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Labour Market Attachment of People Outside the Labour Force
An Explorative Analysis of the Hidden Labour Force in Europe
Holst, Elke | Spiess, C. Katharina
Journal of Contextual Economics – Schmollers Jahrbuch, Vol. 122 (2002), Iss. 1 : pp. 55–83
Spiess, C. Katharina
In addition to employed and unemployed persons, individuals outside the labour force also often enter gainful employment. Generally they are not taken into account in the determinations of a country's labour supply This is mainly due to the difficulty of identifying this "hidden labour force".
Based on the European Community Household Panel (ECHP) in the years 1994, 1995 and 1996, this study takes an explorative look at the hidden labour force by comparing 12 member states of the European Union in both longitudinal and crosssectional contexts. The group of the !Attached' is developed to analyse both the extent and the behaviour of the labour supply not registered in statistics.
The usefulness of such an approach is confirmed by our results, which indicate a relatively high tendency of persons in this group of the Attached to enter into gainful employment compared to others outside the labour force. Nevertheless, this group does only account for a part of the hidden labour force. The importance of hidden labour overall appears in the longitudinal study of the transition into employment. Based on two year periods for the 12 European countries, the study indicates that unemployed persons do account for about only half of the persons who enter into gainful employment.
Comparisons of the EU countries confirmed the hypothesis of above-average inflow to the hidden labour force during periods of a tight labour market. But our investigation also cast doubt on simple macroeconomic explanations for the behaviour of persons in the group of the Attached. High unemployment was in some, but not all, countries associated with an above-average size of the Attached.