THE EVOLUTION OF EMPLOYMENT AND UNEMPLOYMENT IN AUSTRALIA

We are gratefill to Don Clark and Michael Jones fioin the ABS for their assistance with the data, and to John Kyriakopoulos, R o ~ y Robertson, and other colleagues at the Reserve Bank for their helpful comments. All errors are our own. The views expressed herein are those of the authors and do not necessarily reflect the views of the Reserve Bank of Australia. This paper poses two questions: why did the equilibrium rate of unemployment rise so much in the 1970s, and why does unemployment increase rapidly during recessions, but decrease so slowly in the subequent recovery, i.e. why is unemployment persistent? We find that equilibrium unemployment rose because of the economy's inability to adjust to the adverse shocks of the time; employment contracted in some sectors but did not expand sufficiently in others. In answer to the second question, we find that the sources of persistence are different for men and women. Male unemployment has been persistent because, following a recession, employment is created in female dominated sectors, rather than the mal