IZA Journal of Labor Policy Feed

Is the Global Competitiveness Index by the World Economic Forum a reliable tool for the design of labor market policies? Evidence from Latin American countries

Sun, 31 Dec 2023 00:00:00 GMT

Most of the competitiveness gap in Latin America is due to its labor market, one of the areas with the highest rates of subjective indicators in the Global Competitiveness Index (GCI). This paper analyzes the subjective component of the GCI in the labor market area and discusses its accuracy for policy advice. We focus on the set of countries that highly rely on the GCI for policy advice and highlight that the perception of business executives of the labor market as rigid contrasts with the significant experience of flexibilization policies undertaken in the region over the past 3 decades. We show that the GCI has been largely constructed with opinion data from large firms, a business sector that accounts for <5% of total firms in the countries of study. Furthermore, the questionnaire exhibits obvious flaws. Thus, we do not find that the GCI provides a solid base for policy advice.

Teleworkability and the COVID-19 crisis: potential and actual prevalence of remote work across Europe

Sun, 17 Dec 2023 00:00:00 GMT

This paper develops a conceptual analysis to identify the jobs that can be done from home and those that cannot, and on this basis quantifies the fraction of employees that are in teleworkable occupations across EU countries. Using detailed data on occupational tasks, we construct two teleworkability indices. The first core technical teleworkability index, based on the prominence of physical tasks, implies that 36% of dependent employment in the EU is technically teleworkable. However, our second social interaction index shows that only one third of teleworkable employment is in occupations that require limited social interactions, thus ideally suited to telework. To validate our approach, we compare our measures of teleworkability with data on the actual prevalence of telework before and during the COVID-19 outbreak. We show that our measures correlate with the observed increase in telework across countries and occupations in the EU during the outbreak. However, the prevalence of telework among employees appears to have remained below its full potential in 2020, as measured by our technical teleworkability index. This is especially the case for lower-level white-collar occupations as well as for countries with limited previous experience with teleworking. These patterns suggests that, despite the rapid increase in teleworking, the same barriers that prevented the diffusion of telework before the outbreak – lack of ICT infrastructure, fears of losing managerial control, position in the occupational hierarchy, limited workforce's digital skills, awkwardness of remote social interaction – are likely to continue playing an important role in shaping the diffusion of telework after the outbreak.

Families first: A comparative study of company responses to paid care leave programs in the COVID-19 pandemic

Mon, 04 Dec 2023 00:00:00 GMT

Despite established positive associations of paid care leave (PCL) policies on labor market outcomes such as wage replacement and job continuity, the United States is a notable outlier as the only advanced nation without a federal paid leave program. Assuming PCL programs are costly, my study examines employer perceptions and responses to PCL regulations in the US during the COVID-19 pandemic in 2020. Using a policy experiment around the 500-employee cutoff associated with the Families First Coronavirus Response Act (FFCRA), logistic regressions are used on a newly-created dataset constructed from a survey administered to 306 business managers in New York and Boston. The analysis ultimately seeks to evaluate if PCL cost concerns predict 19 different business outcomes such as changes in headcount or employee benefits. In general, while 54.6 percent of firms report cost concerns with PCL laws, the results find firms with such concerns are more likely to engage in non-employee focused operational changes such as increases in prices instead of employee-oriented outcomes such as layoffs or wage decreases. Furthermore, the policy experiment yields that large companies are more likely to increase internal paid leave, while small companies are more likely to increase the number of independent contractors at the company. My study confirms companies react to government PCL regulation in dynamic ways, dependent on the unique circumstances and culture of each company.

Explaining the Evolution of Job Tenure in Europe, 1995–2020

Thu, 09 Nov 2023 00:00:00 GMT

During the last quarter century, job tenure in Europe has shortened. Using data from Eurostat Labor Force Surveys of 29 countries from 1995 to 2020 and applying an age-period-cohort decomposition to analyze changes in tenure for specific birth cohorts, we show that tenure has shrunk for cohorts born in more recent years. To account for compositional changes within cohorts, we estimate the probability of holding jobs of different durations, conditional on individual and employment-related characteristics. The estimations demonstrate that, over time, the likelihood of having a medium- or long-term job decreased and holding a short-term job increased. We also find that stricter job protection legislation appears to decrease the probability of holding a short-term job, and higher trade openness and ICT-related technological change are correlated with an increase of that probability.

