Evidence-based policy making

Increasing population age and low fertility rates, which characterize most modern societies, compromise the balance between people who can participate in the labor market and people who need care. This is a demographic and social issue that is likely to grow in importance for future generations. It is therefore crucial to understand what factors can positively influence fertility decisions. Policies related to the availability and costs of different kinds of childcare (e.g. formal care, grandparents, childminders) should be considered after an evaluation of their effects on the probability of women having children.

The shadow (underground) economy has a major impact on society and economy in many countries. People evade taxes and regulations by working in the shadow economy or by employing people illegally. On the one hand, this unregulated economic activity can result in reduced tax revenue and fewer public goods and services, lower tax morale and less tax compliance, higher control costs, and lower economic growth rates. But on the other hand, the shadow economy can be a powerful force fostering institutional change and boosting the overall production of goods and services in an economy. The shadow economy has implications on the political order and institutional change.

Entrepreneurs, creators of new firms, 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 and may establish new jobs. 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.

Randomized control trials are often considered the gold standard to establish causality. However, in many policy-relevant situations, these trials are not possible. Instrumental variables affect the outcome only via a specific treatment; as such, they allow for the estimation of a causal effect. However, finding valid instruments is difficult. Moreover, instrumental variables (IV) estimates recover a causal effect only for a specific part of the population. While those limitations are important, the objective of establishing causality remains; and instrumental variables are an important econometric tool to achieve this objective.

The Mincer equation—arguably the most widely used in empirical work—can be used to explain a host of economic, and even non-economic, phenomena. One such application involves explaining (and estimating) employment earnings as a function of schooling and labor market experience. The Mincer equation provides estimates of the average monetary returns of one additional year of education. This information is important for policymakers who must decide on education spending, prioritization of schooling levels, and education financing programs such as student loans.

Raising the minimum wage in developing countries could increase or decrease poverty, depending on labor market characteristics. Minimum wages target formal sector workers—a minority in most developing countries—many of whom do not live in poor households. Whether raising minimum wages reduces poverty depends not only on whether formal sector workers lose jobs as a result, but also on whether low-wage workers live in poor households, how widely minimum wages are enforced, how minimum wages affect informal workers, and whether social safety nets are in place.

Workplace sexual harassment is internationally condemned as sex discrimination and a violation of human rights, and more than 140 countries have enacted legislation prohibiting it. Sexual harassment increases absenteeism and turnover and lowers productivity and job satisfaction. Yet, it remains pervasive and underreported, as the #MeToo movement starkly revealed in October 2017. Standard workplace policies such as training and a complaints process have proven inadequate. Initiatives such as bans on confidential settlements and measures that support market incentives for deterrence may offer the most promise.

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.

Public sector jobs are established by governments to directly provide goods and services. Governments may also choose to regulate the size of the public sector in order to stabilize targeted national employment levels. However, economic research suggests that these effects are uncertain and critically depend on how public wages are determined. Rigid public sector wages lead to perverse effects on private employment, while flexible public wages lead to a stabilizing effect. Public employment also has important productivity and redistributive effects.

Expenditures on job placement and related services make up a substantial share of many countries’ gross domestic products. Contracting out to private providers is often proposed as a cost-efficient alternative to the state provision of placement services. However, the responsible state agency has to be able and willing to design and monitor sufficiently complete contracts to ensure that the private contractors deliver the desired service quality. None of the empirical evidence indicates that contracting-out is necessarily more effective or more cost-efficient than public employment services.

Can entrepreneurship programs be successful labor market policies for the poor? A large share of workers in developing countries are self-employed (mostly own-account workers without paid employees, often interchangeably used as micro entrepreneurs). Their share among all workers has not changed much over the past two decades in the developing world. Entrepreneurship programs provide access to finance (or assets) and advisory and networking services as well as business training with the aim of boosting workers’ earnings and reducing poverty. Programs vary in design, which can affect their impact on outcomes. Recent studies have identified some promising approaches that are yielding positive results, such as combining training and financial support.

In the first decade of the 21st century, the Brazilian economy experienced an important expansion followed by a significant decline in inequality. The minimum wage increased rapidly, reducing inequality with no negative effects on employment or formality. This resulted from economic growth and greater supply of skilled labor. However, from 2014-2021, real wages were stagnant, and unemployment rates surged. Inequality rose again, although only marginally. Some positive signs emerged in 2022, although it is still too early to know whether they mark a return to past trends or a recovery from the pandemic.

Although early human capital theory recognized the relevance of workers’ experience, its focus was on education and formal training. More recent studies show that much of the performance of newly hired workers is driven by learning by doing or learning from peers or supervisors in the workplace. Descriptive data show that workers learn a lot from the various tasks they perform on the job. Informal learning at work seems to be relevant for all age groups, although it is more meaningful for younger workers’ performance. Informal learning is far more important for workers’ human capital development than formal training courses.

Job displacement is a serious earnings risk to long-tenured workers, both through spells of unemployment and through reduced wages on subsequent jobs. Less developed countries often rely exclusively on government mandated employer-provided severance pay to protect displaced workers. Higher income countries usually rely on public unemployment insurance and mandated severance pay. Beyond these options, more administratively demanding plans have been proposed, including UI savings accounts and “actual loss” wage insurance, though real-world experience on either model is lacking.

Acceptance of one’s gender identity and congruence between one’s gender identity and outward appearance are associated with less adverse mental health symptoms, and greater life and job satisfaction. However, trans people are subject to human rights violations, hate crimes, and experience higher unemployment and poverty than the general population. Trans people often feel that they are citizens who are not allowed to be themselves and practice their authentic identity. Many biased treatments of trans people could be attenuated if legal protections and inclusive workplace practices were in place.

Old and new EU member states still adopt quite different labor market institutions and policies: convergence has been partial and limited. Nevertheless, a new agreement is spreading on the importance of well-developed, coordinated institutions, supported by social dialogue, in view of the increasing challenges posed by the macro economy and by the increasing fragmentation of labor markets.

Multiple job-holding, or “moonlighting”, is an important form of atypical employment in most economies. New forms of work, driven by digitalization, may enable its future growth. However, many misconceptions exist, including the belief that multiple job-holders are only low-skilled individuals who moonlight primarily for financial reasons, or that the practice increases during economic downturns. Recent literature highlights the significant links between moonlighting and job mobility. Multiple job-holding allows for the development of workers’ skills and spurs entrepreneurship.

Evidence suggests that productivity would be much higher and unemployment much lower if the supply of and demand for skills were better matched. As a result, skills mismatch between workers (supply) and jobs (demand) commands the ongoing attention of policymakers in many countries. Policies intended to address the persistence of skills mismatch focus on the supply side of the issue by emphasizing worker education and training. However, the role of the demand side, that is, employers’ rigid skill requirements, garners comparatively little policy attention.

The relationship between climatic shocks, climate related disasters, and migration has received increasing attention in recent years and is quite controversial. One view suggests that climate change and its associated natural disasters increase migration. An alternative view suggests that climate change may only have marginal effects on migration. Knowing whether climate change and natural disasters lead to more migration is crucial to better understand the different channels of transmission between climatic shocks and migration and to formulate evidence-based policy recommendations for the efficient management of the consequences of natural disasters.

