Unemployment by Age and the Unemployment Rate

This paper examines the effects of shifts in the age group size of the unemployed on the unemployment rate. Since ageing of the labour force will fundamentally change the shares of younger and older people that supply labour in most of the industrialised countries, it seems to be important to analyse if shifts in the age structure will change the level of the unemployment rate. From unemployment statistics it is known that the unemployment rate for the age group 55 to 64 years is lower than the unemployment rates for the age group 16 to 24 years and the prime-age group (25 to 54 years) in most of the OECD countries.¹ Hence, there are age-specific differences. In addition, it is observed empirically that the average duration of unemployment increases with age while the quit rate decreases with increasing age.²