Labour Mobility and Unemployment : Some Evidence from Labour Force Survey

The rise and persistence of unemployment emerged as a serious macroeconomics problem during the 1980s. This highlighted the possibility of imperfect labour mobility as
significant factor. Thus, understanding the relationship between labour mobility and unemployment is important in analyzing the unemployment during the 1980s.
Using Labour Force Survey (LFS) data from 1975 to 1990 inclusively, this dissertation analyzes this relationship at both aggregate and disaggregate levels. At the aggregate
level, the relationship appears to be negative with no evidence that labour mobility drives aggregate unemployment. This negative relationship also emerges at industry and regional level. These results point against sectoral shock explanations for the rise in joblessness.
However, both high unemployment industries and regions have higher mobility. This suggests that the unemployment can affect mobility differently at two levels. First, at the aggregate level, it may reduce mobility through its effects on job offer arrival probabilities, and the potential cost of changing industry. At the industry and regional level, it may raise mobility. Since the unemployment differences across industries and regions represent varying employment opportunities and prospects, high differences may encourage mobility towards low unemployment industries and regions.
The data also suggests a role for individual heterogeneity. Among the selected high unemployment demographic groups, old workers, male workers, and nonwhite workers have low mobility. However, high unemployment young and manual workers, they have high labour mobility. Thus, low mobility as symptom of high unemployment only applied to certain groups. Policies constructed to reduce unemployment by raising mobility must
target the appropriate groups.