Duration of unemployment in youth transitions from schooling to work in Cape Town

The transition from school to work marks the beginning of the labour market experience of youth. If smooth and efficient, it can be a springboard to a successful career. However, it often is not a smooth transition and youth can be trapped in unemployment for relatively long periods. This paper makes use of a youth panel data set, the Cape Area Panel Survey (CAPS), which is rich in information about job search and timing of employment to illuminate the issue of youth transition to the labour market. Utilising month-by-month calendar entries, we are able to chart detailed labour market activity of youth in Cape Town. Following this, the nature and degree of duration dependence in the Cape Town labour market is examined using survival analysis. Furthermore, we examine whether the hazard of exiting the unemployment state is positive, negative or constant. Economic theory suggests that where the unemployment rate is very high, duration dependence should be negative, meaning that the likelihood of exiting a state of unemployment decreases with the length of the unemployment spell. The reasoning behind this postulation is that in an environment of high unemployment, the discouraged worker effect is prevalent, and it is likely that workers will decrease their search intensity or resort to a more passive means of job search. These factors could serve to decrease the exit probability of the unemployed.Cecil Mlatsheni: Senior Lecturer in the School of Economics, University of Cape Town, cecil.mlatsheni@uct.ac.za Murray Leibbrandt: The DST/NRF Research Chair in Poverty and Inequality Research, the Director of SALDRU and a Principal Investigator on the National Income Dynamics Study at the University of Cape Tow