Evidence-based policy making

When hiring new workers, employers use a wide variety of different recruiting methods in addition to posting a vacancy announcement, such as adjusting education, experience, or technical requirements, or offering higher wages. The intensity with which employers make use of these alternative methods can vary widely depending on a firm’s performance and with the business cycle. In fact, persistently low recruiting intensity partly helps to explain the sluggish pace of job growth in the US economy following the Great Recession, and the historically subpar wage growth during the subsequent expansion.

Workers participating in firm-sponsored training receive higher wages as a result. But given that firms pay the majority of costs for training, shouldn’t they also benefit? Empirical evidence shows that this is in fact the case. Firm-sponsored training leads to higher productivity levels and increased innovation, both of which benefit the firm. Training can also be complementary to, and enhance, other types of firm investment, particularly in physical capital, such as information and communication technology (ICT), and in organizational capital, such as the implementation of high-performance workplace practices.

Economists have for a long time argued that performance-based bonuses raise performance. Indeed, many firms use bonuses tied to individual performance to motivate their employees. However, there has been heated debate among human resources professionals recently, and some firms have moved away from individual performance bonuses toward fixed wages only or collective performance incentive schemes such as profit-sharing or team incentives. The appropriate approach depends on each company's unique situation, and managers need to realize that individual bonus plans are not a panacea to motivate employees.

The recent rise of populism in advanced economies reveals major voter discontent. To effectively respond to voters’ grievances, researchers and policymakers need to understand their drivers. Recent empirical research shows that these drivers include both long-term trends (job polarization due to automation and globalization) and the rise in unemployment due to the recent global financial crisis. These factors have undermined public trust in the political establishment and have contributed to increased governmental representation for anti-establishment parties.

Employees are more willing to work and put effort in for an employer that genuinely promotes the greater good. Some are also willing to give up part of their compensation to contribute to a social cause they share. Being able to attract a motivated workforce is particularly important for the public sector, where performance is usually more difficult to measure, but this goal remains elusive. Paying people more or underlining the career opportunities (as opposed to the social aspects) associated with public sector jobs is instrumental in attracting a more productive workforce, while a proper selection process may mitigate the negative impact on intrinsic motivation.

There is increasing global competition for high-skilled immigrants, as countries intensify efforts to attract a larger share of the world's talent pool. In this environment, high-skill immigrants are becoming increasingly selective in their choices between alternative destinations. Studies for major immigrant-receiving countries that provide evidence on the comparative economic performance of immigrant classes (skill-, kinship-, and humanitarian-based) show that skill-based immigrants perform better in the labor market. However, there are serious challenges to their economic integration, which highlights a need for complementary immigration and integration policies.

Norway has a rather high labor force participation rate and a very low unemployment rate. Part of the reason for this fortunate situation is the so-called “tripartism”: a broad agreement among unions, employers, and government to maintain a high level of coordination in wage bargaining. This has led to downward real wage flexibility, which has lessened the effects of negative shocks to the economy. Reduced net immigration, especially from neighboring countries, also mitigated the negative effects of the oil price drop in 2014. A potential drawback of tripartism is the difficulty of reducing employee absences and disability.

A growing body of research has begun to examine the match between student ability and university quality. Initial research focused on overmatch—where students are lower attaining than their college peers. However, more recently, attention has turned to undermatch, where students attend institutions with lower attaining peers. Both have been shown to matter for student outcomes; while in theory overmatch could be desirable, there is evidence that overmatched students are less likely to graduate college. Undermatched students, meanwhile, have been shown to experience lower graduate earnings.