Employment rate hysteresis by gender and age group

The recent financial and pandemic crises suggest that severe recessions induce lasting effects on employment rate via hysteresis mechanisms. Yet, the literature has not explored variations in hysteresis intensity among demographic groups. This paper fills this gap by employing a switching employment rate equation based on the play model of hysteresis. This model portrays a dynamic process where non-convex adjustment costs and uncertainty result in intervals of weak employment rate response to minor changes in forcing variables but sudden spurts in response to large or cumulative labour demand shocks. The switching parameter, interpreted as a ‘band of lower employment rate reaction,’ serves as a key summary indicator capturing the magnitude of employment rate hysteresis effects. Empirical findings reveal significant hysteresis effects across gender-age subgroups, diminishing with age and more pronounced in male employment rate.