The effects of more intensive counseling for disadvantaged unemployed youth

Thu, 09 Nov 2023 00:00:00 GMT

Many European countries are facing the key challenge of integrating low-skilled jobless young people into the labor market. From 2018 to 2020, the Public Employment Service (PES) in Vienna tested a new model of intensified support (“case management”). The target group consisted of young unemployed persons with low formal qualifications who were drawing on social assistance. Based on the pilot project and a propensity matching approach, we show that the increase in staff significantly increased the intensity of the counseling. It led to an increase in job proposals and active labor market program participation, as well as sanctions in the form of benefit suspensions for failure to keep PES appointments. In line with the goal, more of the young people were encouraged to take part in training and further education instead of being quickly placed in an unskilled job. However, in the three-year follow-up period, the intensified counseling did not (yet) have a significant effect on the overall extent of integration into employment. Regarding post-unemployment job quality, we find no effects on wages at the start of a job.

Job Protection — It is Good to be an Insider

Tue, 07 Nov 2023 00:00:00 GMT

This study develops a search and matching model for labour markets with temporary and permanent contracts. It matches empirical patterns of higher matching rates and lower surplus for temporary workers and predicts an increase in separation taxes leads to a fall in the number of new permanent jobs, an increase in their wages, and stable separation rates because temporary workers shield permanent workers from adverse shocks. We find empirical support using a regional French policy experiment, the “Contrat de Transition Professionelle”, which increased separation taxes for recently hired permanent workers in firms with fewer than 1,000 workers.

The distributional effects of the pension system reform in Poland

Thu, 03 Aug 2023 00:00:00 GMT

This paper quantifies the effect of Poland's 1999 pension reform on the inequality of future pension benefits. The reform increases inequality, both in the upper and lower parts of the distribution. The estimates, based on the 2012 Polish Household Budget Survey, show that the Gini coefficient reaches 0.27 once the full effect of the reform has materialized. Had the pre-reform system continued unchanged, the Gini coefficient would not be >0.19. The increased inequality of pension benefits is the result of the system gradually moving from a more redistributive defined benefit pension system to a system in which benefits are strongly linked to earnings. We show to what extent minimum pension benefits mitigate the increase in inequality under different scenarios.

Minimum wage and collective bargaining shocks: a narrative database for advanced economies

Sun, 23 Jul 2023 00:00:00 GMT

This paper presents and describes a new database of major minimum wage and collective bargaining (CB) shocks covering 26 advanced economies over the period 1970–2020. The main advantage of this dataset is the precise identification of the nature and date of major shocks, which is valuable in many empirical applications. Based on the dataset, we observe that major changes in minimum wages have been more frequent than in CB in the last decades, and the majority of these were implemented during the 1980s and 1990s. In our empirical application, we find that minimum wage policy reductions have a medium-run positive impact on labor productivity and they lead to a fall in the unemployment rate. CB policy liberalizations do not seem to affect either productivity or capital formation, but they have a clear medium-term effect on the labor market. Moreover, CB policy liberalizations are characterized by a greater sensitivity to the prevailing business cycle conditions at the time of the shock (vis-à-vis minimum wage reforms).

Does the early release of retirement savings prolong labor market participation for workers approaching retirement? Evidence from Australia's “Transition to Retirement Income Streams” program

Fri, 11 Nov 2022 00:00:00 GMT

Australia's “Transition to Retirement Income Streams” (TRIS) program aims to prolong labor force participation for older workers (aged 55–65 years) by offering early access to a worker's compulsory retirement savings (superannuation). Using a difference-in-differences design, our results suggest a small labor supply response, which increases after the program's initial years. The size of the effects appears to be consistent with the program adoption profile, which was low initially. For this reason, our estimates should be viewed as a lower bound for the true effects. We find that individuals with higher incomes are more likely to adopt TRIS. At least half of the program participants appear to be using strategies to minimize tax, a behavioral response that seems at odds with the program's intent.

Social and fiscal impacts of statutory minimum wages in EU countries: a microsimulation analysis with EUROMOD

Sun, 23 Oct 2022 00:00:00 GMT

This paper analyzes the effects of hypothetical MW (HMW) increases on social and fiscal outcomes in 21 European Union (EU) countries with a statutory national MW (NMW) based on a microsimulation approach using EUROMOD. The methodological challenges related to the use of available EU household survey data are described, along with the choices made to address these challenges. The paper assesses hypothetical scenarios in which countries with a statutory NMW increase their minimum wage (MW) to various reference values, set in relation to the gross national median and average wage. The model simulations suggest that MW increases can significantly reduce in-work poverty, wage inequality, and the gender pay gap, while generally improving the public budget balance. The implied wage increases for the beneficiaries are substantial, while the implied increases in the aggregate wage bill are generally modest. Extensions explore possible effects on employment and labor supply at the intensive margin.