In most developed countries, women have closed the gap in educational attainment and labor market experience, yet gender wage gaps persist. This has led to an increased focus on the role of employers and employment practices. In particular, research has focused on the types of workplace where men and women work, their promotion prospects and the extent to which they are rewarded differently for similar work. Understanding the relative importance of these features, and the mechanisms that generate them, is necessary to design effective policy responses.

The minimum wage has never been as high on the political agenda as it is today, with politicians in Germany, the UK, the US, and other OECD countries implementing substantial increases in the rate. One reason for the rising interest is the growing consensus among economists and policymakers that minimum wages, set at the right level, may help low paid workers without harming employment prospects. But how should countries set their minimum wage rate? The processes that countries use to set their minimum wage rate and structure differ greatly, as do the methods for adjusting it. The different approaches have merits and shortcomings.

The earned income tax credit provides important benefits to low-income families with children. At substantial costs (over $70 billion to the US federal government), it increases the incomes of such families while encouraging parents to work more by subsidizing their incomes. But low-income adults without children and non-custodial parents receive very low payments under the program in most years. Many of these adults are less-educated men, whose labor force participation rates and relative wages have been declining for years. They might benefit significantly from a more generous earned income tax credit for childless adults.

Since the collapse of the Soviet Union, the differing impact of institutions on entrepreneurship development is undeniable. Several post-Soviet countries benefitted from early international integration by joining the EU, adopting the euro, and becoming OECD members. This process enabled entrepreneurship to develop within institutional contexts where democratic and free market principles were strengthened. In general, however, post-Soviet economies continue to be characterized by higher levels of corruption, complex business regulations, weak rule of law, uncertain property rights and often, lack of political will for institutional change.

Job displacement represents a serious earnings risk to long-tenured workers through lower re-employment wages, and these losses may persist for many years. Moreover, this risk is often poorly insured, although not for a lack of policy interest. To reduce this risk, most countries mandate scheduled wage insurance (severance pay), although it is provided only voluntarily in others, including the US. Actual-loss wage insurance is uncommon, although perceived difficulties may be overplayed. Both approaches offer the hope of greater consumption smoothing, with actual-loss plans carrying greater promise, but more uncertainty, of success.

Increasing instruction time might seem a simple way to improve students' outcomes. However, there is substantial variation in its effects reported in the literature. When focusing on school day extensions, some studies find no effects, while others find that an additional hour of daily instruction significantly improves test scores. A similar pattern arises when examining the effect of additional days of class. These mixed findings likely reflect differences in the quality of instruction or in the activities that are being replaced by additional instruction. Hence these elements need to be considered when designing policies that increase instruction time.

Some studies estimate that the value of time spent on unpaid caregiving is 2.7% of the GDP of the EU. Such a figure exceeds what EU countries spend on formal long-term care as a share of GDP (1.5%). Adult caregiving can exert significant harmful effects on the well-being of caregivers and can exacerbate the existing gender inequalities in employment. To overcome the detrimental cognitive costs of fulfilling the duty of care to older adults, focus should be placed on the development of support networks, providing caregiving subsidies, and enhancing labor market legislation that brings flexibility and level-up pay.

Remittances have risen spectacularly in absolute terms and in relation to traditional sources of foreign exchange, such as export revenues. Remittances can improve the well-being of family members left behind and boost growth rates of receiving economies. They can also create a culture of dependency, lowering labor force participation in recipient nations, promoting conspicuous consumption, and accelerating environmental degradation. A more thorough understanding of their impacts can help formulate policies that enable developing economies to harness the most out of these monetary inflows.

Although coverage of collective bargaining agreements has been declining for decades in most countries, it is still extensive, especially in non-Anglo-Saxon countries. Strong unions may influence firms' incentives to invest in capital, particularly in sectors where capital investments are sunk (irreversible), as in research-intensive sectors. Whether unions affect firms' investment in capital depends on the structure and coordination of bargaining, the preference of unions between wages and employment, the quality of labor-management relations, the structure of corporate governance, and the existence of social pacts, among other factors.

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.

There is growing agreement among parents in high-income countries that having a working mother does not harm a preschool child. Yet, research is ongoing on what the long-term effects on children are of being looked after at home (primarily by their mothers) or in childcare. Most studies find positive effects of childcare on child outcomes for children from disadvantaged backgrounds and moderate effects for children from more advantaged backgrounds. Policymakers need to improve compensation and the working environment for the sector if a high quality level is to be achieved and if the beneficial effects are to be maintained.

The negative correlation between women's education and fertility has been observed across regions and time, although it is now weaker among high-income countries. Women's education level could affect fertility through its impact on women's health and their physical capacity to give birth, children's health, the number of children desired, and women's ability to control birth and knowledge of different birth control methods. Each of these mechanisms depends on the individual, institutional, and country circumstances experienced. Their relative importance may change along a country's economic development process.

Denmark is often highlighted as a “flexicurity” country with lax employment protection legislation, generous unemployment insurance, and active labor market policies. This model has coped with the Great Recession and the Covid-19 pandemic, avoiding large increases in long-term and structural unemployment. The recovery from Covid-19 alongside re-openings has been swift, so labor market effects were temporary. A string of recent reforms has boosted labor supply and employment; although fiscal sustainability is ensured, demographic changes challenge the labor market. Real wage growth has been positive and responded—with some lag—to unemployment.

It is not possible for a formal employment contract to detail everything an employee should do and when. Informal relationships, in particular trust, allow managers to arrange a business in a more productive way; high-trust firms are both more profitable and faster growing. For example, if they are trusted, managers can delegate decisions to employees with confidence that employees will believe the promised rewards. This is important because employees are often better informed than their bosses. Consequently, firms that rely solely on formal contracts will miss profitable opportunities.

Digital payment systems can conveniently and affordably connect entrepreneurs with banks, employees, suppliers, and new markets for their goods and services. These systems can accelerate business registration and payments for business licenses and permits by reducing travel time and expenses. Digital financial services can also improve access to savings accounts and loans. Electronic wage payments to workers can increase security and reduce the time and cost of paying employees. Yet, there are challenges as many entrepreneurs and employees lack bank accounts, digital devices, and reliable technology infrastructure.

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.

It is a well-established view amongst economists that good-looking people have a better chance of employment and can earn more than those who are less physically attractive. A “beauty premium” is particularly apparent in jobs where there is a productivity gain associated with good looks, though this varies for women and men, and varies across countries. People sort into occupations according to the relative returns to their physical and other characteristics; good-looking people take jobs where physical appearance is deemed important while less-attractive people steer away from them, or they are required to be more productive for the same wage.

Many immigrant destination countries face considerable pressure to change their immigration policies. One of the most innovative policies is auctioning the right to immigrate or to hire a foreign worker to the highest bidders. Visa auctions would be more efficient than current ways of allocating visas, could boost the economic contribution of immigration to the destination country, and would increase government revenues. However, visa auctions might weaken the importance of family ties in the migration process and create concerns about fairness and accessibility. No country has yet auctioned visas, although several have considered doing so.

Alternative dispute resolution procedures such as arbitration and mediation are the most common methods for resolving wage, contract, and grievance disputes, but they lead to varying levels of success and acceptability of the outcome depending on their design. Some innovative procedures, not yet implemented in the real world, are predicted to improve on existing procedures in some ways. Controlled tests of several procedures show that the simple addition of a nonbinding stage prior to binding dispute resolution can produce the best results in terms of cost (monetary and “uncertainty” costs) and acceptability.

