Australian labor market dynamics across the ages

Transition probabilities between four labor market states (full-time employment, part-time employment, unemployment and inactive) for three age groups (the young, mature and old) are calculated using monthly gross flow data for Australia from October 1997 to May 2012. We determine the responses of the different groups to phases of the business cycle by estimating four unobserved common dynamic factors that drive the age group transitions. Job-finding and job-losing factors were significantly affected by the business cycle variable. Impulse responses to a business cycle shock show that both job-finding and job-losing matter, with the former more important. Part-time job flow responses are more important cyclically than full-time ones. In business cycle downturns, the young have a disproportionate difficulty finding and keeping all jobs, the mature unemployed have more difficulty finding full-time work, and the old have difficulty keeping full-time work.