Training during recessions: recent European evidence

Wed, 14 Sep 2022 00:00:00 GMT

We use European Union Labour Force Survey data for the period 2005–2018 to investigate the cyclicality of training in Europe. Consistent with the view that firms use recessions as times to update skills, we find that training participation is moderately countercyclical for the employed. Within the not-employed group, this is true also for the unemployed, who are likely to be involved in public training programs during recessions, but not for the inactive, who may be affected by liquidity constraints.

The effect of time-saving household appliance ownership on outcomes for children and married women: evidence from India

Wed, 14 Sep 2022 00:00:00 GMT

We use microlevel data from the India Human Development Survey to test our hypothesis that ownership of time-saving household appliances results in the following: an increase in employment rates for married women; an increase in school enrollment rates; and a decrease in employment rates for children. We address the concern of endogeneity of appliance ownership by instrumenting household ownership of time-saving appliances by two family-specific time-using household assets and (1) average ownership rate among single women living in the same primary sampling unit (for the adult female sample) or (2) average ownership among households with no children living in the same primary sampling unit (for the child sample). Our results suggest a decrease in married women's and children's employment when ownership of time-saving appliances increases. Disaggregating our measure of employment, we find that married women use time-saving appliances as a substitute for human capital and increase their probability of working in more productive employment outside of the household.

Effects of a national work hours restriction in a high hours country

Tue, 13 Sep 2022 00:00:00 GMT

This paper examines the effect of a new maximum work hour restriction introduced in South Korea in 2018 that limited maximum working hours from 68 h/week to 52 h/week. I use difference-in-differences analysis with continuous treatment measuring the prevalence of those working longer than 52 h/week prior to the policy change across industry-occupation-education groups. I find that the policy reduces work hours while increasing monthly earnings and hourly wages for male full-time workers. However, I find that the policy does not significantly affect total work hours, total employment, and total worker pay at the industry-occupation-education group level.

Countercyclical fiscal policy and gender employment: evidence from the G-7 countries

Tue, 09 Aug 2022 00:00:00 GMT

Would countercyclical fiscal policy during recessions improve or worsen the gender employment gap? We answer this question by exploring the state-dependent impact of fiscal spending shocks on employment by gender in the G-7 countries. Using the local projection method, we find that, during recessions, a positive fiscal spending shock increases female employment more than male employment, contributing to gender employment equality. Our findings are driven by disproportionate employment changes in female-friendly industries, occupations, and part-time jobs in response to fiscal spending shocks. The analysis suggests that fiscal stimulus, particularly during recessions, could achieve the twin objectives of supporting aggregate demand and improving gender gaps.

Economics of Healthy Aging in India: A Multidimensional Perspective

Tue, 09 Aug 2022 00:00:00 GMT

Aging is the foremost challenge in recent times, given the demographic shift in populations across the world. It implies the costs of healthcare burden and involves economic and social security challenges through shortage of labor supply, consumption–saving paradox, increase in expenditure on healthcare, and most importantly, social capital among the developing countries. Furthermore, there is a likely challenge of old age security in terms of income and expenditure due to increasing healthcare costs and low earning incentives at older ages. India currently has the second largest population globally, with >9% of its population accounting for aging. Based on the multidimensional aging index (AI) using the latest longitudinal survey data of older adults in India, we examined the possible challenges of the economics of aging in India while examining the economic health and social outcomes of the elderly. Our results found that the elderly in India are highly exposed to negative impacts due to vulnerability in socio-economic and health spheres of life. Low labor force participation, lack of skills, and low literacy are the prevalent challenges faced by the elderly Indian population, particularly women. Similarly, the fiscal challenges include increased income tax and insurance coverage for the elderly, while health challenges imply a greater proportion of the disabled and multi-morbid, leading to more burden on the health and welfare system of India. Thus, given the possible short- and long-term effects of aging on the path of economic growth in India, policy incentives are required to minimize the impact and avert the burden of population aging in the country.

How effective are hiring subsidies in reducing long-term unemployment among prime-aged jobseekers? Evidence from Belgium

Sat, 07 May 2022 00:00:00 GMT

Hiring subsidies are widely used to create (stable) employment for the long-term unemployed. This paper exploits the abolition of a hiring subsidy targeted at long-term unemployed jobseekers older than 45 years of age in Belgium to evaluate its effectiveness in the short and medium run. Based on a triple-difference methodology, the hiring subsidy is shown to increase the job-finding rate by 13% without any evidence of spillover effects. This effect is driven by a positive effect on individuals with at least a bachelor's degree. However, the hiring subsidy mainly creates temporary short-lived employment: eligible jobseekers are not more likely to find employment that lasts at least 12 consecutive months compared with ineligible jobseekers.

