Labour market flows: Accounting for the public sector

Abstract

For the period between 2003 and 2018, we document a number of facts about worker gross flows in France, the United Kingdom, Spain and the United States, focussing on the role of the public sector. Using the French, Spanish and UK Labour Force Survey and the US Current Population Survey data, we examine the size and cyclicality of the flows and transition probabilities between private and public employment, unemployment and inactivity. We examine the stocks and flows by gender, age and education. We decompose contributions of private and public job-finding and job-separation rates to fluctuations in the unemployment rate. Publicsector employment contributes 20 percent to fluctuations in the unemployment rate in the UK, 15 percent in France and 10 percent in Spain and the US. Private-sector workers would forgo 0.5 to 2.9 percent of their wage to have the same job security as public-sector workers.

The intensity of COVID‐19 nonpharmaceutical interventions and labor market outcomes in the public sector

“…For example, during the last Great Recession in the U.S., government employment grew during the first months of the recession of 2008, this behavior is also observed in the crisis of 1990-91 and 2001 (Fontaine et al, 2020;Goodman & Mance, 2011;Hatch, 2004). Government employment is driven by other objectives including: budgetary targets, stabilization policies and/or electoral objectives (Fontaine et al, 2020). The public sector has more difficulties in order to reduce public expenditure by, for example, cutting jobs in the face of an income shortfall (Craig & Hoang, 2011).…”

“…During a traditional economic crisis, public sector employment is expected to be less sensitive to economic recession than private sector employment following different paths in the magnitude and in the timing of declines and recovery, being normally less negatively affected at the beginning of the recessions (Fontaine et al, 2020;Kopelman & Rosen, 2016;Laird, 2017).…”

Jumping the queue: Nepotism and public-sector pay

“…These are shown in Appendix F. Around 13.2 percent of the labour force works in the public sector (e g = 0.132). Following Fontaine et al (2018), we construct data on worker flows to calibrate the separation rates by sector. The numbers are s g = 0.022 and s p = 0.044, imply that the private sector has a higher separation rate than the public sector.…”

“…The worker stocks and flows are expressed as total number of people in thousands (t), as a percentage of the working-age population (p) or as a hazard rate (h). See Fontaine et al (2018) for details. For the calibration, we excluded the flows from and to inactivity.…”

Job mobility, reallocation and wage growth

“…show that using a different definition does not change the patterns of earnings gains/losses associated with job-to-job moves substantially.8 This means that non-covered sectors such as some agriculture or the public sector are effectively included in the definition of non-employment. SeeFontaine et al (2019) for an analysis of the role of public sector for labour market flows in the United States and selected European countries.9 In the case of job-to-job and employment mobility, wages are based on the yearly earnings at the previous and current employer, adjusted to a full quarter to be comparable to the nearest full-quarter earnings as used in in.…”