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 had dropped to 3.4% in 2021. The labor force participation of older workers increased following reforms aimed at prolonging careers. However, participation remains low compared to most developed countries and the reversal of the statutory retirement age in 2017 leaves Poland vulnerable to the effects of population aging. Rising immigration has eased the resulting labor shortages, but women, people with disabilities, and agricultural workers remain underemployed. During the Covid-19 pandemic the slowdown in economic growth and increase in unemployment were small.

Apprenticeship training programs typically last several years and require substantial investments by training firms, largely due to the associated labor costs for participants and instructors. Nevertheless, apprentices also add significant value in the workplace. One tool to measure the costs and benefits of training for firms is employer surveys, which were first introduced in the 1970s in Germany. Such cost–benefit surveys (CBS) help to better understand a firm's demand for apprentices and to identify market failures. Therefore, CBS are an important tool for designing effective training policies.

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.

Transition to a market economy is accompanied by a period of greater economic uncertainty. Women are likely to suffer substantial disadvantages from this uncertainty compared to men as they are, for example, more likely to lose their job. This not only implies a monetary loss for the entire family, but also degrades female bargaining power within the household, possibly further aggravating their well-being. When intrahousehold inequality—an unequal distribution of resources among family members—exists, female poverty might be significantly larger than what can be deduced using standard household-based poverty measures.

The Covid-19 pandemic has produced unprecedented negative effects on the global economy, affecting both the demand and supply side. Its consequences in terms of job losses have been important in many European countries. A large number of firms have been forced to dismiss at least part of their workforce or to close down all together. Considering that young people are usually penalized more than their adult counterparts during economic crises due to the so-called “last-in-first-out” principle, it is worthwhile to evaluate if the youth will also end up paying the highest price during this pandemic-induced recession.

Private charitable contributions play an essential role in most economies. From a policy perspective, there is concern that comprehensive government spending might crowd out private charitable donations. If perfect crowding out occurs, then every dollar spent by the government will lead to a one-for-one decrease in private spending, leaving the total level of welfare unaltered. Understanding the magnitude and the causes of crowding out is crucial from a policy perspective, as crowding out represents a hidden cost to public spending and can thus have significant consequences for government policies toward public welfare provision.

The rise in the average age of women bearing their first child is a well-established demographic trend in recent decades. Postponed childbearing can have important consequences for the mothers and, at a macro level, for the country in which they live. Research has primarily focused on the effect postponing fertility has on mothers’ labor market outcomes and on the total number of children a woman has in her lifetime. Most research finds that postponing the first birth raises a mother's labor force participation and wages but may have negative effects on overall fertility, especially in the absence of supportive family-friendly policies.

In-plant alliances are plant-specific deviations from sectoral collective agreements related to wages and working time that are intended to hold down labor costs. These agreements enable firm-level reorganizations to respond to an imminent economic crisis or to improve competitiveness. They also encourage social partners to take greater responsibility for employment issues. Both unions and works councils agree to such contracts because they see them as helpful in avoiding severe employment losses. Thus, these alliances substantially unburden public employment policy.

Work-from-home possibilities are lower in developing than in developed countries. Within countries, not all workers have equal chances of transitioning from the usual workplace to work-from-home. Moreover, infrastructure limitations and lack of access to certain services can limit the chances of effectively working from home. Having a home-based job can affect, positively or negatively, work–life balance, levels of job satisfaction and stress, and productivity. The differential chances of working from home may end up increasing the levels of income inequality between workers who can and those who cannot work from home.

Many migrants do not stay in their host countries permanently. On average, 15% of migrants leave their host country in a given year, many of whom will return to their home countries. Temporary migration benefits sending countries through remittances, investment, and skills accumulation. Receiving countries benefit via increases in their prime-working age populations while facing fewer social security obligations. These fiscal benefits must be balanced against lower incentives to integrate and invest in host country specific skills for temporary migrants.

Spending time sleeping not only improves individuals’ well-being, but it can influence employment outcomes and productivity. Sleep can be disrupted by company schedules and deadlines, extended working times, and several individual and household decisions. Labor market regulation and corporate strategies should factor in the immediate effect of insufficient sleep on employee fatigue and cognitive performance, and the associated effects on employment disruption and productivity loss. Sleep can be influenced by “sleep friendly” employment regulations, technology nudges, monetary incentives, and subsidies for sleeping.

Many OECD countries have, or have had, a policy that exempts older unemployed people from the requirement to search for a job. An aging population and low participation by older workers in the labor market increasingly put public finances under strain, and spur calls for policy measures that activate labor force participation by older workers. Introducing job search requirements for older unemployed workers aims to increase their re-employment rates. Abolishing the exemption from job search requirements for the older unemployed has been shown to initiate higher outflow rates from unemployment for them.

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.

From 2000 to 2019, Canada's economy and labor market performed well. Important in this success was a strong resource boom from the late 1990s to 2014. After the boom the economy and labor market adjusted relatively smoothly, with labor and other resources exiting resource-rich regions and moving elsewhere. Strong growth in major export markets (Asia and the US) aided the adjustment. The Covid-19 downturn resulted in an unprecedented decline in employment, and a steep rise in unemployment and non-participation. Despite the severity of the Covid-19 shock, by December 2021 most key measures of labor market activity had returned to pre-pandemic levels.

Standard economic theory suggests that individuals know best how to make themselves happy. Thus, policies designed to encourage more forward-looking behaviors will only reduce people's happiness. Recently, however, economists have explored the role of impatience, especially difficulties with delaying gratification, in several important economic choices. There is strong evidence that some people have trouble following through on investments that best serve their long-term interests. These findings open the door to policies encouraging or requiring more patient behaviors, which would allow people to enjoy the eventual payoff from higher initial investment.

Many experimental studies and surveys have shown that women consistently display more risk-averse behavior than men when confronted with decisions involving risk. These differences in risk preferences, when combined with gender differences in other behavioral traits, such as fondness for competition, have been used to explain important phenomena in labor and financial markets. Recent evidence has challenged this consensus, however, finding gender differences in risk attitudes to be smaller than previously thought and showing greater variation of results depending on the method used to measure risk aversion.

Around ten countries currently use a variant of a national income-contingent loans (ICL) scheme for higher education tuition. Increased international interest in ICL validates an examination of its costs and benefits relative to the traditional financing system, time-based repayment loans (TBRLs). TBRLs exhibit poor economic characteristics for borrowers: namely high repayment burdens (loan repayments as a proportion of income) for the disadvantaged and default. The latter both damages credit reputations and can be associated with high taxpayer subsidies through continuing unpaid debts. ICLs avoid these problems as repayment burdens are capped by design, eliminating default.

The gender wage gap is largely due to men and women holding different kinds of jobs. This job segregation is partly driven by gender differences in careers in corporate hierarchies. Research has shown that the careers of men and women begin to diverge immediately upon entry into the labor market and that subsequent career progress exacerbates the divergence. This divergence of career progress explains a large part of the gender wage gap. Understanding how and why the careers of men and women differ is necessary to design effective policies that can reduce the gender differences in hierarchies.

