Labour Market Transitions and Social Exclusion

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Abstract
This article considers the dynamic effects that the labour market has on poverty and social exclusion.1 It shows how the analysis of labour markets can help our understanding of social exclusion and reviews some of the evi dence from Europe and the United States. The evidence is that there is consaderable move ment into and out of poverty. However, there is a significant group who stay in poverty for a number of years and a group that experience repeated poverty spells. The data also show that labour market transitions are an import ant cause of movements into and out of pov erty, although demographic factors are about equally important. There are tnterestang similarities between the pattern of movements into and out of un employment and those for poverty: many people leave unemployment quickly, but there are also important groups who are unem ployed for several years or who become unem ployed repeatedly. It is not only easily observable personal characteristics that are relevant to determining an individual's em ployment patterns: repeated periods of unem ployment appear to result from 'unobserved heterogeneity', rather than any damaging ef fect from earlier unemployment spells. This finding raises the interesting possibility that the observed repeated spells of poverty are also due to unmeasured personal character istics.