TOWARDS A FORMAL PROFILING MODEL TO FOSTER ACTIVE LABOUR MARKET POLICIES IN NEW ZEALAND

Abstract

Following the unemployment hysteresis of the 1980s, discussions of methods for reducing the natural rate of unemployment tend to focus on long-term unemployment (LTU). A broad consensus exists among economists for efforts to move towards active labour market policies or ALMPs that increase employment opportunities. The premium is on accurate and early identification of jobseekers at risk of LTU (an activity known as profiling) so that action on referral to an appropriate ALMP can be taken as early as possible in the unemployment spell. Evidence shows that statistical-model based profiling is more accurate than profiling based on other methods. To advance a statistical profiling model for New Zealand, this paper has attempted to fit a logit model to more than 2.2 million completed unemployment spells. Despite the prevailing data limitations, the estimated coefficients have the expected signs and form the most plausible basis yet for estimating the probability an identified jobseeker has of suffering LTU. JEL Classification: J64