides of the labour market plays a more important role for employed job seekers than for the unemployed. --worker °ows,accessions,separations,business cycle,job-to-job,employer-to-employer,linked employer-employee

Decomposing the Ins and Outs of Cyclical Unemployment

This paper analyzes the contribution of the socioeconomic and demographic composition of the pool of employed and unemployed individuals to the dynamics of the labor market in different phases of the business cycle. Using individual level data from the Current Population Survey (CPS), we decompose differences in employment status transition rates between economic upswings and downturns into composition effects and behavioral effects. We find that overall composition effects play a minor role for the cyclicality of the unemployment outflow rate, although the contribution of the duration of unemployment is significant. In contrast, composition effects dampen the cyclicality of the unemployment inflow rate considerably. We further observe that the initially positive contribution of composition effects to a higher unemployment outflow rate turns negative over the course of the recession.

The Importance of Two-Sided Heterogeneity for the Cyclicality of Labour Market Dynamics

Using administrative data on individual workers' employment history and firms, we investigate the cyclicality of worker flows on the German labour market. Focusing on heterogeneities on both sides of the labour market, we find that small firms hire mainly unemployed workers, and that they do so at the beginning of an economic expansion. Later on in the expansion, hirings more frequently result from direct job-to-job transitions to larger firms. Transitions between employment and unemployment at large firms are generally found to be more cyclical. However, this stylised fact disappears when the composition of the workforce is controlled for.employer-to-employer, job-to-job, business cycle, separations, accessions, worker flows

Decomposing the Ins and Outs of Cyclical Unemployment

This paper analyzes the contribution of the socioeconomic and demographic composition of the pool of employed and unemployed individuals to the dynamics of the labor market in different phases of the business cycle. Using individual level data from the Current Population Survey (CPS), we decompose differences in employment status transition rates between economic upswings and downturns into composition effects and behavioral effects. We find that overall composition effects play a minor role for the cyclicality of the unemployment outflow rate, although the contribution of the duration of unemployment is significant. In contrast, composition effects dampen the cyclicality of the unemployment inflow rate considerably. We further observe that the initially positive contribution of composition effects to a higher unemployment outflow rate turns negative over the course of the recession.gross worker flows, unemployment duration, decomposition analysis, Blinder-Oaxaca

Sectoral Transformation, Turbulence, and Labor Market Dynamics in Germany

This paper analyzes the interaction between structural change and labor market dynamics in West Germany, during a period in which industrial employment declined by more than 30% and service sector employment more than doubled. Using transition data on individual workers, we document a marked increase in structural change and turbulence, in particular since 1990. Net employment changes resulted partly from an increase in gross flows, but also from an increase in the net transition “yield" at any given gross worker turnover. In growing sectors, net structural change was driven by accessions from nonparticipation rather than unemployment; contracting sectors reduced their net employment primarily via lower accessions from nonparticipation. While gross turnover is cyclically sensitive and strongly procyclical, net reallocation is countercyclical, meaning that recessions are associated with increased intensity of sectoral reallocation. Beyond this cyclical component, German reunification and Eastern enlargement appear to have contributed significantly to this accelerated pace of structural change.gross worker flows, sectoral and occupational mobility, turbulence

Sectoral Transformation, Turbulence, and Labour Market Dynamics in Germany

The secular rise of European unemployment since the 1960s is hard to explain without reference to structural change. This is especially true in Germany, where industrial employment has declined by more than 30% and service sector employment has more than doubled over the past three decades. Using individual transition data on West German workers, we document a marked increase in structural change and turbulence, in particular since 1990. Net employment changes resulted partly from an increase in gross flows, but also from an increase in the net transition "yield" at any given gross worker turnover. In growing sectors, net structural change was driven by accessions from nonparticipation rather than unemployment; contracting sectors reduced their net employment primarily via lower accessions from nonparticipation. While gross turnover is cyclically sensitive and strongly procyclical, net reallocation is countercyclical, meaning that recessions are associated with increased intensity of sectoral reallocation. Beyond this cyclical component, German reunification and Eastern enlargement appear to have contributed significantly to this accelerated pace of structural change.Gross worker flows, sectoral and occupational mobility, turbulence.