In a slow-growth, high-unemployment continent, Germany’s performance stands out. The success is often ascribed to the politically difficult Hartz labour-market reforms. This column discusses evidence to the contrary. The Hartz reforms played no essential role. Rather, the key was the threat of offshoring to central Europe together with the pre-Hartz structure and autonomy of the German labour-market institutions. This structure allowed trade unions to make wage concessions necessary to adapt to the new realities. Other nations should decentralise bargaining to the firm level while keeping workers’ representatives.
Christian Dustmann, Bernd Fitzenberger, Uta Schönberg, Alexandra Spitz-Oener, 03 February 2014
Miguel Cardoso, Rafael Doménech, Juan Ramón García, Camilo Ulloa, 20 December 2013
After witnessing the destruction of almost 18% of its employment during the crisis, the Spanish economy is now recovering. Understanding the effects of the recent labour market reform and wage moderation is crucial in accelerating employment creation. Correctly implemented and accompanied by appropriate policies at the European level, labour and products market structural policies could be the solution to the anomalously high unemployment rate in Spain
Borağan Aruoba, Francis Diebold, Jeremy Nalewaik, Frank Schorfheide, Dongho Song, 03 December 2013
GDP can be estimated by measuring either expenditure or income. Since a penny spent is a penny earned, both methods should give the same answer, but there is substantial measurement error in both estimates. This column presents a new method of measuring US GDP that blends these two estimates. According to the new measure, GDP growth is about twice as persistent as the current headline measure implies. The new measure also makes the current recovery look stronger, especially in 2013.
Jens Nordvig, 25 November 2013
Having promised to do ‘whatever it takes’ to ensure the survival of the euro, the ECB now faces the problem of record high unemployment combined with a strong currency. There is accumulating evidence that the ECB is more willing to fight currency appreciation than the Bundesbank would have been. Capital inflows have been a key source of recent upward pressure on the euro. Should this continue, the ECB may need to intervene more aggressively in order to promote economic recovery in the Eurozone.
Richard Dorsett, 21 November 2013
Individuals moving from long-term unemployment into work face a number of challenges. This column discusses the use of temporary in-work support during this transition. Recent experimental evidence has shown the potential for such support to have a positive long-term effect. It can increase not only employment entry but also employment retention, and so may provide a means of addressing the low pay, no pay cycle.
Rafael Lalive, Camille Landais, Josef Zweimüller, 09 November 2013
In response to the Great Recession, unemployment insurance has been extended in many countries, but there is controversy over whether such extensions are optimal. Unemployment insurance entails direct fiscal costs, and encourages job seekers to prolong their search. The familiar benefit of unemployment insurance is that it allows the jobless to maintain their consumption. However, by reducing the search effort of other workers, it also improves a given worker’s chance of finding a job. Unemployment insurance extensions appear less costly when these search externalities are considered.
Olivier Blanchard, Florence Jaumotte, Prakash Loungani, 18 October 2013
The state of labour markets in advanced economies remains dismal despite recent signs of growth. This column explains the IMF’s logic behind the advice it provided on labour markets during the Great Recession. It argues that flexibility is crucial both at the micro level, i.e. on worker reallocation, and at the macro level, e.g. on collective agreements. It suggests that the IMF approach is close to the consensus among labour-market researchers.
Francis Kramarz, Oskar Nordström Skans, 17 October 2013
Modest recoveries in employment following the crisis mask severe youth unemployment. Because labour market struggles during the early stages of working life can have persistent negative effects, understanding job-finding networks among youth is key to forming pro-employment policies. This column analyses the transition from schooling to working life of Swedish youth. Close familial ties are important in job searches, especially among the less educated. Preliminary evidence suggests that family association can signal worker ability.
Jan van Ours, 06 October 2013
In absolute terms, the Great Recession affected the unemployment rate of non-Western immigrants more than that of native workers in the Netherlands. However, this merely reflects their generally weak labour-market position – job-finding rates are much lower for non-Western immigrants than they are for natives. There is little difference between the cyclical sensitivity of these two groups’ unemployment or job-finding rates. In relative terms, the labour-market position of non-Western immigrants is bad, but the Great Recession did not make it worse.
Tom Krebs, Martin Scheffel, 20 September 2013
Faced with stubbornly high and persistent unemployment in 2003-05 the German government implemented far-reaching labour-market reforms, the so-called Hartz reforms. This column shows that these reforms were highly successful in bringing down the non-cyclical component of unemployment in Germany but also argues that the Hartz reforms created winners and losers. This explains why these reforms have been hugely unpopular among the German public.
