Local Underemployment and the Discouraged Worker Effect

Urban Studies, Vol. 38, No. 10, 1733 –1751, 2001 Local Underemployment and the Discouraged Worker Effect Maarten van Ham, Clara H. Mulder and Pieter Hooimeijer [Paper rst received, April 2000; in nal form, December 2000] Summary. The effectof poor local labour marketopportunities on occupational achievement is an important aspect of the spatial mismatchhypothesis. Much of the researchhas concentrated on the directlink betweengeographical accessto jobs and employment outcomes. In contrast, little attention has been given to the discouraging effectof poor chances on job searchactivities. The discouraged workereffect is dened as the decision to refrain fromjob searchas aresultof poor chances on the labour market. Discouragement effectscan arisefrom a lack of individual qualications, fromdiscrimination in the labour marketor froma high local level of underemployment. The empirical ndings of this paper, based on the Netherlands Labour ForceSurveys 1994– 97, show that discouragement can enterthe job searchprocess both at the stage of deciding to enterthe labour forceand at the stage of deciding to engage actively in ajob search. Gender differentials in discouragement arerevealed in the processof self-selectioninto the labour force. Poor labour marketchances lead to lessactivity in both off-the-job and on-the-job search, indicating arole of discouragement in the spatial mismatch.Individual qualications and ascribed characteristicsturn out to be moredecisive than the local level of underemployment. 1. Introduction Even though Kain’s ‘spatial mismatchhy- bias in studies aimedat estimating the com- pothesis’(Kain, 1968) was muting tolerance of the unemployed (Cooke and Ross, 1998). The second is the widening originally coined to describe abroad set of of the issue to encompass not only racebut geographical barriersto employment for also gender (Preston and McLafferty,1999). African-Americaninner city residents The third is the detailed measurementof (Preston and McLafferty,1999, p. 388) geographical access to appropriate jobs using it has also stimulated moregeneral research GIS, linking this access to the level of occu- on the effectof poor job access on occupational achievement (Hanson et al., 1997; pational achievement. This researchhelps to Ong and Blumenberg, 1998; van Ham et al., understand the variety of mechanisms that 2001). underlie the original hypothesis. Research in Several empiricalstudies have focused on the 1990s has shown majoradvancement in the inuence of spatial restrictions on em- three areas. The rst is uncovering selection ployment rates(for example, Ong and Blu- Maarten van Ham, Clara H.Mulder and Pieter Hooimeijer are in the Urban Research Centre (URU),Faculty of Geographical Sciences, Utrecht University, POBox 80.115, 3508 TC Utrecht, The Netherlands. Fax: 31 30 253 2037. E-mail: [email protected]; [email protected]; and [email protected]. Maarten van Ham’s research was supported by the Netherlands Organization for Scientic Research (grant no. 42513002). Clara Mulder’s research was made possible by afellowship from the Royal Netherlands Academy of Arts and Sciences. 0042-0980 Print/1360-063X On-line/01/101733-19 Ó 2001 The Editors of Urban Studies DOI:10.1080/ 00420980120084831 1734 MAARTENVAN HAM ET AL. menberg, 1998; Immergluck, 1998) and gen- ing engaged in job search. Individual charac- der differences in labour participation (for teristics (eitherreal or ascribed) and the local example, Hanson and Pratt, 1988, 1990, level of underemployment areboth con- 1991). However, no direct empiricalevi- sidered potential sources of discouragement. dence has been found of arelationship be- We show that discouragement can enter the tween spatial restrictions and job search. Yet job search process at two different stages. this relation is crucial, as job search is a The rst stage concerns the decision to par- prerequisite forlabour marketparticipation ticipate in the labour market.At this stage, and careeradvancement. The jobless search people select themselves into or out of the to escape unemployment and those already in active labour force.This selection clearly has ajob search to nd abetter one (Mortensen, an effecton their chances of employment, as 1986). The relationship between poor the potentially less successful will refrain chances in the labour marketand the inten- fromparticipation moreoften. The second sity of job search has been expressed in the stage is the decision to engage actively in job discouraged worker hypothesis (Fisher and search, either on or offthe job, once one is in Nijkamp, 1987). The hypothesis states that the active labour force. In this second stage, people with poor labour marketexpectations selection effectsare expected, asthe discour- become discouraged in their