Understanding the impact of recession on labour market behaviour in Britain

Understanding the impact of recession on labour market behaviour in Britain is a programme of research funded by the Economic and Social Research Council.

This integrated, comprehensive and innovative programme investigates the labour market responses of individuals and households to economic recession.

The programme is made up of four projects which focus on:

• developing a theoretical framework within which to model the impact of the business cycle on employment and wages which will then feed into the empirical analysis
• investigating the impact of recession on children and young people, their educational ambitions and attainment, their first labour market experiences and employment trajectories, and their longer-term productivity
• investigating the impact of recession on people of working age, in terms of responses to wage and working hours constraints, resulting occupational and industrial mobility and their consequences, unemployment experiences, and the role of education and skills as a buffer during the recession
• investigating the impact of recession on households in terms of within-household patterns of labour market participation and working hours, patterns of job loss and the distribution of complete and partial income losses within households

Background

This research is particularly timely, given that the British economy is currently emerging from its first recession in almost twenty years, during which GDP fell by more than in the recessions of the early 1980s and 1990s.

Furthermore, in terms of loss of output, this recession was the worst since the Second World War. Despite this, unemployment rates have remained lower than in the recessions of the ’80s and ‘90s, while employment rates have remained relatively high. Instead, there is evidence that the recession affected earnings and hours, with negative earnings growth through 2009 and increases in the proportions of men and women working part-time rather than full-time.

Methods

The programme will draw on the data sources listed, and the researchers will also collect and analyse their own qualitative data.

The BHPS/Understanding Society follow the same nationally representative sample of individuals annually over a relatively long period of time – a time-span that includes both economic growth and recession. They include a youth component that from 1994 onwards collects information on 11–15 year olds and their attitudes and ambitions (who can then be followed through their early years in the labour market) and provide the household context, allowing the researchers to relate the behaviour of all individuals within each household.

The advantage of the LFS is its long time-span (biannual from 1975–1981, annual from 1983–1991, and quarterly from 1992–2010; and from 1990 for the household datasets), allowing the researchers to include previous recessions (although only for repeated cross-sectional analysis).

LFS data will be used to provide cross-sectional (and short-run panel) counterpart analysis. Most importantly, characteristics of the local labour market (e.g. average wages, employment and unemployment rates, and hirings at the local level) can be computed from LFS data, which we then merge into the BHPS and LSYPE (by month, year, county and, where sample sizes permit, by age, gender and local authority district) and use as key indicators of the macro-economic climate.

The qualitative element of the project will interview up to 20 couple households where one partner has reduced their hours or stopped working during the recession. In depth interviews with each couple member will be carried out in people’s homes to gain independent views on the processes involved. Interviews will be taped and transcribed for analysis.

What the researchers will do

The research team will undertake four separate projects:

Project 1: Theoretical framework

The researchers will create a framework which will inform model specifications and interpretation of results producing a strong link between theory and data that provides a robust structure within which to draw policy implications.

Project 2: The recession and young people

This project provides a comprehensive analysis of how the prevailing economic climate affects young people’s behaviour.

Project 3: Workers’ responses to recession

This project investigates the likely longer-term impacts of the recession on people’s labour market behaviour.

Project 4: Household-level responses to recession

This project focuses on households’ responses to the recession.

Event

Young people in the recovery: from false starts to rewarding careers (4 June 2014)

Podcasts

The long shadow of recession (14 July 2014)

Dr Mark Bryan discusses research findings from ISER’s ESRC funded project, Understanding the impact of recession on labour market behaviour in Britain, which investigates the labour market responses of individuals and households to economic recession.

How couples respond when one loses a job (14 August 2014)

Dr Karon Gush talks about research using the Understanding Society Innovation Panel to look at the responses of couples when one of them loses their job.