Developing countries are often seen as unquestionable beneficiaries in the phenomenal rise of global value chains in international trade. Offshoring—the cross-border trade in intermediate goods and services which facilitate country-level specialization in subsets of production tasks—enables an early start in global trade integration even when the requisite technology and knowhow for cost-effective production from scratch to finish are not yet acquired. A growing economics literature suggests a more nuanced view, however. Policymakers should be mindful of issues related to inequality across firms and wages, labor standards, and effects of trade policy.

Remote work and digital collaborations are prevalent in the business world and many employees use digital communication tools routinely in their jobs. Communication shifts from face-to-face meetings to asynchronous formats using text, audio, or video messages. This shift leads to a reduction of information and signals leaders can send and receive. Do classical leadership and communication techniques such as transformational or charismatic leadership signaling still work in those online settings or do leaders have to rely on transactional leadership techniques such as contingent reward and punishment tools in the remote setting?

The IT revolution has had dramatic effects on jobs and the labor market. Many routine manual and cognitive tasks have been automated, replacing workers. By contrast, new technologies complement and create new non-routine cognitive and social tasks, making work in such tasks more productive, and creating new jobs. This has polarized labor markets: while low-skill jobs stagnated, there are fewer and lower-paid jobs for middle-skill workers, and higher pay for high-skill workers, increasing wage inequality. Advances in AI may accelerate computers’ ability to perform cognitive tasks, heightening concerns about future automation of even high-skill jobs.

New Zealand is a small open economy, with large international labor flows and skilled immigrants. After the global financial crisis (GFC) employment took four years to recover, while unemployment took more than a decade to return to pre-crisis levels. Māori, Pasifika, and young workers were worst affected. The Covid-19 pandemic saw employment decline and unemployment rise but this was reversed within a few quarters. However, the long-term impact of the pandemic remains uncertain.

There are a myriad of economic and non-economic forces behind the decision to migrate. Migrants can be “pushed” out of their home countries due to deteriorating economic conditions or political unrest. Conversely, migrants are often “pulled” into destinations that offer high wages, good health care, strong educational systems, or linguistic proximity. In making their decision, individuals compare the net benefits of migration to the costs. By better understanding what forces affect specific migrant flows (e.g. demographic characteristics, migrant networks, and economic conditions), policymakers can set policy to target (or reduce) certain types of migrants.

Many countries experience gender differences, of various magnitudes, in the time devoted to paid work (e.g. market work time) and unpaid work (e.g. housework and childcare). Since household responsibilities influence the participation of women, especially mothers, in the labor market, the unequal sharing of unpaid work, with women bearing the brunt of housework and childcare, is one of the main drivers of gender inequality in the labor market. Understanding the factors behind these gender inequalities is crucial for constructing policies aimed at promoting gender equality and combating gender-based discrimination.

Numerous studies have investigated whether the provision and generosity of parental leave affects the employment and career prospects of women. Parental leave systems typically provide either short unpaid leave mandated by the firm, as in the US, or more generous and universal leave mandated by the government, as in Canada and several European countries. Key economic policy questions include whether, at the macro level, female employment rates have increased due to parental leave policies; and, at the micro level, whether the probability of returning to work and career prospects have increased for mothers after childbirth.

An extensive program of economic liberalization reforms, even when it generates positive outcomes, does not automatically generate support for further reforms. Societies respond with strong support only after experiencing the effects of reversing these reforms (i.e. corruption, inequality of opportunity). This point is illustrated through the example of the post-communist transformation in Eastern Europe and Central Asia—arguably a context where the end point of reforms was never clearly defined, and even successful reforms are now associated with a degree of reform suspicion.

A considerable share of the labor force consists of underemployed part-time workers: employed workers who, for various reasons, are unable to work as much as they would like to. Offering unemployment benefits to part-time unemployed workers is controversial. On the one hand, such benefits can strengthen incentives to take a part-time job rather than remain fully unemployed, thus raising the probability of obtaining at least some employment. On the other hand, these benefits weaken incentives for part-time workers to look for full-time employment. It is also difficult to distinguish people who work part-time by choice from those who do so involuntarily.

High levels of economic inequality may lead to lower economic growth and can have negative social and political impacts. Recent empirical research shows that income and wealth inequalities in Eastern Europe since the fall of socialism increased significantly more than previously suggested. Currently, the average Gini index (a common measure) of inequality in Eastern Europe is about 3 percentage points higher than in the rest of Europe. This rise in inequality was initially driven by privatization, liberalization, and deregulation reforms, and, more recently, has been amplified by technological change and globalization coupled with relatively ungenerous income and wealth redistribution policies.

Employee ownership has attracted growing attention for its potential to improve economic outcomes for companies, workers, and the economy in general, and help reduce inequality. Over 100 studies across many countries indicate that employee ownership is generally linked to better productivity, pay, job stability, and firm survival—though the effects are dispersed and causation is difficult to firmly establish. Free-riding often appears to be overcome by worker co-monitoring and reciprocity. Financial risk is an important concern but is generally minimized by higher pay and job stability among employee owners.

A key element of anti-poverty policy is the accurate identification of poor individuals. However, measuring poverty at the individual level is difficult since consumption data are typically collected at the household level. Per capita measures based on household-level data ignore both inequality within the household and economies of scale in consumption. The collective household model offers an alternative and promising framework to estimate poverty at the individual level while accounting for both inequality within the household and economies of scale in consumption.

In knowledge-based economies, attracting and retaining international students can help expand the skilled workforce. Empirical evidence suggests that open migration policies and labor markets, whereby students can remain in the host country post-study, as well as good quality higher education institutions are crucial for successfully attracting international students. Student migration can positively affect economic growth in both sending and receiving countries, even though migrants themselves reap most of the gains, mainly through higher earnings.

Many workers admit that at times they show up for work even though they feel sick. This behavior, termed “presenteeism,” is puzzling since most workers do not incur financial losses when staying home sick. The various reasons behind presenteeism are person-related (e.g. individuals’ health or job attitude) or work-related (e.g. job demands and constraints on absence from work). Working when sick can have positive and negative consequences for workers’ performance and health, but it also affects co-workers’ well-being and firms’ productivity. There are various strategies as to how firms can address presenteeism.

Gross domestic product (GDP) is the key indicator of the health of an economy and can be easily compared across countries. But it has limitations. GDP tells what is going on today, but does not inform about sustainability of growth. The majority of time is spent in home production, yet the value of this time is not included in GDP. GDP does not measure happiness, so residents can be dissatisfied even when GDP is rising. In addition, GDP does not consider environmental factors, reflect what individuals do outside paid employment, or even measure the current or future potential human capital of a country. Hence, complementary measures may help to show a more comprehensive picture of an economy.

Extreme weather events are increasing in frequency and intensity, threatening lives and livelihoods around the world. Understanding the short- and long-term effects of such events is necessary for crafting optimal policy. The short-term economic impacts of natural disasters can be severe, suggesting that policies that better insure against consumption losses during this time would be beneficial. Longer-term economic impacts are more complex and depend on the characteristics of the affected population and the affected area, changes in migration patterns, and public policy.

In many countries, the wage floors and working conditions set in collective contracts negotiated by a subset of employers and unions are subsequently extended to all employees in an industry. Those extensions ensure common working conditions within the industry, mitigate wage inequality, and reduce gender wage gaps. However, little is known about the so-called bite of collective contracts and whether they limit wage adjustments for all workers. Evidence suggests that collective contract benefits come at the cost of reduced employment levels, though typically only for workers earning close to the wage floors.

