Labor demand

While many firms have recognized the importance of recruiting and hiring diverse job applicants, they should also pay attention to the challenges newly hired diverse candidates may face after entering the company. It is possible that they are being assessed by unequal or unequitable standards compared to their colleagues, and they may not have sufficient access to opportunities and resources that would benefit them. These disparities could affect the career trajectory, performance, satisfaction, and retention of minority employees. Potential solutions include randomizing task assignments and creating inclusive networking and support opportunities.

Measuring workers’ productivity is important for public policy and private-sector decision-making. Due to the lack of a general measure that captures workers’ productivity, firms often use one- or multi-dimensional performance measures, which can be used, for example, to analyze how different incentive systems affect workers’ behavior. The public sector itself also uses measures to monitor and evaluate personnel, such as teachers. Policymakers and managers need to understand the advantages and disadvantages of the available metrics to select the right performance measures for their purpose.

The responses of working hours and employment levels to temporary negative demand shocks like those caused by the Great Recession in 2007–2008 and the Covid-19 pandemic in 2020–2022 have shown that consideration of both is important. Workers’ desired rises in working hours in times of recession also serve to modify the standard measure of unemployment. During Covid-19, both jobs and earnings were temporarily protected among workers forced into short-time work schemes, providing a useful comparison with the provision of improved unemployment insurance to unemployed workers at that time.

Environmental regulations are typically considered to be a drag on the economy. However, improved environmental quality may actually enhance productivity by creating a healthier workforce. Evidence suggests that improvements in air quality lead to improvements in worker productivity at the micro level across a range of sectors, including agriculture, manufacturing, and the service sectors, as well as at more aggregate macro levels. These effects also arise at levels of air quality that are below pollution thresholds in countries with the highest levels of environmental regulation. The findings suggest a new approach for understanding the consequences of environmental regulations.

Climate change is rapidly deteriorating environmental conditions through droughts and floods, hurricanes, wildfires, rising temperatures, and more frequent and longer heatwaves. A growing literature has shown how higher temperatures reduce worker productivity and economic output. These effects are more pronounced in poorer countries and in climate-exposed economic sectors like agriculture, construction, and manufacturing. The development of new technologies that mitigate exposure to heat among workers, combined with better temperature control in the workplace, will be essential to reduce the economic burden of climate change.

Entrepreneurship is essential for a healthy labor market. Recent evidence shows that young businesses (at most ten years old) have, on average, accounted for all of US employment growth over the past few decades. New businesses are especially important for youth employment. However, these businesses tend to borrow a lot, and the credit constraints they face limit their ability to create jobs. Historically, much of the discussion regarding the economic importance of entrepreneurship has focused on small businesses. Empirical evidence increasingly suggests that, among small businesses, those that are young create the most jobs.