by Jim Rose in business cycles, job search and matching, labour economics, labour supply, macroeconomics, occupational choice, unemployment Tags: recall unemployment, rest unemployment, temporary layoffs, waiting unemployment, work for the dole

Time use surveys in a range of countries show that the unemployed spend maybe a few hours per week looking for a new job. Krueger and Mueller (2008) found that:

…average search time is highest in the U.S.A., at 32.3 minutes per day, closely followed by Canada. Europeans search much less, but there is considerable variation across countries. In France the unemployed search around 21 minutes a day compared with 3 minutes in Finland

A small amount of job search per week is rational for many of the unemployed because a major form of job search doesn’t involve any job search any time soon. Instead, they are waiting for a call.

Also, Anglo-Saxon labour market are much more dynamic with many more vacancies opening every month as compared with the Eurosclerosis dual labour markets. In the European Union’s dual labour markets, it is not rational to search for vacancies that will never be there.

Job searches is an entrepreneurial venture that can involve a considerable amount of biding your time. Job seekers must choose between wider job search that may involve switching to a new industry or new occupation and investing in availability for suitable vacancies in their local labour markets or a recall to employment by old employers.

A spell of unemployment followed by a rehire by an old employer is known as recall unemployment or a temporary layoff.

Demand is less stable and more seasonal in industries such as construction, manufacturing and agriculture. When demand rebounds, recalling an old employee is a faster and cheaper hiring process than screening unfamiliar applicants of uncertain quality and training recruits.

Recall is not certain. Temporary layoffs will forecast their chances of recall and review these forecasts as they discover more about the length of drop in local labour demand and the general state of the rest of the labour market. the majority of unemployed who regard themselves as temporary layoffs are indeed recalled to their old job by their old employer after most downturns.

Better prospects of recall by old employers will reduce the intensity of job searches of temporary layoffs and increase their asking wages for other jobs. Workers with considerable industry and firm-specific human capital are likely to risk waiting longer for recall. Workers will search more intensively for other jobs as their forecasts of their chances of recall to old jobs become less encouraging.

There are more temporary layoffs in milder recessions because the lull in demand is expected to be short and there are fewer business closures. The higher levels of recall unemployment will reduce downward pressure on asking wages and slow the filling of vacancies because many well qualified job applicants are waiting for recall to their old jobs rather than applying more widely for new jobs.

Dixon and Crichton (2006) found that 58% of New Zealand benefit-to-work transitions involved starting with a new employer, 30% continued with an employer for whom they worked part-time in the benefit spell and 12% returned to an employer they had worked for in the past 2 years. The prospect of a recall by an old employer has been important for unemployed workers in countries such as the US, Canada, Demark, Sweden, Austria and Norway.

In the context of work-for-the-dole schemes and activation programmes that involve intensive monitoring of job search by the unemployed on unemployment benefits, requiring workers who are temporarily laid off to search for jobs is in many ways counter-productive.

Developing a screening mechanism to find these temporary layoffs and distinguishing them from permanent layoffs would be quite challenging. Countries which have unemployment insurance premiums spend a lot of try trying to adjust those premiums for temporary layoffs. This is so employers and employees do not take advantage of unemployment insurance to have a week or two off work in slack periods at the expense of the unemployment insurance system and top up their wages in the interim.

A cousin of recall unemployment is rest unemployment or waiting unemployment – job seekers who are waiting for conditions in a depressed sector to improve (Hamilton 1988; Alvarez and Shimer 2008).

Some job seekers may wait for local labour market conditions to improve, rather than search for jobs in other industries and new occupations. A job seeker’s old industry may offer better wage and job finding prospects than other industries If the newly unemployed worker waits a while.

Rest unemployment or waiting unemployment strives to salvage as much of the occupation and industry-specific human capital of the newly unemployed worker as possible.

A significant share of job seekers have been found to be waiting for local labour market conditions to improve rather than searching further afield in different industries or new occupations (Alvarez and Shimer 2008).

Again, rest unemployment or waiting unemployment is a type of job search that cannot be well handled by work-for-the-dole schemes and intensive monitoring of the job search of unemployed workers.