There is a widely held belief that older students, by virtue of being more mature and readier to learn at school entry, may have better academic, employment, and earnings outcomes compared to their younger counterparts. There are understated, albeit important, costs to starting school later, however. Compulsory school-attendance laws may allow these same older pupils to drop out of high school earlier, which could adversely impact their employment; entering the workforce later also has implications for lifetime earnings and remittances to governments. Overall, research suggests that school-age entry policies can improve student achievement in the short term, but the long-term impacts are currently not well-understood.

Youth participation in extracurricular activities is associated with a variety of benefits, ranging from higher concurrent academic performance to better labor market outcomes. In particular, these activities provide avenues through which youth can develop the interpersonal and leadership skills that are crucial to succeed as a manager. A lack of opportunity to participate in extracurricular activities for many youths, particularly those from lower-income backgrounds, may have negative consequences for developing the next generation of managers and business leaders.

How migration affects labor markets in receiving countries is well understood, but less is known about how migration affects labor markets in sending countries, particularly the wages of workers who do not emigrate. Most studies find that emigration increases wages in the sending country but only for non-emigrants with substitutable skills similar to those of emigrants; non-emigrants with different (complementary) skills lose. These wage reactions are short-term effects, however. If a country loses many highly educated workers, the economy can become less productive altogether, leading to lower wages for everyone in the long term.

At the national level, it has long been observed that a country's average education level is negatively associated with its total fertility rate. At the household level, it has also been well documented that children's education is negatively associated with the number of children in the family. Do these observations imply a causal relationship between the number of children and the average education level (the quantity–quality trade-off)? A clear answer to this question will help both policymakers and researchers evaluate the total benefit of family planning policies, both policies to lower fertility and policies to boost it.

Immigrants tend to live in clusters within host countries. Does clustering in ethnic enclaves explain the persistent differences in skill, employment rates, and earnings between immigrants and the native population? Empirical studies consistently find that residing in an enclave can increase earnings. While it is ambiguous whether employment probabilities are also affected or whether earnings benefits accrue to all immigrants, irrespective of their skill levels, it is clear that effects are driven by enclave “quality” (in terms of income, education, and employment) rather than enclave size.

In developing and transition economies as much as half the labor force works in the informal sector (or “shadow economy”). Informal firms congest infrastructure and other public services but do not contribute the taxes needed to finance them. Informal workers are unprotected against such negative shocks as ill-health, but for certain groups there can be scarce opportunities to enter the formal sector meaning informal employment is the only feasible option. Reducing informality requires better enforcement, more reasonable regulation, and economic growth.

The labor market disruptions due to the Covid-19 pandemic and lockdowns impacted immigrant workers more severely than native-born workers in the US, Canada, Australia, and most EU countries. Immigrant workers in most of these countries were more vulnerable to the pandemic since they were more likely to be employed in jobs that are not as easy to perform remotely. The labor market recovery for both groups in the US was rapid, and by Fall 2020, the employment gaps between immigrant and native-born workers, both for men and women, had returned to pre-pandemic levels.

France has the second largest population of countries in the EU. Since 2000, the French labor market has undergone substantial changes resulting from striking trends, some of which were catalyzed by the Great Recession and the Covid-19 crisis. The most interesting of these changes have been the massive improvement in the education of the labor force (especially of women), the resilience of employment during recessions, and the dramatic emergence of very-short-term employment contracts (less than a week) and low-income independent contractors, which together have fueled earnings inequality.

Cash transfers are a popular and successful means of tackling household vulnerability and promoting human capital investment. They can also reduce child labor, especially when it is a response to household vulnerability, but their efficacy is very variable. If not properly designed, cash transfers that promote children's education can increase their economic activities in order to pay the additional costs of schooling. The efficacy of cash transfers may also be reduced if the transfers enable investment in productive assets that boost the returns to child labor. The impact of cash transfers must thus be assessed as part of the whole incentive system faced by the household.

Female labor force participation is mainly driven by the value of their market wages versus the value of their non-market time. Labor force participation varies considerably across countries. To understand this international variation, it is important to further consider differences across countries in institutions, non-economic factors such as cultural norms, and public policies. Such differences provide important insights into what actions countries might take to further increase women's participation in the labor market.

The number of refugees has increased worldwide, and about half of them are children and youth. These refugee children arrive in resettlement countries with a unique set of challenges caused by, for instance, extreme stress and trauma that call for specific policies to address their needs. Yet, the long-term effect of refugee status on newcomer children's economic trajectories varies by country of origin, signaling the need for effective resettlement support and initiatives to tackle broader systemic barriers for newcomer children, beyond refugees. Such findings challenge the commonly held notion of refugees as a distinctive, relatively homogeneous group with similar trajectories.

A growing number of firms offer compensation packages that link pay to performance. The aim is to motivate workers to be more efficient while also increasing their attachment to the company, thereby reducing turnover and absenteeism. The effects of performance-related pay on productivity depend on the scheme type and design, with individual incentives showing the largest effect. Governments often offer tax breaks and financial incentives to promote performance-related pay, though their desirability has been questioned due to large deadweight losses involved. The diffusion of remote work will increase the relevance of performance-related pay.

Recent research has tried to quantify how firms contribute to the immigrant–native earnings gap. Findings from several countries show that around 20% of the gap is due to firm policies that lead to a systematic underrepresentation of immigrants at higher-paying firms. Results also show that some of the closing of the gap over time is attributable to the reallocation of immigrants toward higher-paying employers. This pattern is especially pronounced for immigrants coming from disadvantaged countries, who face several barriers at initial entry, including language difficulties and lack of recognition of their educational credentials.

Recessions are complex events that affect personal health and behavior via various potentially opposing mechanisms. While recessions are known to have negative effects on mental health and lead to an increase in suicides, it has been proven that they reduce mortality rates. A general health policy agenda in relation to recessions remains ambiguous due to the lack of consistency between different individual- and country-level approaches. However, aggregate regional patterns provide valuable information, and local social planners could use them to design region-specific policy responses to mitigate the negative health effects caused by recessions.

Many countries have enacted legislation over the past few decades making divorce easier. Some countries have legalized divorce where it had previously been banned, and many have eased the conditions required for a divorce, such as allowing unilateral divorce (both spouses do not have to agree on the divorce). Divorce laws can regulate the grounds for divorce, division of property, child custody, and child support or maintenance payments. Reforms can have a range of social effects beyond increasing the divorce rate. They can influence female labor supply, marriage and fertility rates, child well-being, household saving, and even domestic violence and crime.

Time plays an important role in both the design and interpretation of evaluation studies of training programs. While the start and duration of a training program are closely linked to the evolution of job opportunities, the impact of training programs in the short and longer term changes over time. Neglecting these “dynamics” could lead to an unduly negative assessment of the effects of certain training schemes. Therefore, a better understanding of the dynamic relationship between different types of training and their respective labor market outcomes is essential for a better design and interpretation of evaluation studies.

Return migration can have multiple benefits. It allows migrants who have accumulated savings abroad to ease credit constraints at home and set up a business. Also, emigrants from low- and middle-income countries who have invested in their human capital may earn higher wages when they return. However, whether the home country benefits from return migrants depends on the migrant's success in accumulating savings and human capital and on the home country's ability to make use of returnees’ skills and investment. To benefit from returnees, home countries need policies that encourage returnees’ investment and labor market reintegration.

