Labor productivity is generally seen as bringing
wealth and prosperity; but how does it vary over the business cycle?
Aggregate labor productivity is a central
indicator of an economy’s economic development and a wellspring of living
standards. Somewhat controversially, many macroeconomists see productivity
as a primary driver of fluctuations in economic activity along the business
cycle. In some countries, the cyclical behavior of labor productivity seems
to have changed. In the past 20–30 years, the US has become markedly less
procyclical, while the rest of the OECD has not changed or productivity has
become even more procyclical. Finding a cogent and coherent explanation of
these developments is challenging.
Employment has grown steadily and the gender gap
and skill premiums have fallen
New Zealand is a small open economy, with large
international labor flows and skilled immigrants. Since 2000, employment
growth has kept pace with strong migration-related population growth. While
overall employment rates have remained relatively stable, they have
increased substantially for older workers. In contrast, younger workers as
well as the Maori and Pasifika ethnic groups experienced a sharp decline in
employment rates and a rise in unemployment around the time of the global
financial crisis. Wage gains have been modest and there has been a
compression of earnings differentials by gender as well as by skill.
Family firms offer higher job security but lower wages
than other firms
Family firms are ubiquitous in most countries. The
differences in objectives, governance, and management styles between those firms and
their non-family counterparts have several implications for the workforce, which
scholars have only recently started to investigate. Family firms offer greater job
security, employ different management practices, have a comparative advantage to avoid
conflicts when employment relations are more hostile, and provide insurance to workers
through implicit contracts when labor market regulation is limited. But all this also
comes at a cost.
Productivity growth and low unemployment have
not been matched by comparable rises in wages
The Indian economy entered an ongoing process of
trade liberalization, domestic deregulation, and privatization of public
sector units in 1991. Since then, per capita output has increased
significantly, while the overall unemployment rate has remained low.
However, labor force participation rates have fallen sharply, especially for
women. In addition, youth unemployment remains stubbornly high, an
overwhelming proportion of the labor force continues to work in the informal
sector, and there is little evidence of a sustained rise in wages for either
unskilled rural or factory workers.
One-company towns concentrate employment but
their ability to adapt to adverse events is often very limited
One-company towns are a relatively rare
phenomenon. Mostly created in locations that are difficult to access, due to
their association with industries such as mining, they have been a marked
feature of the former planned economies. One-company towns typically have
high concentrations of employment that normally provide much of the funding
for local services. This combination has proven problematic when faced with
shocks that force restructuring or even closure. Specific policies for the
redeployment of labor and funding of services need to be in place instead of
subsidies simply aimed at averting job losses.
Beyond satisfactory average performances lies a
strongly segmented labor market with long-term challenges
Might the Belgian labor market be included in
the gallery of “Belgian surrealism”? At first sight, Belgium with its 11
million inhabitants has withstood the Great Recession and the euro area debt
crisis relatively well, quickly getting back on track toward growth and
employment, apparently without rising earnings inequality. But if one digs a
little deeper, Belgium appears to be a strongly segmented labor market,
first and foremost in an astounding north–south regional (linguistic)
dimension. This extreme heterogeneity, along with several demographic
challenges, should serve as a warning for the future.
Retirement offers the potential for improved health, yet also
creates the risk of triggering bad health behavior
Retirement offers the opportunity to give up potentially risky,
unhealthy, and/or stressful work, which is expected to foster improvements in retirees’
health. However, retirement also bears the risk that retirees suffer from the loss of daily
routines, physical and/or mental activity, a sense of identity and purpose, and social
interactions, which may lead them to adopt unhealthy behaviors. Depending on the relative
importance of the different mechanisms, retirement may either improve or cause a deterioration
of retirees’ health, or eventually have no effect on it at all.
Employment has been rising, but low participation of older
people and a large share of temporary jobs pose challenges
In the early 2000s, Poland’s unemployment rate reached 20%.
That is now a distant memory, as employment has increased noticeably and the unemployment rate
has dropped to 5%. However, most of the net job creation has consisted of temporary jobs.
Labor market segmentation has become an issue and an important factor behind wage inequality.
Labor force participation of older workers increased after reforms aimed at prolonging
careers, but the recent reversal of the statutory retirement age leaves Poland vulnerable to
the effects of population aging.
The China Shock has challenged economists’
benign view of how trade integration affects labor markets in developed
Economists have long recognized that free trade
has the potential to raise countries’ living standards. But what applies to
a country as a whole need not apply to all its citizens. Workers displaced
by trade cannot change jobs costlessly, and by reshaping skill demands,
trade integration is likely to be permanently harmful to some workers and
permanently beneficial to others. The “China Shock”—denoting China’s rapid
market integration in the 1990s and its accession to the World Trade
Organization in 2001—has given new, unwelcome empirical relevance to these
Business consulting and supervisory skills
training can improve firm productivity and labor relations
Productivity differences across firms and countries are surprisingly large
and persistent. Recent research reveals that the country-level distributions
of productivity and quality of management are strikingly similar, suggesting
that management practices may play a key role in the determination of worker
and firm productivity. Understanding the causal impacts of these practices
on productivity and the effectiveness of various management interventions is
thus of primary policy interest.