the impact of the recession on the structure and labour ... objectives - i what are the determinants...
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The Impact of the Recession on the Structure and Labour Market Success of Young Unemployed and NEET Individuals in Ireland
Elish Kelly and Seamus McGuinness Economic and Social Research Institute, Dublin
ENEPRI/CEPS Conference21 June 2013
Outline
Background
Study Objectives
Data
Results
Conclusions
Background
Ireland’s unemployment rate has increased from 4.4% in 2006 to 14.0% today (long-term unemployment is a growing problem)
Youth unemployment rate has increased from 8.7% in 2006 to 30.6% in 2012 (youth unemployment ratio increased from 5.4% in Q3 2007 to 12.8% in Q3 2011; currently 9.8%)
Two concerns in relation to unemployed youths:1. Growth in the numbers with no formal education – risen from 17.4% in 2007 to
48.9% in 20112. Percentage in long-term unemployment has increased from 20.3% in 2007 to
45.8% in 2011
The proportion of NEETs increased from 11.8% in 2006 to 24% in 2011
Study Objectives - I
What are the determinants of being an unemployed or NEET youth, or unemployed prime-aged individual, and have these factors changed since the recession?
What are the labour market transition patterns of these groups pre (2006) and post (2011) the boom?
To what degree do changes in the composition of the unemployed or NEET youth stocks explain changes in their labour market transition rates following the downturn?
To what degree do adjustments in the labour market value of various attributes account for changes in unemployed and NEET youths labour market transition rates pre and post the recession?
Study Objectives - II
Draw out implications of results for policy, specifically in terms of designing effective activation measures to assist young unemployed and NEET people
Data - I Newly published longitudinal data from Ireland’s labour force
survey, the Quarterly National Household Survey, is used to address the study objectives
Pre-Recession (Q2 2006-Q4 2006) & Post-Recession (Q2 2011-Q4 2011)
Balanced Panel: Focus on young individuals unemployed or NEET on entering the panel who are present in the panel for two consecutive quarters (e.g. Q2 2006 through to Q4 2006)
From this, we develop a cross-sectional dataset based on the characteristics of individuals as observed in Q1 and incorporate their transition behaviours in Q2 and Q3
Data - II As a balanced panel is used, the impacts of migration are not
considered
ILO, Principal Economic Status and Receipt of formal education in the previous 4 weeks used to construct unemployed and NEET youth groups
The data contains controls for age, gender, nationality, education, unemployment duration and geographical location
Approach Probit models used to identify the characteristics associated with being an i)
unemployed youth, ii) NEET youth, and iii) unemployed prime-aged individual in 2006 and 2011
Probit models used to estimate the impact of various socio-economic factors on each sub-groups likelihood of transitioning to employment in 2006 and 2011
Decomposition analysis used to determine the extent to which variations in the rates of transition to employment between 2006 and 2011 were related to:
i) changes in the population structure of the various sub-groups (endowment effect),ii) changes in the returns to possessing certain labour market characteristics (coefficient effect), andiii) unexplained factors (e.g. labour market experience, socio-economic background, etc.)
Estimated a non-linear Oaxaca decomposition models – produces overall endowment and coefficient effects and a breakdown of each
Characteristics of Youth Unemployed: 2006 and 2011 (reference group employed youths)
2006 2011Marginal
EffectsMarginal
Effects ChangeReference: FemaleMale -0.015*** 0.088*** Yes
Reference: Age 15-19Age 20-24 -0.024*** -0.054*** No
Reference: Junior Certificate or LessLeaving Certificate -0.050*** -0.216*** YesPost Leaving Cert -0.052*** -0.088*** YesThird-level Non-Degree -0.062*** -0.210*** YesThird-level Degree -0.066*** -0.245*** Yes
Reference: Non-IrishIrish 0.005 -0.092*** Yes
Characteristics of Youth NEETS: 2006 and 2011 (reference group employed youths)
2006 2011Marginal