Differences in labor market outcomes for women and men are highly persistent. Apart from discrimination, one frequently mentioned explanation could be differences in the attitude toward competition for both genders. Abundant empirical evidence indicates that multiple influences shape attitudes toward competition during different periods of the life cycle. Gender differences in competitiveness will not only influence outcomes during working age, but also during early childhood education. In order to reduce the gender gap in educational and labor market outcomes, it is crucial to understand when and why gender gaps in competitiveness arise and to study their consequences.

Unemployment not only causes material hardship but can also affect an individual's sense of identity (i.e. their perception of belonging to a specific social group) and, consequently, feelings of personal happiness and subjective well-being. Labor market policies designed to help the unemployed may not overcome their misery: wage subsidies can be stigmatizing, measures that require some work or attendance for training from those receiving benefits (workfare) may not provide the intended incentives, and a combination of an unregulated labor market and policy measures that bring people who became unemployed quickly back to work (flexicurity) may increase uncertainty. Policies aimed at bringing people back to work should thus take the subjective well-being of the affected persons more into consideration.

Parents now engage in much more intensive parenting styles compared to a few decades ago. Today’s parents supervise their children more closely, spend more time interacting with them, help much more with homework, and place more emphasis on educational achievement. More intensive parenting has also led to more unequal parenting: highly educated parents with high incomes have increased their parenting investments the most, leading to a growing “parenting gap” in society. These trends can contribute to declining social mobility and further exacerbate rising inequality, which raises the question of how policymakers should respond.

As the largest economy in the world, the US labor market is crucial to the economic well-being of citizens worldwide as well as, of course, that of its own citizens. Since 2000 the US labor market has undergone substantial changes, reflecting the Great Recession and the Covid Recession, but also resulting from some striking trends. Most interesting have been a remarkable drop in the labor force participation rate, reversing a nearly 50-year trend; the full recovery of unemployment after 2010 and its skyrocketing in 2020; and the little-known continuing growth in post-inflation average earnings.

Migration policies need to consider how immigration affects investment behavior and productivity, and how these effects vary with the type of migration. College-educated immigrants may do more to stimulate foreign direct investment and research and development than low-skilled immigrants, and productivity effects would be expected to be highest for immigrants in scientific and engineering fields. By raising the demand for housing, immigration also spurs residential investment. However, residential investment is unlikely to expand enough to prevent housing costs from rising, which has important distributional implications.

Ever since the major inflow of refugees (the “refugee crisis”) in 2015 and 2016, there has been heated debate about the appropriate distribution of refugees in the EU. Current policies revolve around mandatory quotas, which disregard the preferences of EU members and refugees alike. This problem can be addressed with two market mechanisms. First, tradable quotas minimize the cost of asylum provision for host countries. Second, a matching system gives refugees more discretion over where they are sheltered. While this proposal is theoretically appealing, it has yet to be tested in practice.

In transition economies, a significant number of companies reduce their tax and social contributions by paying their staff an official salary, described in a registered formal employment agreement, and an extra, undeclared “envelope wage,” via a verbal unwritten agreement. The consequences include a loss of government income and a lack of fair play for lawful companies. For employees, accepting under-reported wages reduces their access to credit and their social protections. Addressing this issue will help increase the quality of working conditions, strengthen trade unions, and reduce unfair competition.

Minimum wage increases are not an effective mechanism for reducing poverty. And there is little causal evidence that they do so. Most workers who gain from minimum wage increases do not live in poor (or near-poor) families, while some who do live in poor families lose their job as a result of such increases. The earned income tax credit is an effective way to reduce poverty. It raises only the after-tax wage rates of workers in low- and moderate-income families, the tax credit increases with the number of dependent children, and evidence shows that it increases labor force participation and employment in these families.

Ample empirical evidence links adverse conditions during early childhood (the period from conception to age five) to worse health outcomes and lower academic achievement in adulthood. Can early-life medical care and public health interventions ameliorate these effects? Recent research suggests that both types of interventions may benefit not only child health but also long-term educational outcomes. In some cases, the effects of interventions may spillover to other family members. These findings can be used to design policies that improve long-term outcomes and reduce economic inequality.

Labor market institutions that may weaken workers’ bargaining leverage have received increased scrutiny in recent years. One example is noncompete agreements, which prevent workers from freely moving across employers, potentially weakening earnings growth. New data sources and empirical evidence have led policymakers to consider sharp restrictions on their use, especially among lower-income workers. These restrictions take many different forms, each of which has unique tradeoffs between the desire to protect workers while allowing firms to use noncompetes in cases where they may create social value.

Employers are steadily increasing their reliance on technology when recruiting. On the one hand, this technology enables the wide dissemination of information and the management of large quantities of data at a relatively low cost. On the other hand, it introduces new costs and risks. The ease with which information can be shared, for example, can lead to its unauthorized use and obsolescence. Recruiting technologies are also susceptible to misuse and to biases built into their underlying algorithms. Better understanding of these trade-offs can inform government policies aiming to reduce search frictions in the labor market.

Eastern European countries, particularly former Soviet Union economies, traditionally have the highest rates of alcohol consumption in the world. Consequently, they also have some of the highest male mortality rates in the world. Regulation can be effective in significantly decreasing excessive drinking and its related negative effects, such as low labor productivity and high rates of mortality. Understanding the consequences of specific regulatory measures and what tools should be used to combat excessive alcohol consumption is essential for designing effective policies.

The labor market position of older workers is cause for concern in many industrialized countries. Rapid population aging is challenging pension systems. The recent economic crisis has forced many older adults out of the workforce, into either pre-retirement or non-employment. Encouraging people to work longer and fostering the employability of older workers have become priorities for policymakers. Training specifically designed for older workers might help attain these goals, since it may refresh human capital and reduce the pay–productivity gap. Training older workers might also benefit employers and society as a whole.

Corporate income taxation influences the quantity and type of entrepreneurship, which in turn affects economic development. Empirical evidence shows that higher corporate income tax rates reduce business density and entrepreneurship entry rates and increase the capital size of new firms. The progressivity of tax rates increases entrepreneurship entry rates, whereas highly complex tax codes reduce them. Policymakers should understand the effects and underlying mechanisms that determine how corporate income taxation influences entrepreneurship in order to provide a favorable business environment.

High risk of poverty and low employment rates are widespread among low-skilled groups, especially in the case of some household compositions (e.g. single mothers). “Making-work-pay” policies have been advocated for and implemented to address these issues. They alleviate the above-mentioned problems without providing a disincentive to work. However, do they deliver on their promises? If they do reduce poverty and enhance employment, is it possible to determine their effects on indicators of well-being, such as mental health and life satisfaction, or on the acquisition of human capital?

Guest worker programs allow migrants to work abroad legally, and offer benefits to workers, firms, and nations. Guest workers are typically authorized to work only in specific labor markets, and are sponsored by, and must work for, a specific firm, making it difficult for guest workers to switch employers. Critics argue that the programs harm host country citizens and permanent residents (“existing workers”), and allow employers to exploit and abuse vulnerable foreign-born workers. Labor market institutions, competitive pressures, and firm strategy contribute to the effects of migration that occur through guest worker programs.

