The Effect of Unemployment Insurance on Unemployment Duration in Yazd

Unemployment duration is the length of time that an unemployed person looks for a job. It is an indicator of labor market performance. In other words, a longer period of unemployment duration reflects the poor performance of labor market and implies that structural barriers prevent the employment of unemployed. In recent years, the unemployment rate in Yazd has exceeded the average unemployment rate in the country, and this has made unemployment an important issue in Yazd. In this regard, unemployment duration is of importance. Accordingly, identifying the factors affecting the unemployment duration is as important as identifying the factors affecting the unemployment rate. Unemployment insurance is a factor affecting the unemployment duration. On this basis, the purpose of this study is to investigate the effect of unemployment insurance on unemployment duration in Yazd.

In the present study, the generalized Cox proportional hazard model has been used as a statistical method to correlate survival with a number of explanatory variables. This model belongs to the group of non-parametric models and is a function of time and explanatory variables. One of the features of this model is the proportional hazard assumption, according to which the risk ratio is always a fixed number and independent of time. If the explanatory variables in the exponential expression are not time-independent, the generalized Cox proportional hazard model is applicable. The exponential part of the generalized Cox proportional hazard model includes time-independent and time-dependent variables. In the present study, the maximum likelihood method has been used to estimate the parameters, in which the parameters are obtained by maximizing the probability function. In the model of this study, the unemployment duration is a function of unemployment insurance and a vector of explanatory variables including age, gender, marital status, employment history and number of children. Unemployment duration in terms of day and unemployment insurance, which is the wage given during the unemployment or a coefficient of wage that is received based on the minimum wage, is entered into the model. The statistical population of this study consisted of the unemployed job seekers who were unemployed from 2013 to 2017. They received unemployment insurance and were re-employed. Raw data were collected from the Department of Labor, Cooperation and Social Welfare Organization and the Social Security Organization of Yazd.

The distribution of statistical population according to the unemployment duration shows that the unemployment duration of 66.2% was under 12 months and of 29.8% was between 12 and 24 months, which accounts for 96% of the statistical population. Also, the unemployment wage (unemployment insurance) of 74.1% was equal to the minimum wage and of 25.9% was more than the minimum wage. In addition, unemployment wage (unemployment insurance) has a positive and significant correlation with unemployment period. The results of estimating the generalized Cox model show that unemployment insurance has significantly increased the unemployment duration, and the increased unemployment insurance has resulted in increased unemployment duration. Also, being single and having no children leads to an increase in the unemployment duration. In contrast, employment history and age lead to a decrease in the unemployment duration. In other words, people who received unemployment insurance, namely those who were single and had no children, left the unemployment duration later, and people with a longer employment history and age left the unemployment duration earlier. In addition, gender did not have a significant effect on the unemployment duration. According to the coefficients, unemployment duration is more affected by individual characteristics than by unemployment insurance. Also, among the variables, the largest coefficient is related to being married.

In this study, for the first time, unemployment insurance is included in the model not as a dummy variable (receiving or not receiving unemployment insurance) but as unemployment wage. This is used as a coefficient, or the ratio of unemployment insurance to minimum wage. The results of the model estimation showed that unemployment insurance significantly increases the unemployment duration. Most studies confirm this result. However, a few studies such as Carling et al. (1996) in Sweden, Tatsiramos (2006) for European countries, Fitzenberger and Wilke (2007) in Germany and Galean et al. (2019) in Spain contradict the results of the present study. This study showed that the benefits under unemployment insurance payment are as important as the payment period to reduce the length of the unemployment duration. Also, policymakers should reduce the adverse impact of unemployment insurance on the unemployment duration by paying attention to both benefits and duration. Therefore, if unemployment insurance benefits gradually decrease over time with increasing unemployment duration, the incentive to re-employ will increase. In addition, paying attention to the education and training of the unemployed by emphasizing on technical and vocational training can provide the basis for reducing the unemployment duration.