Academic Literature

Evidences suggests that structural unemployment is worsening in many countries

Since the onset of the Great Recession, there has been a change in the relationship between the unemployment rate and vacancy rate in the U.S.” write Bart Hobijn and Aysegul Sahin in Beveridge Curve Shifts across Countries since the Great Recession on frbsf.org. (Choosen excerpts by JMM to follow)

This relationship, summarized by the Beveridgecurve, was remarkably stable from 2000 through 2007, even during the 2001 recession. However, since the summer of 2009 the vacancy rate has trended upwards while the unemployment rate has only come down slightly. In fact, in June 2012 the job openings rate in the U.S. was back to its June 2008 level, before the depth of the financial crisis. The unemployment rate, however, was 2.7 percentage points higher than in June 2008. This change in the relationship between the unemployment and vacancy rates caused a rightward shift in the Beveridge curve.

The three most prominent explanations for the decline in match efficiency are

  1. occupational, industrial, and skill mismatch between labor supply and demand,
  2. house lock (geographical mismatch), and
  3. disincentive and labor supply effects of the extensions of UI benefits.

Recent studies which examined the potential causes of the shift in the Beveridge curve indicate that, while geographical mismatch was quantitatively unimportant, skill mismatch and extension of UI benefits have contributed to the shift in the Beveridge curve in the U.S. and that these factors are largely transitory.

Bart Hobijn and Aysegul Sahin study the Beveridge curves and recent labor market outcomes of a large set of countries to compare and contrast their experiences with those of the U.S. Specifically, they quantify deviations from the Beveridge curve for 14 OECD countries, including the U.S., since the Great Recession. They then discuss the magnitude of and reasons for the shift in the Beveridge curve in the U.S. since the Great Recession and argue that skill mismatch and the extension of unemployment insurance benefits likely have played a nontrivial role in this shift.

They then introduce a method to estimate fitted Beveridge curves for other OECD countries for which data on vacancies and employment by job tenure are available.They show that Portugal, Spain, Sweden, and the U.K. also experienced rightward shifts in their Beveridge curves. They argue that the shift in the first three countries is due to similar mismatch factors as in the U.S. while the shift in Sweden is due to labor market reforms passed right before the Great Recession.

Beveridge Curve Shifts across Countries since the Great Recession

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