Measuring Unemployment: A Composition Model

Abstract

In looking at statistics of the labour market, the labour force status categories are often considered as independent, but when expressed as proportions they are observations over a simplex of non-negative components summing to 1. This leads to serious deficiencies in the conventional tools of analysis, and a framework commonly referred to as compositional modelling has been developed to address them. This paper explores the application of these tools to labour force data and demonstrates simple consistent patterns between job search (unemployment) and current participation levels across both aggregate and age and gender sub populations. Unlike previous uses of composition models in labour market studies we use a simple transform with a direct interpretation for our analysis.