Evidence from decomposing the job openings and unemployment relationship using data on unemployed persons by reason of unemployment shows that a significant portion of the outward shift in the Beveridge curve is concentrated among new entrants and unemployed re-entrants—those generally not eligible to collect regular or extended benefits. The decomposition reveals that at most half of the shift in the aggregate Beveridge curve is attributable to the disincentive effects of unemployment benefit programs.
This policy brief explores the nature of the recent change in the vacancy-unemployment relationship by disaggregating the data by industry, age, education, and duration of unemployment, and by examining blue- and white-collar groups separately. Considering all the evidence together, we conclude that the current outward shift of the Beveridge curve is likely being driven by something other than a mismatch between workers’ skills and the demands of available jobs.
The Jobless Trap
Three recent audit studies on nonemployment discrimination report results consistent with the long-term jobless having significantly lower chances of being invited to job interviews. Given the design of previous studies unfavorable treatment can be due to a marginal preference among employers for hiring applicants with shorter spells or to stronger negative beliefs about the long-term nonemployed. Using a résumé audit study, I explore the extent to which employers become forgiving of longer nonemployment spells when other merits appear on an applicant's résumé: in this case relevant work experience. Responses indicate a strong distaste for applicants with long spells of nonemployment—even in a situation characterized by observationally superior résumés in comparison to applicants with short nonemployment spells. The findings reveal a sharp drop-off in the number of interview requests for those whose nonemployment spell topped six months, implying that those experiencing long jobless spells might become trapped in nonemployment, regardless of their prior experience. To interpret the findings, a nonstationary job search model under duration-dependent unemployment benefits and endogenous job search intensity is constructed. It is shown that in the spirit of Lockwood (1991), the model can generate a unique equilibrium for plausible parameter values, with unemployment benefits expiration date becoming a focal point around which job search intensifies and employer screening becomes optimal.