Labour supply and population cohorts : Impact of the business cycle on labour market attachment

Abstract

People of different age react in the labour market differently to cyclical trends and changes in social security and pension provision. The labour force participation rate for even same-age people has not remained unchanged over a long period of time. Cohorts born in the 1950s and 1960s and entering working life in the 1970s and 1980s have the highest labour force participation rate. However, the participation rate for younger people has begun to fall. Young people s absence from the labour market can in part be explained by longer times of study. But the weakness of the business cycle and tightness of the labour market are also reducing labour supply among young men, in particular. Structural change in the economy has increasingly gained momentum during the financial crisis, and the employment situation has deteriorated particularly in male-dominated industrial sectors. There is a risk that the labour market will face a generation of recession males in the same way as following the recession of the 1990s there were recession females , whose labour force participation rate remained lower than average for a long time.