Unemployment transitions and the role of minimum wage: From pre-crisis to crisis and recovery

Tue, 19 Apr 2022 00:00:00 GMT

During the last decade, unemployment in Greece climbed up to 28%, almost quadrupling due to the economic crisis that hit Greece. In the present paper, we examine the determinants of the unemployment dynamics and the impact of the minimum wage on the probability of making a transition into and out of unemployment. We use micro-level data from the Greek Labour Force Survey (LFS) of the period 2004 to 2019 and control for several demographic factors, macro-economic conditions, regional differences, and changes in the statutory minimum wage. The results suggest that individual-level characteristics play an important role in making a transition into or out of unemployment. Changes in the real minimum wage are estimated to have either a statistically insignificant or a very small impact on unemployment entries and exits. Further, the impact of economy's growth rate follows the theoretical predictions as higher growth rates increase unemployment outflows and decrease inflows, while the regional differences are also important. Our findings persist even when we split the sample in three periods (pre-crisis, crisis, recovery). The results have important policy implications. Given that the disemployment effect of the minimum wage seems to be very limited in the Greek labor market, while the socioeconomic characteristics and regional characteristics play an important role, improving the skills of individuals through the educational system and reskilling or up-skilling programs while targeting specific regions may facilitate labor market mobility.

Directing young dropouts via SMS: evidence from a field experiment

Mon, 21 Feb 2022 00:00:00 GMT

Although short message services (SMS) are constantly used to transmit information, little is known about the use of SMS by public institutions to direct people. This paper presents a field experiment in France about the effectiveness of SMS in directing disadvantaged people toward public services. Two types of treatment SMS were provided: one type had its content written in a formal style; the second type SMS style was much informal. All the SMS were individualized and included specific information about the agencies. Results indicate that the SMS had no significant effect on enrollment. There is also no apparent heterogeneous effect according to individual, agency, or location characteristics. In line with other academic evidence, these findings suggest that SMS have very limited effectiveness in directing this population toward public services.

Puerto Rico's minimum wage: Revisiting a price floor with bite

Thu, 25 Nov 2021 00:00:00 GMT

Revisiting research from the 1990s from Castillo-Freeman and Krueger, I use the synthetic control method of Abadie et al. to estimate the impact of the most recent increase in the federal minimum wage on employment in Puerto Rico. I estimate that the employment/population ratio of various groups in Puerto Rico was significantly lower than that of a data-constructed synthetic Puerto Rico which did not raise its minimum wage. Placebo tests on other donor units, time periods, and population groups suggest that a significant portion of this gap is a result of the minimum wage. Groups with greater exposure to the minimum wage, such as teens and restaurant workers, experienced proportionally greater declines in employment. My results suggest an own-wage elasticity of employment in Puerto Rico of −0.68, higher than estimates from the mainland, which suggests that the employment response to minimum wages may be more dramatic at higher relative minimum wages.

Determinants of youth unemployment in Uganda: The role of gender, education, residence, and age

Tue, 21 Sep 2021 00:00:00 GMT

Youth unemployment in Uganda increased from 12.7% in 2012/13 to 13.3 in 2016/17, despite a decline in the overall national unemployment rate from 11.1% to 9.2%. This poses serious development challenges, particularly to the ongoing efforts to poverty reduction. The main objective of the current study is to examine the extent to which gender, education, residence, and age determine youth unemployment in Uganda. Using recent data from the Uganda National Household Survey 2016/17 collected by the Uganda National Bureau of Statistics, we obtained a sample of 5,912 respondents for the ages between 18 years and 30 years. The main findings based on a binary logistic regression approach, reveal that education, gender, residence, and age are all critical in driving youth unemployment. The Ugandan youth who has some level of education is more likely to be unemployed compared to those with no education. But the youth that attended post-secondary education is associated with the highest unemployment probability followed by those with secondary school education and finally by primary education. While an increase in age appears to increase youth unemployment for females, the married youth have less chances of being unemployed compared to the unmarried youth. Moreover, as the probability of being unemployed reduces for the married youth, being divorced increases that probability. Similarly, the male youth are found more likely to be unemployed than their female counterparts. Additionally, the urban youth increased their chances of unemployment compared to the rural ones. Likewise, males are far more likely to remain in unemployment relative to females, just as living in the northern, eastern, or western region as a youth is less risky in terms of unemployment compared to living in the central region. On the other hand, whereas the education level of the household head is not important for youth unemployment, the marital status and gender of the household head are critical. The indirect effects of education, gender, residence, and age are clearly notable. Implications for policy and research are drawn.