Hendrik van Dalen, Kène Henkens, 28 August 2013
In times of economic crisis, managers often take drastic measures to survive. This column presents new research on the preferences of managers from across Europe when faced with ‘downsizing’. It seems that, when recession bites, the instincts or ‘animal spirits’ of employers that were previously suppressed by prosperity or considered to be outdated resurface. European employers predominantly resort to offering early retirement packages (and to a lesser extent buy-outs) in response to the threat of downsizing, exacerbating, in the long run, the problems associated with Europe’s ageing population. The only notable exception to this rule is the response of Danish employers, who prefer to tackle this problem by reducing the working hours of their employees.
Laurent Gobillon, Peter Rupert, Étienne Wasmer, 23 July 2013
The unemployment rate in France is roughly six percentage points higher for African immigrants than for natives. Why? This column argues that the explanation is spatial: recent immigrants tend to have much longer commute times. Research suggests that in the region of 20% of the employment gap between the French minority and the French majority can be put down to commute times, but more research is needed, especially in France where research into the ethnic unemployment gap is scarce.
Andrew Oswald, 18 June 2013
Unemployment is once again the bane of the US and Europe. This column highlights an intriguing association between home ownership and high unemployment using US state-level data. Given the heavy subsidisation of and rise in home ownership, this association merits more attention from economists.
Bruno Crépon, Esther Duflo, Marc Gurgand, Roland Rathelot, Philippe Zamora, 24 April 2013
Youth unemployment in Europe seems to be sticking around. This column assesses youth unemployment policy in France using data from a controlled experiment. ‘Job counselling’ – a key French policy that prepares some job seekers for the recruitment process, and connects them with potential employers – seems to improve graduates' chances of employment only marginally. Moreover, the evidence suggests that what’s good for one graduate may be bad for another: the beneficiaries of intensive job counselling are more likely to find employment simply at the expense of other job seekers.
Javier Andrés, Rafael Doménech, 05 April 2013
Fiscal adjustment and structural reform are key parts of Eurozone bailout packages (or key features of government policy that aims to avoid such bailouts). This column argues that patience is the most prized virtue of policymakers implementing fiscal adjustment and structural reform. Reducing unemployment and fiscal consolidation are mutually reinforcing, but they move at different speeds.
John Driffill, 08 March 2013
How do we solve worryingly high unemployment across Europe? In a time of crisis, would reform actually exacerbate unemployment? This column argues that labour markets – especially in southern Europe – have to be reformed, presenting policy prescriptions to that effect. If we are to break the back of sluggish labour markets, policymakers need to learn from Europe’s success stories.
Laurence Ball, Daniel Leigh, Prakash Loungani, 26 January 2013
Will recovery be jobless? A broad array of analysts, from Vox columnists to McKinsey, are arguing that Okun’s Law is broken. This column presents new research suggesting that, in fact, Okun is alive and well. When output recovers, the jobs will come back, although employment will differ across countries. There may be good reasons for the structural reforms that many propose as a way to boost job creation, but undertaking them in the belief that Okun’s Law has broken down should not be one of them.
Rand Ghayad, William Dickens, 05 January 2013
US unemployment seems stuck at an unusually high level of 8%, prompting some to suggest a widespread skills mismatch. This column argues that a skills mismatch is not supported by the evidence. Rather, out of the possible explanations, it seems that any shift in the ratio between unemployment and vacancies is driven by either lower search efforts by the long-term unemployed or by a reduction in their employability.
David Fine, Susan Lund, 04 December 2012
Africa's recent growth is impressive, yet its rate of stable job creation is anything but. This column argues that Africa needs rapid growth in stable, wage-paying jobs in order to ensure future stable growth and prosperity. African governments must develop and implement targeted jobs strategies – which focus on labour-intensive, competitive industries – to get the most out Africa’s rapid economic emergence.
Henry Siu, Nir Jaimovich, 06 November 2012
The US economy is recovering. But what explains the stubborn malaise in its labour market? This column argues that future recovery from recession will likely be jobless because technological advances and mechanisation now enable troubled firms to shed middle-income jobs in favour of machines and automation. If these jobs are not recouped during subsequent economic recovery, future recoveries may well remain jobless.