Increased competition affects the pay incentives
firms provide to their managers and may also affect overall pay
Deregulation and managerial compensation are two
important topics on the political and academic agenda. The former has been a
significant policy recommendation in light of the negative effects
associated with overly restrictive regulation on markets and the economy.
The latter relates to the sharp increase in top executives’ pay and the
nature of the link between pay and performance. To the extent that
product-market competition can affect the incentive schemes offered by firms
to their executives, the analysis of the effects of competition on the
structure of compensation can be informative for policy purposes.
CEO pay, often contentious, is the product of
The escalation in chief executive officer (CEO)
pay over recent decades, both in absolute terms and in relation to the
earnings of production workers, has generated considerable attention. The
pay of top executives has grown noticeably in relation to overall firm
profitability. The pay gap between CEOs in the US and those in other
developed countries narrowed substantially during the 2000s, making top
executive pay an international concern. Researchers have taken positions on
both sides of the debate over whether the level of CEO pay is economically
justified or is the result of managerial power.
How to design social protection programs that
poor women can benefit from
Women are more likely than men to work in the
informal sector and to drop out of the labor force for a time, such as after
childbirth, and to be impeded by social norms from working in the formal
sector. This work pattern undermines productivity, increases women's
vulnerability to income shocks, and impairs their ability to save for old
age. Many developing countries have introduced social protection programs to
protect poor people from social and economic risks, but despite women's
often greater need, the programs are generally less accessible to women than
Happiness is key to a productive economy, and a
job remains key to individual happiness, also under robotization
Measures of individual happiness, or well-being,
can guide labor market policies. Individual unemployment, as well as the
rate of unemployment in society, have a negative effect on happiness. In
contrast, employment protection and un-employment benefits or a basic income
can contribute to happiness—though when such policies prolong unintended
unemployment, the net effect on national happiness is negative. Active labor
market policies that create more job opportunities increase happiness, which
in turn increases productivity. Measures of individual happiness should
therefore guide labor market policy more explicitly, also with substantial
robotization in production.
Do poor labor market opportunities lead to
Immigration is one of the most important
policy debates in Western countries. However, one aspect of the debate is
often mischaracterized by accusations that higher levels of immigration lead
to higher levels of crime. The evidence, based on empirical studies of many
countries, indicates that there is no simple link between immigration and
crime, but legalizing the status of immigrants has beneficial effects on
crime rates. Crucially, the evidence points to substantial differences in
the impact on property crime, depending on the labor market opportunities of
Measures of intergenerational persistence can be
indicative of equality of opportunity, but the relationship is not
A strong association between incomes across
generations—with children from poor families likely to be poor as adults—is
frequently considered an indicator of insufficient equality of opportunity.
Studies of such “intergenerational persistence,” or lack of
intergenerational mobility, measure the strength of the relationship between
parents’ socio-economic status and that of their children as adults.
However, the association between equality of opportunity and common measures
of intergenerational persistence is not as clear-cut as is often assumed. To
aid interpretation researchers often compare measures across time and space
but must recognize that reliable measurement requires overcoming important
data and methodological difficulties.
What evidence exists on whether bad bosses damage workers’ performance, or good bosses enhance it?
A good boss can have a substantial positive effect on the productivity of a typical worker. While much has been written about the peer effects of working with good peers, the effects of working with good bosses appear much more substantial. A good boss can enhance the performance of their employees and can lower the quit rate. This may also be relevant in situations where it is challenging to employ incentive pay structures, such as when quality is difficult to observe. As such, firms should invest sufficiently in the hiring of good bosses with skills that are appropriate to their role.
Better information on university quality may
reduce underemployment and overeducation in developing countries
As the number of secondary school graduates
rises, many developing countries expand the supply of public and private
universities or face pressure to do so. However, several factors point to
the need for caution, including weak job markets, low-quality university
programs, and job–education mismatches. More university graduates in this
context could exacerbate unemployment, underemployment, and overeducation of
professionals. Whether governments should regulate the quantity or quality
of university programs, however, depends on the specific combination of
factors in each country.
Improving outcomes for women takes more than
raising labor force participation—good jobs are important too
The relationship between female labor force
participation and economic development is far more complex than often
portrayed in both the academic literature and policy debates. Due to various
economic and social factors, such as the pattern of growth, education
attainment, and social norms, trends in female labor force participation do
not conform consistently with the notion of a U-shaped relationship with
GDP. Beyond participation rates, policymakers need to focus on improving
women’s access to quality employment.
When minimum wages are introduced or raised, are
there fewer jobs?
The potential benefits of higher minimum wages
come from the higher wages for affected workers, some of whom are in poor or
low-income families. The potential downside is that a higher minimum wage
may discourage firms from employing the low-wage, low-skill workers that
minimum wages are intended to help. If minimum wages reduce employment of
low-skill workers, then minimum wages are not a “free lunch” with which to
help poor and low-income families, but instead pose a trade-off of benefits
for some versus costs for others. Research findings are not unanimous, but
especially for the US, evidence suggests that minimum wages reduce the jobs
available to low-skill workers.