Articles

In the popular immigration narrative, migrants leave one country and establish themselves permanently in another, creating a “brain drain” in the sending country. In reality, migration is typically temporary: Workers migrate, find employment, and then return home or move on, often multiple times. Sending countries benefit from remittances while workers are abroad and from enhanced human capital when they return, while receiving countries fill labor shortages. Policies impeding circular migration can be costly to both sending and receiving countries.

With aging populations and increased demands on government revenue, countries need to boost employment and earnings. Tax policy should focus on labor market entry and retirement. Those are the points where labor supply is most responsive to tax incentives, which can enhance the flow into work of people leaving school and women with young children and can prolong employment among older workers. Human capital policy has a complementary role in improving the payoff to work and ensuring that earnings hold up longer over a lifetime.

Entrepreneurs are a rare species. Even in innovation-driven economies, only 1–2% of the work force starts a business in any given year. Yet entrepreneurs, particularly innovative entrepreneurs, are vital to the competitiveness of the economy. The gains of entrepreneurship are only realized, however, if the business environment is receptive to innovation. In addition, policymakers need to prepare for the potential job losses that can occur in the medium term through “creative destruction” as entrepreneurs strive for increased productivity.

Neither public opinion nor evidence-based research supports the claim of some politicians and the media that immigrants take the jobs of native-born workers. Public opinion polls in six migrant-destination countries after the 2008–2009 recession show that most people believe that immigrants fill job vacancies and many believe that they create jobs and do not take jobs from native workers. This view is corroborated by evidence-based research showing that immigrants—of all skill levels—do not significantly affect native employment in the short term and boost employment in the long term.

Laws on hiring and firing are intended to protect workers from unfair behavior by employers, to counter imperfections in financial markets that limit workers’ ability to insure themselves against job loss, and to preserve firm-specific human capital. But by imposing costs on firms’ adaptation to changes in demand and technology, employment protection legislation may reduce not only job destruction but also job creation, hindering the efficient allocation of labor and productivity growth.

All developed economies have unemployment benefit programs to protect workers against major income losses during spells of unemployment. By enabling unemployed workers to meet basic consumption needs, the programs protect workers from having to sell their assets or accept jobs below their qualifications. The programs also help stabilize the economy during recessions. If benefits are too generous, however, the programs can lengthen unemployment and raise the unemployment rate. The policy challenge is to protect workers while minimizing undesirable side effects.

Survey and register data indicate that many employees prefer a socially responsible employer and will accept a lower wage to achieve this. Laboratory experiments support the hypothesis that socially responsible groups are more productive than others, partly because they attract cooperative types, partly because initial cooperation is reinforced by group dynamics. Overall, the findings indicate corporate social responsibility may have cost advantages for firms.

Since the internet’s earliest days, firms and workers have used various online methods to advertise and find jobs. Until recently there has been little evidence that any internet-based tool has had a measurable effect on job search or recruitment outcomes. However, recent studies, and the growing use of social networking as a business tool, suggest workers and firms are at last developing ways to use the internet as an effective matchmaking tool. In addition, job boards are also emerging as important for the statistical study of labor markets, yielding useful data for firms, workers, and policymakers.

Continuous enterprise restructuring is needed for the transition and emerging market economies to become and remain competitive. However, the beneficial effects of restructuring in the medium run are accompanied by large worker displacement. The costs of displacement can be large and long-lasting for some workers and for the economy. To devise the right policy interventions, governments need to fully understand which workers are displaced and what costs they bear.

Since 1989 fertility and family formation have declined sharply in Central and Eastern Europe and the former Soviet Union. Fertility rates are converging on—and sometimes falling below—rates in Western Europe, most of which are below replacement levels. Concerned about a shrinking and aging population and strains on pension systems, governments are using incentives to encourage people to have more children. These policies seem only modestly effective in countering the impacts of widespread social changes, including new work opportunities for women and stronger incentives to invest in education.