Income inequality has been on the rise in many countries. Is this bad? One way to decide is to look at the degree of change in incomes across generations (intergenerational mobility) and, more generally, at the extent to which income differences among individuals are traceable to their social origins. Inequalities that reflect factors largely out of an individual’s control—such as parents’ education, local schools, and communities—require attention in order to reduce income inequality. Evidence shows a negative association between income inequality and intergenerational mobility, and a positive relationship between mobility and economic performance.

Countries have adopted a variety of legalization programs to address unauthorized immigration. Research in the US finds improved labor market outcomes for newly authorized immigrants. Findings are more mixed for European and Latin American countries where informal labor markets play a large role and programs are often small scale. Despite unclear labor market outcomes and mixed public support, legalization will likely continue to be widely used. Comprehensive legislation can address the complex nature of legalization on immigrants and on native-born residents.

Many countries are experiencing increasing inflows of immigrant students. This raises concerns that having a large share of students for whom the host country language is not their first language may have detrimental effects on the educational outcomes of native children. However, the evidence is mixed, with some studies finding negative effects, and others finding no effects. Whether higher concentrations of immigrant students have an effect on native students differs across countries according to factors such as organization of the school system and the type of immigrants.

Higher inequality reduces capital accumulation and increases the informal economy, which creates additional employment opportunities for low-skilled and deprived people. As a result, informal employment leads to beneficial effects on income distribution by providing sources of income for unemployed and marginalized workers. Despite this positive feedback, informality raises problems for public finances and biases official statistics, reducing the effectiveness of redistributive policies. Policymakers should consider the links between inequality and informality because badly designed informality-reducing policies may increase inequality.

Low-wage employment has become an important feature of the labor market and a controversial topic for debate in many countries. How to interpret the prominence of low-paid jobs and whether they are beneficial to workers or society is still an open question. The answer depends on whether low-paid jobs are largely transitory and serve as stepping stones to higher-paid employment, whether they become persistent, or whether they result in repeated unemployment. The empirical evidence is mixed, pointing to both stepping-stone effects and “scarring” effects (i.e. long-lasting detrimental effects) of low-paid work.

In Europe, about one in eight people of working age report having a disability; that is, a long-term limiting health condition. Despite the introduction of a range of legislative and policy initiatives designed to eliminate discrimination and facilitate retention of and entry into work, disability is associated with substantial and enduring labor market disadvantage in many countries. Identifying the reasons for this is complex, but critical to determine effective policy solutions that reduce the extent, and social and economic costs, of disability-related disadvantage.

In today's globalized world, people are increasingly mobile and often need to communicate across different languages. Learning a new language is an investment in human capital. Migrants must learn the language of their destination country, but even non-migrants must often learn other languages if their work involves communicating with foreigners. Economic studies have shown that fluency in a dominant language is important to economic success and increases economic efficiency. However, maintaining linguistic diversity also has value since language is also an expression of people's culture.

Higher labor costs (higher wage rates and employee benefits) make workers better off, but they can reduce companies’ profits, the number of jobs, and the hours each person works. The minimum wage, overtime pay, payroll taxes, and hiring subsidies are just a few of the policies that affect labor costs. Policies that increase labor costs can substantially affect both employment and hours, in individual companies as well as in the overall economy.

Statistical models can help public employment services to identify factors associated with long-term unemployment and to identify at-risk groups. Such profiling models will likely become more prominent as increasing availability of big data combined with new machine learning techniques improve their predictive power. However, to achieve the best results, a continuous dialogue between data analysts, policymakers, and case workers is key. Indeed, when developing and implementing such tools, normative decisions are required. Profiling practices can misclassify many individuals, and they can reinforce but also prevent existing patterns of discrimination.

Anti-discrimination policies play an important role in public discussions. However, identifying discriminatory practices in the labor market is not an easy task. Correspondence testing provides a credible way to reveal discrimination in hiring and provide hard facts for policies, and it has provided evidence of discrimination in hiring across almost all continents except Africa. The method involves sending matched pairs of identical job applications to employers posting jobs—the only difference being a characteristic that signals membership to a group.

Chronic health conditions are a global concern and can impact labor market outcomes of those diagnosed and their caregivers. Since the global prevalence of many chronic health conditions is on the rise, it is important to know what firms can do to retain and hire workers who are impacted. Firms can improve hiring by addressing biases against potential employees with chronic health conditions. Furthermore, firms can retain impacted workers by offering workplace flexibility such as partial sick leave, work hour flexibility, and part-time work options.

Regulation of standard workweek hours and overtime hours and pay can protect workers who might otherwise be required to work more than they would like to at the going rate. By discouraging the use of overtime, such regulation can increase the standard hourly wage of some workers and encourage work sharing that increases employment, with particular advantages for female workers. However, regulation of overtime raises employment costs, setting in motion economic forces that can limit, neutralize, or even reduce employment. And increasing the coverage of overtime pay regulations has little effect on the share of workers who work overtime or on weekly overtime hours per worker.

The fear of unemployment has increased around the world in the wake of Covid-19. Research has shown that job insecurity affects both mental and physical health, though the effects are lower when employees are easily re-employable. The detrimental effects of job insecurity could be partly mitigated if employers improved other aspects of job quality that support better health. But as job insecurity is felt by many more people than just the unemployed, the negative health effects during recessions are multiplied and extend through the majority of the population. This reinforces the need for effective, stabilising macroeconomic policies, most especially at this time of pandemic.

Public debate on immigration focuses on its effects on wages and employment, yet the discussion typically fails to consider the effects of immigration on working conditions that affect workers’ health. There is growing evidence that immigrants are more likely than natives to work in risky jobs. Recent studies show that as immigration rises, native workers are able to work in less demanding jobs. Such market adjustments lead to a reduction in native occupational risk and thus an improvement in native health.

Increasing women's labor force participation is important to sustainable economic development, especially in economies with highly educated women and an aging population. Women's participation varies across transition countries, driven by such economic and social factors as traditional views of gender roles and limited government support for caregivers. Still, in all countries there is clear scope for policies aimed at increasing women's participation. In particular, in countries where women's educational attainment is already high, policies to support a better work–life balance and female entrepreneurship look particularly promising.

New environmental technologies (environmental/eco-innovations) are often regarded as potential job creators—in addition to their positive effects on the environment. Environmental regulation may induce innovations that are accompanied by positive growth and employment effects. Recent empirical analyses show that the introduction of cleaner process innovations, rather than product-based ones, may also lead to higher employment. The rationale is that cleaner technologies lead to cost savings, which helps to improve firms’ competitiveness, thereby inducing positive effects on their market shares.

The decision to outsource public provision of services is multifaceted and context dependent. Doing so tends to lower labor intensity and increase its efficiency. Costs are usually lower, but quality problems can affect services like health care, though consumer choice has stimulated innovation and quality in both education and health care. Natural monopolies are less suitable for outsourcing, while network services (public transportation) may be outsourced through public tenders. Though some jobs may be lost in the short term, the long-term effects are generally positive for a wide variety of activities.

In many developed countries, racial and ethnic minorities are paid, on average, less than the native white majority. While racial wage differentials are partly the result of immigration, they also persist for racial minorities of second and further generations. Eliminating racial wage differentials and promoting equal opportunities among citizens with different racial backgrounds is an important social policy goal. Inequalities resulting from differences in opportunities lead to a waste of talent for those who cannot reach their potential and to a waste of resources if some people cannot contribute fully to society.

