Unemployment in Theory and Practice

Citation

Urwin, P. (2001), "Unemployment in Theory and Practice", International Journal of Manpower, Vol. 22 No. 7, pp. 664-674. https://doi.org/10.1108/ijm.2001.22.7.664.1

A majority of the chapters in this book are revised versions of papers presented at the 1996 International Labour Markets Research Network conference. As a result, the text presents a wide variety of approaches to the theory of unemployment. As the editor emphasises at a number of points in the introduction, this diversity of content serves as a reminder that the causes of unemployment in different regions and between different people are rarely the same. In fact the stated aim of the text is to underline the lesson that the possible causes of, and therefore the range of policy options associated with, unemployment are numerous and a “one‐size‐fits‐all” approach is often inappropriate.

The text is divided into five parts, with the first of these attempting to guide the reader, “From a macro to a micro perspective” – a title that does seem rather inappropriate. The first two contributions adopt an open economy perspective, in an attempt to gauge the employment effects of recent developments in the international economy. First, Beachill and Pugh comment on the possible implications for European unemployment of the introduction of a single European currency. Aspinwall then uses a case study approach to discuss the possible implications of increased globalisation and the constraints this may place on governments’ ability to determine social policy. These two contributions, though very specific in their respective approaches, provide interesting additions to the existing literature. They also highlight the diversity of approaches adopted by economists and social scientists, with Beachill and Pugh’s use of the Johansen procedure for the identification of cointegrating vectors, in stark contrast to the much more qualitative case study approach of Aspinwall.

Part I rounds off with a more general discussion of European joblessness. For students of labour economics wishing to place the various theories of unemployment into some kind of framework, this contribution by Shackleton will prove extremely useful. While it does not introduce any particularly new ideas, the approach adopted in explaining the various theories is refreshingly original and the clear explanations will be valuable to those who are relatively new to the subject area.

Pederson and Westergard‐Nielsen introduce Part II of the book with an extensive review of the empirical evidence on the dynamics of unemployment. This chapter is particularly valuable as a source of reference and provides a useful empirical complement to the review of theory presented in chapter 3. While the authors rightly warn of the problems associated with comparison across empirical studies, the common findings which they draw attention to, do make a valid contribution to the “Identification of policy target groups” – the stated aim of this part of the book.

The next two sections of Part II then focus on two currently popular areas of labour market debate. First, Covick analyses the Australian experience of self‐employment and discusses the possibility that this is a form of disguised unemployment – a particularly relevant discussion, given the continuing debate surrounding the “quality” of atypical employment. This is followed by Wagner’s contribution to the debate on the effects of the “demographic time bomb”. The author argues that in Germany there are many incentives for older workers to retire early – a situation which seems to be supported by employers and the government.

In Part III the book moves on to an evaluation of active labour market policies (ALMPs). The introduction by Lange and Shackleton is by far the most interesting of this section, with Auer (chapter 8) and Evans (chapter 9) adding little to the discussion. Lange and Shackleton are extremely critical of ALMPs and provide extensive evidence which questions the wisdom of such grand schemes as the UK’s New Deal programme. Though this chapter was written before the implementation of the New Deal, its objective discussion of the merits of such a programme provides a welcome alternative to the present spin surrounding New Deal “success”. Also, the reason put forward by the authors for government behaviour in the area of ALMPs is interesting (if a little cynical).

In Part IV, Lenkova estimates a proportional hazard model for the Bulgarian labour market (incorporating both single and competing risks) and thus provides a useful example of the methods discussed by Pederson and Westergard‐Nielsen in chapter 4. One of the conclusions from this investigation, is that government employment agencies are not effective in helping the unemployed in job search. This is particularly interesting, given the arguments of Shackleton and Lange in chapter 7. The analysis by Ingham and Ingham which follows, adopts a more static cross‐sectional approach to the modelling of labour market outcomes. From this analysis, the authors conclude that in Poland the question of unemployment does not seem to be an equal opportunities question.

Finally, Part V of the book analyses the area of “Wage policy and compensatory pay”, with contributions from Schneider, who analyses German data to test the link between benefit entitlement and unemployment duration; and Fryer, discussing recent changes in the South African labour market and the possible implications for wage setting of its high unionisation. Though these contributions are both valid additions to the book, with the analysis of both authors of interest to a wide variety of readers, Part V does seem to be something of an “add on” to the main body of the text. This last point highlights the main problem with the book. As with many such collections, we are presented with a rather eclectic mix of articles, written by authors from a number of different backgrounds who undertake their analysis from widely differing theoretical and empirical standpoints. This does have the advantage that, for experienced practitioners of labour economics, a wide range of views is likely to be of interest. However, the categorisation of the chapters into five separate sections often seems arbitrary and rather forced, with chapters 3, 4 and 7 seemingly added in an attempt to provide some structure to the presentation.

One possible reason for this structuring is the editor’s assertion that this text would be appropriate for undergraduate students – a rather dubious claim. While the book is likely to prove useful to postgraduate students and experienced practitioners, I feel that the variety of views and approaches would serve only to confuse the majority of undergraduate students. As a collection of papers, with different perspectives and a sources of reference the book is extremely useful. However, it seems rather artificial to attempt to present this as a systematic approach to the subject matter. The editor should have chosen either a text book with a reduced number of contributions or an eclectic mix of interesting and valuable papers. Though an attempt to produce a text which is a combination of the two is laudable, much more guidance would have to be given to the contributors, a priori.