job search and aged worker hypothesis stipulates that low leave or failto enter the labour force,be- chances of being unemployed will have a cause the probability of nding asuitable job negative effecton the search intensity. aftera certain period of timeis low. The remainderof this paper is organised in Poor labour marketchances can result four parts. Section 2describes atheoretical fromindividual characteristics, fromdis- frameworkwithin which (gender-related) crimination in the labour market,and froma discouragement effectsin the various stages high level of local underemployment, which of the search process can be understood. indicates amismatchbetween demand and Section 3introduces the data and methodol- supply on the local labour market(Simpson, ogy. The method consists of aseries of three 1992). Evidence fromstudies using USdata logistic regression models which areused to (Parsons, 1991; Keith and McWilliams, estimate:the chances of being in the active 1999) and British data (van Ophem, 1991) labour force;the chances of being unem- indicates that women areless likely than men ployed, given the factthat people arepartici- to be engaged in job search. Women are pating on the labour market;the chances of morespatially restricted than men (Hanson being in search of ajob dependent on and Pratt, 1988), so gender differences in whether one is employed. Section 4reports search behaviour may be explained in part by the results of the empiricalvalidation of the gender differences in the discouraged worker models. Selection effectsare measured, using effect.In general, discouragement can be the two-step Heckman procedure, and also regarded as anextra mechanism that hampers given asubstantive interpretation in termsof the occupational achievement of groups with discouragement. The nal section comprises poor chances on the labour market,like asummary and adiscussion of the implica- Kain’s inner-city African-Americanresi- tions. dents, and researchon discouragement might thereforecontribute to amoregeneral under- 2. Job Search: Theory and Background standing of spatial mismatches. The aimof this paper is to nd empirical To explain job search and the inuence of evidence forthe discouraged worker hypoth- local underemployment on job search, we esis by looking at direct evidence of job use insights fromvarious theoretical points search activity. The main issue is the extent of view. We commencewith job search the- to which poor labour marketchances have a ory and human capital theory. Individual and discouraging effecton the probability of be- household restrictions areconsidered, paying LOCAL UNDEREMPLOYMENT 1735 special attention to racialand gender differ- search; people search in order to avoid un- ences. Finally, job search is placed in aspa- deremployment. For unemployed people, tial context and the discouraged worker there areno returns on previous investments effectis worked out in moredetail. in human capital. The higher the level to which an unemployed person has been edu- cated, the greateris the loss of income, so the 2.1 Job Search Theory moreintensive is the job search. For the Since the seminal papers of Stigler (1961, employed, the effectof human capital on job 1962), job search theory has conclusively search cannot be seen independently from become one of the main theoretical and em- the level of their present job. The human pirical tools forunderstanding the working of capital of an employed person is best utilised the labour market.In the past four decades, when that person’s job level and education labour economists have produced an exten- level arein keeping. Workers therefore sive body of researchrelated to job search search moreintensively when the educational theory (Lippman and McCall, 1976; Kiefer requirements of their job arelower than their and Neumann, 1989; Devine and Kiefer, level of education (seeSimpson, 1992). On 1991). In the basic sequential job search the basis of the foregoing, it can be hypothe- model, individuals choose areservation sised that the probability of being engaged in wage; this isthe lowest wage level at which an off-the-job search increases with educa- they would be willing to accept ajob. Ajob tional level. Itis further expected that, fora offerwould only be accepted ifthe wage given level of education, the probability of offerwere at least as high as the reservation being engaged in on-the-job search decreases wage. The arrivalrate of job offersdepends with the level of the job. on an individual’s search intensity; this in In addition to job level, other job charac- turn depends on the potential gains of the teristics can also indicate that aworker’s search (seeMortensen, 1986). By varying present job is sub-optimal, given past invest- search intensity, individuals

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