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Age structure and the UK unemployment rate

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  • Richard Barwell

Abstract

The proportion of youths in the labour force has fallen dramatically over the past 15 years, following the collapse in the fertility rate in the 1970s ('the baby bust'). Given that youths always have higher unemployment rates than adults, this shift in the composition of the labour force towards those with lower unemployment rates may have been responsible for a fall in the aggregate unemployment rate. Using data from the Labour Force Survey, it is estimated that about 55 basis points of the 565 basis point fall in the UK unemployment rate between 1984 and 1998 can be accounted for by changes in the age structure of the labour force. Changes in the fraction of each age group that is economically active will also affect the composition of the labour force (and therefore potentially the unemployment rate); however, even controlling for changing labour force participation rates by age, demographically driven shifts in the age composition of the labour force still explain about 40 basis points of the fall in the unemployment rate. Finally, it is estimated that demographic change will have a negligible impact on the unemployment rate over the next decade, on the basis of recent labour force projections.

Suggested Citation

  • Richard Barwell, 2000. "Age structure and the UK unemployment rate," Bank of England working papers 124, Bank of England.
  • Handle: RePEc:boe:boeewp:124
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    References listed on IDEAS

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    Cited by:

    1. Vincenzo Cassino & Richard Thornton, 2002. "Do changes in structural factors explain movements in the equilibrium rate of unemployment?," Bank of England working papers 153, Bank of England.
    2. Lindblad, Hans & Sellin, Peter, 2003. "The Equilibrium Rate of Unemployment and the Real Exchange Rate: An Unobserved Components System Approach," Working Paper Series 152, Sveriges Riksbank (Central Bank of Sweden).
    3. Hamilton, Rob, 2005. "Education, Demographics and the Irish Economic Miracle," Quarterly Bulletin Articles, Central Bank of Ireland, pages 103-130, May.
    4. David Campbell & Alan Carruth & Andrew Dickerson & Francis Green, 2007. "Job insecurity and wages," Economic Journal, Royal Economic Society, vol. 117(518), pages 544-566, March.
    5. Petr Malecek, 2021. "Effects Of Demographic Structure In Growth Accounting And Labour Market Decompositions," International Journal of Economic Sciences, European Research Center, vol. 10(2), pages 103-113, December.
    6. Ademola Obafemi Young, 2021. "Cohort Size and Unemployment Rate: New Insights from Nigeria," Global Journal of Emerging Market Economies, Emerging Markets Forum, vol. 13(1), pages 122-151, January.
    7. Jennifer V Greenslade & Richard G Pierse & Jumana Saleheen, 2003. "A Kalman filter approach to estimating the UK NAIRU," Bank of England working papers 179, Bank of England.
    8. Petr Malecek, 2021. "Effects Of Demographic Structure In Growth Accounting And Labour Market Decompositions," International Journal of Economic Sciences, European Research Center, vol. 10(2), pages 104-114, December.

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