EffectsMarginal
Effects ChangeReference: FemaleMale -0.116*** 0.018*** Yes
Reference: Age 15-19Age 20-24 0.029*** 0.056*** No
Reference: Junior Certificate or LessLeaving Certificate -0.145*** -0.291*** YesPost Leaving Cert -0.132*** -0.165*** YesThird-level Non-Degree -0.133*** -0.299*** YesThird-level Degree -0.152*** -0.351*** Yes
Reference: Non-IrishIrish -0.021*** -0.078*** Yes
Labour Market Transition RatesContinuously Unemployed
Into Employment
Into Inactivity
Youths:
2006 37% 38% 25%
2011 52% 17% 31%
Prime-Aged:
2006 39% 28% 33%
2011 63% 17% 21%
Continuously NEET
Into Employment
NEETs:
2006 79% 21%
2011 86% 14%
Probability of Transitioning to Employment (reference group continuously unemployed/continuously NEET)
2006 2011UE
Youths NEET YouthsUE
Youths NEET YouthsGender (Ref = Female)Male -0.129*** 0.077*** -0.132*** -0.010**
(0.017) (0.007) (0.009) (0.004)Age (Ref = Age 15-19)Aged 20-24 0.224*** 0.028*** -0.152*** -0.104***
(0.017) (0.007) (0.013) (0.007)Educational Attainment (Ref = Junior Certificate or less)Leaving Certificate 0.341*** 0.116*** 0.066*** 0.016***
(0.016) (0.008) (0.010) (0.005)Post Leaving Cert 0.408*** 0.353*** 0.019 0.051***
(0.020) (0.021) (0.013) (0.008)Third-level Non-Degree -0.099*** -0.040*** 0.156*** 0.075***
(0.038) (0.014) (0.023) (0.014)Third-level Degree 0.152*** 0.070*** 0.468*** 0.402***
(0.032) (0.020) (0.019) (0.018)Nationality (Ref = Non-Irish)Irish -0.060** -0.207*** 0.133*** 0.087***
(0.029) (0.015) (0.009) (0.004)
Probability of Transitioning to Employment (reference group continuously unemployed/continuously NEET)
2006 2011
UE Youths
NEET Youths
UE Youths
NEETYouths
Previous UE Duration (Ref = 1-3 Months)
4-6 Months -0.147*** -0.021* -0.041*** 0.084***(0.024) (0.012) (0.011) (0.011)
7-12 Months -0.190*** -0.106*** -0.240*** -0.110***(0.019) (0.006) (0.005) (0.003)
13 Months and Above -0.299*** -0.125*** -0.081*** 0.001(0.017) (0.006) (0.009) (0.007)
Never had a Job - -0.328*** - -0.095***- (0.009) - (0.006)
Overall Oaxaca Decomposition Results
UE Youths
NEET Youths
UE Prime-Aged
Overall Difference(Change in transition rate)
-25.0 -7.8 -17.4
Endowment Effect(Compositional Changes)
-2.5 1.4 -0.3
Coefficient Effect(Changes in Labour Market)
-25.6 -13.6 -8.8
Interaction 3.2 4.4 -8.4
Main Drivers of the Change in Transition Rates Between 2006 and 2011 (Oaxaca)
UE Youths NEET YouthsObservable Coefficient Effects:Male -0.029*** -0.055***Aged 20-24 -0.258*** -0.130***Aged 35-44 - -Aged 45-54 - -Leaving Certificate -0.077*** -0.041***Post Leaving Cert -0.056*** -0.030***Third-level Non-Degree 0.012*** 0.007***Third-level Degree 0.033*** 0.016***4-6 Months 0.008*** 0.010***7-12 Months -0.052*** -0.017***13 Months and Above 0.067*** 0.060***Never had a Job - 0.067***Irish 0.227*** 0.350***Total: -0.126 0.333
Unobservables:Constant -0.131*** -0.470***
Overall Coefficient Effect: -0.256 -0.136
Summary
Unemployed and NEET youths transition rates to employment fell in 2011 relative to 2006
Results indicate the relative fall is not due to a change in the population structure of either sub-group but to changes in external factors that have had an impact on possessing certain characteristics
Policy Implications
Education matters:
Need for re-orientation towards academic qualifications that will assist young people in the labour market,
Also, need to redesign vocational training towards those areas of the labour market where jobs are emerging.
The evidence indicates as well that the level of disadvantage was much more acute for unqualified individuals by 2011, which suggests greater emphasis should be placed on policies designed to tackle early school leaving.
Policy Implications
The decline in the scarring impact of long-term unemployment among both unemployed youths and NEETs, in contrast to the prime-aged unemployed, policy design should emphasise improving the human capital of individuals as opposed to preventing the drift into long-term unemployment.
The lack of labour demand for young people with low skills is likely to be an ongoing feature of the labour market, suggesting that policy measures aimed at improving individual skills are more likely to yield success compared to short-run changes to activation policy.
