Evidence-based policy making

IZA World of Labor is an online platform that provides policy analysts, journalists, academics and society generally with relevant and concise information on labor market issues. Based on the latest research, it provides current thinking on labor markets worldwide in a clear and accessible style. IZA World of Labor aims to support evidence-based policy making and increase awareness of labor market issues, including current concerns like the impact of Covid-19, and longer-term problems like inequality.

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Firm size and business cycles

Do small businesses shed proportionately more jobs than large businesses during recessions?

Tulio A. Cravo

The discussion on how economic activity affects employment in large and small businesses is critical for the formulation of labor policies, especially during recessions. Knowing how firm size is related to job creation and job destruction is important to design effective policies aimed at dampening employment fluctuations. Recent evidence for developed countries indicates that large firms are proportionately more sensitive to cycles than small firms; however, this pattern is not confirmed for periods of credit constraint or in a developing country context, where small businesses might be more sensitive due to more extreme credit constraints.

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  • Racial wage differentials in developed countries Updated

    The variation of racial wage gaps across and within groups requires differing policy solutions

    Simonetta Longhi, October 2020
    In many developed countries, racial and ethnic minorities are paid, on average, less than the native white majority. While racial wage differentials are partly the result of immigration, they also persist for racial minorities of second and further generations. Eliminating racial wage differentials and promoting equal opportunities among citizens with different racial backgrounds is an important social policy goal. Inequalities resulting from differences in opportunities lead to a waste of talent for those who cannot reach their potential and to a waste of resources if some people cannot contribute fully to society.
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  • What is the economic value of literacy and numeracy? Updated

    Basic skills in literacy and numeracy are essential for success in the labor market

    Even in OECD countries, where an increasing proportion of the workforce has a university degree, the value of basic skills in literacy and numeracy remains high. Indeed, in some countries the return for such skills, in the form of higher wages, is sufficiently large to suggest that they are in high demand and that there is a relative scarcity. Policymakers need robust evidence in order to devise interventions that genuinely improve basic skills, not just of new school leavers entering the market, but also of the existing workforce. This would lead to significant improvements in the population that achieves a minimum level of literacy and numeracy.
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  • Sports at the vanguard of labor market policy

    Lessons from sports can allow managers to develop better policies at “normal” workplaces

    Kerry L. Papps, October 2020
    Economic theory has many predictions regarding how workers should be paid and how workplaces should be organized. However, economists’ attempts to test these in the real world have been hampered by a lack of consistent information about workers’ productivity levels. Professional sports offer a potential solution, since the performance of individual sportspeople is easily observed and yet many of the same problems faced by managers in workplaces still apply. In many ways, sportspeople may be less atypical of the modern workforce than farm laborers, doctors, or other groups of workers that are often scrutinized by economists.
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  • Integrating refugees into labor markets Updated

    Economic integration of refugees into their host country is important and benefits both parties

    Pieter Bevelander, September 2020
    Refugee migration has increased considerably since the Second World War, and amounts to more than 50 million refugees. Only a minority of these refugees seek asylum, and even fewer resettle in developed countries. At the same time, politicians, the media, and the public are worried about a lack of economic integration. Refugees start at a lower employment and income level, but subsequently “catch up” to the level of family unification migrants. However, both refugees and family migrants do not “catch up” to the economic integration levels of labor migrants. A faster integration process would significantly benefit refugees and their new host countries.
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