Temporary job contracts account for a substantial proportion of the workforce in countries such as France and Spain, but they can result in high job turnover and instability. This column assesses the impact of government policies that impose taxes on temporary contracts to induce employers to lengthen job durations. Such policies a negative impact on the labour market, reducing the mean duration of jobs and decreasing job creation. The introduction of open-ended contracts with no termination cost for separations occurring at short tenure may be more effective.
Pierre Cahuc, Olivier Charlot, Franck Malherbet, Hélène Benghalem, Emeline Limon, 05 January 2017
Christopher Blattman, Stefan Dercon, 20 December 2016
African countries are scrambling to bring industrial firms into the continent, and workers face a choice between industrial jobs and self-employment. This column reports the results of a randomised controlled trial of 1,000 job applicants in Ethiopia, which suggests that industrial workers earned no more in a year than those given training as entrepreneurs, and had higher disability rates. Two-thirds of industrial workers chose to quit, suggesting that low wages and poor working conditions are a concern for policymakers who promote industrialisation.
Girum Abebe, Stefano Caria, Marcel Fafchamps, Paolo Falco, Simon Franklin, Simon Quinn, 09 December 2016
Youth unemployment is a growing problem around the world, particularly in urban areas. This column assesses the impact of labour market interventions in Addis Ababa targeting two issues commonly faced by unemployed youth: job search costs and a poor ability to signal their skills. A transport subsidy and a job application workshop were both found to have significant positive effects on youth labour market outcomes, pointing to the important role policymakers can play in helping young people find satisfying employment.
Yoshio Higuchi, Kozo Kiyota, Toshiyuki Matsuura, 04 December 2016
There is a belief among the general public that employment volatility tends to be greater for firms with higher foreign exposure, but the relationship between the two is ambiguous in theory. This column uses firm-level data for Japan to compare the impact of foreign exposure on employment volatility for multinational, trading, and non-trading firms; for manufacturing and wholesale and retail trade; and for intra-firm and inter-firm trade. In manufacturing, the effect of exports on the volatility of employment varies, depending on the share of intrafirm exports to total sales. In wholesale retail, the effect of exports is generally insignificant.
Elisa Gamberoni, Katerina Gradeva, Sebastian Weber, 03 December 2016
Employment subsidies have been widely used in OECD countries to counteract the recent job crisis, but their effectiveness is difficult to assess. This column summarises the findings of a recent study analysing a 2012 Spanish employment subsidy given to firms with fewer than 50 employees that make use of a new type of permanent contract. Consistent with other country studies, it fails to find robust evidence for increased employment growth due to the subsidy scheme.
Sandra Black, Jason Furman, Laura Giuliano, Wilson Powell, 02 December 2016
Over the past three years, 18 states plus the District of Columbia have implemented minimum wage increases, joining ten other states that have raised their minimum wages at least once since the last Federal increase in 2009. This column examines the impact of the more recent state increases on wages, weekly earnings, and employment among workers in the low-wage leisure and hospitality Industry. A comparison with states with no minimum wage increase since 2009 suggests that the recent legislation contributed to substantial wage increases with no discernible impact on employment levels or hours worked.
Dale Jorgenson, Mun S. Ho, Jon Samuels, 01 November 2016
There has been speculation that the low employment rates for younger and less-educated workers in the US reflect a ‘new normal’. This column uses detailed new US data to project output, productivity, and employment rates over the next decade. The results indicate that US economic growth will continue to recover from the Great Recession through the resumption of growth in productivity and labour input. The recovery of employment rates for less-educated and younger workers will make an important contribution to future economic growth.
Sergei Guriev, Biagio Speciale, Michele Tuccio, 13 September 2016
A common explanation for the growth in unemployment in southern Europe after the Great Recession is lack of flexibility in over-regulated labour markets. This column examines wage adjustment in regulated and unregulated labour markets in Italy during the recent crisis. Using data on immigrant workers, it shows that before the crisis wages in the formal and informal sectors moved in parallel. During the crisis, however, formal wages did not adjust downwards, while informal labour wages did. Greater flexibility in wages in the formal market could slow the decline in employment.
Wolfgang Frimmel, Martin Halla, Rudolf Winter-Ebmer, 18 August 2016
It has been widely demonstrated that parental divorce is associated with negative outcomes for affected children. However, the degree of causality in this relationship is not as clear. This column tackles this problem by using the level of gender integration in fathers’ workplaces as an instrument for divorce. The results suggest a causal link between divorce and worse economic outcomes that persists into early adulthood.
Sari Pekkala Kerr, William Kerr, 10 August 2016
Increased hostility to immigration has been a key driver of the rise of right-wing populist movements across the world. At the same time, local governments – notably in the US – have designed work programmes to attract immigrant entrepreneurs to their areas. This column explores the types of businesses founded by immigrants and their growth patterns, and examines how these outcomes relate to immigrants’ age at arrival to the US. Immigrant entrepreneurs experience greater volatility – they fail more frequently, but those that persist experience greater employment growth than their native counterparts.
