Research summary - Job-finding rate and unemployment

Official title: The Job-Finding Rate and Unemployment in Employment Insurance Regions

Author of report: Sami Bibi and Eyob Fissuh

Why this study

Currently, Employment Insurance (EI) benefits depend on the regional unemployment rate. However, the rate is not a good indicator of the probability of unemployed persons finding a job. We refer to this probability as the probability of transition from unemployment to employment.

As such, this study highlights how unemployment rates relate to the probability of transition from unemployment to employment. The study also examines the correlations between the probability of transition from unemployment to employment and the characteristics of the unemployed such as:

• spell of unemployment
• gender
• age
• education level
• occupation
• economic region

The EI Commissioner for Employers requested this study to supplement the 2018 to 2019 EI Monitoring and Assessment Report.

What we did

We estimated probability models to examine the factors that influence the ability (likelihood) of unemployed people to find a job. We did this in 2 steps. We first identified individuals who were unemployed in a given month and found a job in the subsequent month. We then compared the attributes of these individuals with those who remained unemployed during the 2 considered months. The attributes considered in our study included:

• age
• gender
• education level
• spell of unemployment, and
• tenure in the previous job

We also controlled for factors specific to the local labour market that may influence the probability of transition from unemployment to employment:

• regional participation rate
• average hours worked
• part-time, seasonal and temporary work

The study also took into account occupational and industrial differences. The data for the study comes from the Labour Force Survey.

What we found

We found that the probability of transition from unemployment to employment increases with educational attainment, but decreases as the unemployment spell lengthens. The likelihood of finding a job also varies across occupations. In addition, after accounting for occupation and EI economic region, neither gender nor age seemed to affect the probability of transition from unemployment to employment.

Another key finding of the study is that the probability of transition from unemployment to employment varied across regions with similar unemployment rates. This implies that the unemployment rate does not fully reflect the probability of transition from unemployment to employment.

What it means

The key finding of this study is that the unemployment rate may not be a good proxy for the probability of transition from unemployment to employment. Also, within every economic region, the unemployment rate varies greatly across occupations in Canada. This suggests that the average regional unemployment measure may not accurately reflect labour market conditions from regional-occupational perspective. These results may be useful for policy discussions and research into streamlining the eligibility criteria for EI.

Contact us

Skills and Employment Branch, Labour Market Information Directorate, Policy, Research, Analysis and Geomatics Division

Email: ESDC.NC.SSPB.RESEARCH-RECHERCHE.DGPSS.CN.EDSC@hrsdc-rhdcc.gc.ca