New sources of data create challenges that may require new skills
Big Data refers to data sets of much larger size, higher frequency, and often more personalized information. Examples include data collected by smart sensors in homes or aggregation of tweets on Twitter. In small data sets, traditional econometric methods tend to outperform more complex techniques. In large data sets, however, machine learning methods shine. New analytic approaches are needed to make the most of Big Data in economics. Researchers and policymakers should thus pay close attention to recent developments in machine learning techniques if they want to fully take advantage of these new sources of Big Data.
Financial incentives and changes in working conditions are key to many broad and tailor-made programs
Do workplace programs help reduce worker sickness absence? Many programs are based on the principle that the employee’s decision to report an absence can be influenced if it is costly to be absent. Firms can reduce absenteeism by implementing broad programs, including performance pay, general improvements of working conditions, and strengthening workers’ loyalty to the firm. Specific programs, such as grading partial absence, seem to be effective at reducing long-term absences. However, firms will be less inclined to implement such programs if they can shift the financial burden to social security programs.
Uncoordinated unemployment insurance and
severance pay do a poor job of insuring against losses resulting from job
Job displacement poses a serious earnings threat
to long-tenured workers through unemployment spells and lower re-employment
wages. The prevailing method of insuring job displacement losses involves an
uncoordinated combination of unemployment insurance and severance pay. Less
developed countries often rely exclusively on public mandating of employer
severance pay due to the administrative complexity of unemployment insurance
systems. If both options are operational, systematic integration of the two
is important, although perhaps not possible if severance pay is voluntarily
Should statistical criteria for measuring employment and
unemployment be re-examined?
Measuring employment and unemployment is essential for economic
policy. Internationally agreed measures (e.g. headcount employment and unemployment rates
based on standard definitions) enhance comparability across time and space, but changes in
real labor markets and policy agendas challenge these traditional conventions. Boundaries
between different labor market states are blurred, complicating identification. Individual
experiences in each state may vary considerably, highlighting the importance of how each
employed or unemployed person is weighted in statistical indices.
More important than defining and measuring informality is focusing on reducing its detrimental consequences
There are more informal workers than formal workers across the globe, and yet there remains confusion as to what makes workers or firms informal and how to measure the extent of it. Informal work and informal economic activities imply large efficiency and welfare losses, in terms of low productivity, low earnings, sub-standard working conditions, and lack of social insurance coverage. Rather than quibbling over definitions and measures of informality, it is crucial for policymakers to address these correlates of informality in order to mitigate the negative efficiency and welfare effects.
Sustained economic growth led to reduced unemployment and real earnings growth, but prosperity has not been equally shared
Since 1991, the Australian economy has experienced sustained economic growth. Aided by the commodities boom and strong public finances, the Australian economy negotiated the global financial crisis without falling into recession. Over this period there were important structural changes, with increasing labor force participation among the elderly and the continuing convergence of employment and unemployment patterns for men and women. However, some recent negative trends include a rise in unemployment, especially long-term unemployment, a deteriorating youth labor market, and a stagnant gender earnings gap.
The Swedish economy continues to have high
employment and rapidly rising real wages
The economic crisis in the early 1990s brought
about a dramatic increase in unemployment and a similar decrease in labor
force participation. Unemployment declined afterwards, but stabilized at
around 6–7%—more than twice as high as before the crisis. Today, the
unemployment rate is lower than the EU average, though Sweden no longer
stands out in this respect. The 2008 financial crisis had small effects on
the Swedish labor market. Employment in industry declined sharply and then
remained stagnant, but employment in the service sectors has continued to
An ongoing crisis threatens Brazil’s recent
increased earnings and its decreased inequality and gender and ethnic
From 2001 to 2015, Brazil experienced a profound
reduction in income inequality. The commodities boom and some institutional
changes in the early 2000s kick-started the Brazilian labor market,
increasing the quantity of formal jobs and earnings, especially for the
poorest workers. Significant increases in average schooling and the real
minimum wage helped reduce ethnic, gender, and regional earnings gaps,
though all remain rather high. However, since 2014 a major fiscal crisis has
negatively affected GDP and the labor market, seriously threatening these
Student sorting into classes complicates policies that utilize peer effects to optimize educational outcomes
The role of social interactions in modifying individual behavior is central to many fields of social science. In education, one essential aspect is that “good” peers can potentially improve students’ academic achievement, career choices, or labor market outcomes later in life. Indeed, evidence suggests that good peers are important in raising student attainment, both in compulsory schooling and university. Interventions that change the ability group composition in ways that improve student educational outcomes without exacerbating inequality therefore offer a promising basis for education policies.
Wage losses upon re-employment can seriously harm long-tenured
displaced workers if they are not properly insured
Job displacement represents a serious earnings risk to
long-tenured workers through lower re-employment wages, and these losses may persist for many
years. Moreover, this risk is often poorly insured, although not for a lack of policy
interest. To reduce this risk, most countries mandate scheduled wage insurance (severance
pay), and it is voluntarily provided in others. Actual-loss wage insurance is uncommon,
although perceived difficulties may be overplayed. Both approaches offer the hope of greater
consumption smoothing, with actual-loss plans carrying greater promise.