Masayuki Morikawa, 10 July 2016
The service sector accounts for much of the output of many advanced economies, and maximising the sector’s output while also minimising regional disparities is an important policy challenge. This column analyses productivity in service sectors in Japan, focusing on economies of urban density. The higher the employment density of the cities in which service firms are located, the higher their productivity, but firms relocating to such cities negatively impacts regional disparity. Further, considerable differences in productivity improvements among sectors indicate there certain industries should be promoted in large cities, and others in smaller cities with lower employment density.
James Harrigan, Ariell Reshef, Farid Toubal, 06 July 2016
Job polarisation has been documented in many large developed economies over the past two decades. This column shows how the growth of ICT has contributed to these trends. Using French firm-level data, it documents the declining share of middle-wage jobs, and identifies an increase in the share of technology-related jobs as an important contributing factor. Firms with more ‘techies’ are also found to grow faster than less techie-intensive firms.
Daron Acemoglu, Pascual Restrepo, 05 July 2016
Many economists throughout history have been proven wrong in predicting that technological progress will cause irreversible damage to the labour market. This column shows that so far, the labour market has always adapted to the replacement of jobs with capital, using evidence of new types of skilled jobs between 1970 and 2007. As long as the rate of automation of jobs by machines and the creation of new complex tasks for workers are balanced, there will be no major labour market decline. The nature of new technology, and its impact on future innovation potential, has important implications for labour stability.
Biagio Bossone, Stefano Labini, 01 July 2016
Despite facing many of the same challenges, Germany’s current macroeconomic policy is substantially different to those of other countries, in part due to the economy legacy of Walter Eucken. This column considers the economic policy of Hjalmar Schacht, whose ‘MEFO-bills’ monetary solution ended the years of economic struggle caused by the Treaty of Versailles’ reparations commitments. By tying the bills to output, Schacht was able to stimulate output, and eliminate unemployment. This historical implication has clear modern-day implications, with parallels to ‘helicopter money’ policy and Italy’s recent ‘fiscal money’ proposal.
Nicola Fuchs-Schündeln, Paolo Masella, 05 June 2016
There are strong links between the nature of education in a country and its political institutions, and an individual’s education can impact their lifetime labour market choices. This column examines how being educated under a socialist regime impacts individuals in a free labour market. Using data on students from East and West Germany in the 1970s, it finds that a socialist regime education led to a larger spread in labour market outcomes – more of these individuals were not employed, but conditional on being employed, had higher wages and a higher probability of achieving a professional status in the East.
Ross Levine, Chen Lin, Wensi Xie, 03 June 2016
There has been much research on the effects of banking crises, but corporate resilience to systemic crises is less well understood. This column uses data from 34 countries from 1990 to 2011 to analyse the role of social trust – societal expectations that people will behave honestly and cooperatively – in building corporate resilience. It finds that social trust facilitates access to trade credit, and dampens the harmful effects of crises on corporate profits and employment.
Elias Einiö, Henry Overman, 07 April 2016
Areas experiencing poor economic performance are often targeted by governments with programmes aimed at improving employment. However, there are concerns that any increases in employment come at the cost of reduced employment elsewhere. This column examines the displacement effects of one such programme in the UK. While employment increased within the targeted areas, there were comparable decreases in employment just outside the areas’ boundaries. These findings suggest place-based policies should focus on traded activities that are less susceptible to local displacement effects.
Andrea Garnero, Alexander Hijzen, Sébastien Martin, 21 March 2016
Some economists argue that income inequality suggests intra-generational mobility in society. This column provides comprehensive evidence across a large number of advanced economies on the importance of intra-generational mobility and its relationship with earnings inequality. The findings do not support the belief that higher earnings inequality necessarily goes hand-in-hand with greater mobility over the working life. Higher inequalities are not systematically compensated by higher mobility opportunities.
Daniel Aaronson, Eric French, Isaac Sorkin, 19 March 2016
Economists these days tend to think that a minimum wage can be a useful policy tool for reducing poverty while leaving employment numbers intact, as long as the policy is well designed. This column looks at recent evidence from a new perspective and claims that much of the recent research suggesting that minimum wage hikes barely reduce the number of jobs in the short run should be taken with caution. The longer-run disemployment effects are potentially large.
Matteo Picchio, Sigrid Suetens, Jan van Ours, 06 December 2015
The impact of wage and income shocks on labour supply is difficult to measure. Some studies therefore use lottery prizes as an exogenous shock on income. This column looks at the effect of the size of the prize won on employment status and salaried earnings, using data from Dutch lotteries. The findings show that lottery prizes lead to a reduction of working hours but not to a decrease in the employment rate.