The Incidence of Long-term Unemployment in Australia 1978-2003

This paper explores the following question - Has there been any long-run increase (or decrease) in the ‘incidence’ of long-term unemployment once we have corrected for cyclical factors? Our research leads us to conclude that: (i) the incidence of male long-term unemployment has been neither rising nor falling, once we allow for cyclical factors, (ii) the incidence of female long-term unemployment has been rising, once we allow for cyclical factors. We conjecture that there is a link between increasing female participation (which we take to be a proxy for increasing ‘attachment to the labour market’ – and thus attachment to unemployment as well as employment) and the increasing incidence of female long-term unemployment. Experimenting with policy dummies, we find no evidence that policy has permanent effects on the incidence of long-term unemployment for either males or females but we do find some evidence that policy has temporary effects for females.