Negative duration dependence unemployment is a rather strange phrase and a rather strange and hidden concept, to most people, regarding unemployment. However, the concept is worth examination when an economy such as the U.S. is experiencing long term persistent unemployment.
Negative duration dependence unemployment is basically a statistic that shows that the longer James or Jane Goodfellow have been unemployed the less likely James or Jane will land a job. Stated alternatively, the longer a workers is unemployed, a lower probability is present regarding the worker exiting the ranks of the unemployed. (1) (2)
Why? Seems rather counter intuitive. One would think that the unemployed worker has had plenty of time to study job openings, apply for positions, and interview for such positions. Wouldn’t all this effort, over time, make the worker more probable to land a job rather than less probable?
Some of the possible explanations regarding negative duration dependence unemployment are:
(1) the longer the worker is unemployed the worker tends to lose job skills,
(2) with lower job skills the offer for employment likely comes with a lower wage offer,
(3) with a lower wage offer the unemployed worker may opt to continue receiving unemployment benefits rather than accepting the lower wage offer,
(4) the longer the duration of unemployment means the longer away from the work force. The detachment form the work force can erode employment/job networks the unemployed worker once relied upon to help in job seeking,
(5) the longer the duration of unemployment may cause prospective employers to question the abilities of the workers i.e. is the prospective worker being passed over as he or she is the marginal worker. (2)
(1) The Rise in Long-term Unemployment, 2010 Federal Reserve Bank of Richmond publications, Hornstein and Lubik.
(2) The Causes and Consequences of Longterm Unemployment in Europe, 1999, Machin and Manning.
(3) The European Unemployment Dilemma, 1998, Ljungqvist and Sargent