The Impact of Restart on Reservation Wages and Long-Term Unemployment

The last two decades have seen considerable growth in the level of unemployment in the UK. Between 1960 and 1968, the average unemployment rate was 2.6 percent, by the first half of the 198O's this had risen to 10.5 percent. Along with rising unemployment, this period also saw changes in the nature of unemployment, with unemployed individuals spending longer periods out of work. Between 1979 and 1986 the proportion of unemployed people who had been out of work for over a year rose from 20 percent to approximately 40 percent. Recent work by Layard et al (1991) shows that almost the entire growth in unemployment over this period can be attributed to an increase in time spent unemployed rather than an increase in the inflow rate into unemployment