Even in OECD countries, where an increasing proportion of the workforce has a university degree, the value of basic skills in literacy and numeracy remains high. Indeed, in some countries the return for such skills, in the form of higher wages, is sufficiently large to suggest that they are in high demand and that there is a relative scarcity. Policymakers need robust evidence in order to devise interventions that genuinely improve basic skills, not just of new school leavers entering the market, but also of the existing workforce. This would lead to significant improvements in the population that achieves a minimum level of literacy and numeracy.

Economic theory has many predictions regarding how workers should be paid and how workplaces should be organized. However, economists’ attempts to test these in the real world have been hampered by a lack of consistent information about workers’ productivity levels. Professional sports offer a potential solution, since the performance of individual sportspeople is easily observed and yet many of the same problems faced by managers in workplaces still apply. In many ways, sportspeople may be less atypical of the modern workforce than farm laborers, doctors, or other groups of workers that are often scrutinized by economists.

Refugee migration has increased considerably since the Second World War, and amounts to more than 50 million refugees. Only a minority of these refugees seek asylum, and even fewer resettle in developed countries. At the same time, politicians, the media, and the public are worried about a lack of economic integration. Refugees start at a lower employment and income level, but subsequently “catch up” to the level of family unification migrants. However, both refugees and family migrants do not “catch up” to the economic integration levels of labor migrants. A faster integration process would significantly benefit refugees and their new host countries.

The migration crisis of 2015–2016 threw the European asylum system into disarray. The arrival of more than two million unauthorized migrants stretched the system to its breaking point and created a public opinion backlash. The existing system is one in which migrants risk life and limb to gain (often unauthorized) entry to the EU in order to lodge claims for asylum, more than half of which are rejected. Reforms introduced during the crisis only partially address the system's glaring weaknesses. In particular, they shift the balance only slightly away from a regime of spontaneous asylum-seeking to one of refugee resettlement.

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.

Unemployment benefits reduce incentives to search for a job. Policymakers have responded to this behavior by setting minimum job search requirements, by monitoring to check that unemployment benefit recipients are engaged in the appropriate level of job search activity, and by imposing sanctions for infractions. Empirical studies consistently show that job search monitoring and benefit sanctions reduce unemployment duration and increase job entry in the short term. However, there is some evidence that longer-term effects of benefit sanctions may be negative.

The time household members in industrialized countries spend on housework and shopping is substantial, amounting to about half as much as is spent on paid employment. Women bear the brunt of this burden, driven in part by the gender wage differential. Efforts to reduce the gender wage gap and alter gendered norms of behavior should reduce the gender bias in household production time and reduce inefficiency in home production. Policymakers should also note the impact of tax policy on housework time and its market substitutes, and consider ways to reduce the distortions caused by sales and income taxes.

When an employer fills a vacancy with one of its own workers (through promotion or horizontal transfer), it forgoes the opportunity to fill the position with a new hire from outside the firm. Although firms use both internal and external hiring methods, they frequently favor insiders. Internal and external hires differ in observable characteristics (such as skill levels), as do the employers making the hiring decisions. Understanding those differences helps employers design and manage hiring policies that are appropriate for their organizations.

The difference in educational attainment between China's urban- and rural-born populations has widened in recent years, and the relatively low educational attainment of the rural-born is a significant obstacle to raising labor productivity. Rural-to-urban migration does not create incentives to enroll in higher education as the availability of low-skill employment in urban areas makes remaining in school less attractive. In addition, the child-fostering and urban schooling arrangements for children of migrants further inhibit human capital accumulation.

Evidence shows that many college graduates are employed in jobs for which a degree is not required (overeducation), and in which the skills they learned in college are not being fully utilized (overskilling). Policymakers should be particularly concerned about widespread overskilling, which is likely to be harmful to both the welfare of employees and the interests of employers as both overeducation and overskilling can lead to frustration, lower wages, and higher quitting rates while also being a waste of government money spent on education.

Switzerland is a small country with rich cultural and geographic diversity. The Swiss unemployment rate is low, at around 4%. The rate has remained at that level since the year 2000, despite a massive increase in the foreign labor force, the Great Recession, and a currency appreciation shock, demonstrating the Swiss labor market's impressive resiliency. However, challenges do exist, particularly related to earnings and employment gaps between foreign and native workers, as well as a narrowing but persistent gender pay gap. Additionally, regional differences in unemployment are significant.

The perceived lack of economic or social integration by immigrants in their host countries is a key concern in the public debate. Research shows that the option to naturalize has considerable economic and social benefits for eligible immigrants, even in countries with a tradition of restrictive policies. First-generation immigrants who naturalize have higher earnings and more stable jobs. Gains are particularly large for immigrants from poorer countries. Moreover, citizenship encourages additional investment in skills and enables immigrants to postpone marriage and fertility. A key question is: does naturalization promote successful integration or do only those immigrants most willing to integrate actually apply?

The South African economy was on a positive growth trajectory from 2003 to 2008 but, like other economies around the world, it was not spared from the effects of the 2008 global financial crisis. The economy has not recovered and employment in South Africa has not yet returned to its pre-crisis levels. Overall inequality has not declined, and median wages seem to have stagnated in the post-apartheid period. Labor force participation has been stable and although progress has been made, gender imbalances persist.

The Icelandic labor market is characterized by high union density and the Icelanders’ willingness to work, as labor force participation is high, the work week long, and people retire late. The resilience and flexibility of the Icelandic labor market was put to the test in the Great Recession as a large share of employees in the labor market experienced a fall in work hours and a fall in nominal wages, while unemployment rose less than expected. In recent years there has been a strong influx of foreign workers, mostly from Eastern Europe. Studies have shown that their labor force participation is no lower than that of Icelanders.

Public attitudes toward immigration play an important role in influencing immigration policy and immigrants’ integration experience. This highlights the importance of a systematic examination of these public attitudes and their underlying drivers. Evidence increasingly suggests that while a majority of individuals favor restrictive immigration policies, particularly against ethnically different immigrants, there exists significant variation in these public views by country, education, age, and so on. In addition, sociopsychological factors play a significantly more important role than economic concerns in driving these public attitudes and differences.

Finland's population is aging rapidly by international comparison. The shrinking working-age population means that the burden of increasing pension and health care expenditures is placed on a smaller group of employed workers, while the scope for economic growth through increased labor input diminishes. Fiscal sustainability of the welfare state calls for a high employment rate among people of working age. Recent increases in employment contribute favorably to public finances, but high overall unemployment and a large share of the long-term unemployed are serious concerns.

Spain, the fourth largest eurozone economy, was hit particularly hard by the Great Recession, which made its chronic labor market problems more evident. Youth and long-term unemployment escalated during the crisis and, despite the ongoing recovery, in 2018 were still at very high levels. The aggregate rate of temporary employment declined during the recession, but grew among youth. Most interesting have been the narrowing of the gender gap in labor force participation, the decline in the share of immigrants in employment and the labor force, and the overall increase in wage inequality.

Globally, the share of income going to labor (the “labor income share”) is declining. However, this aggregate decline hides more than it reveals. While the labor income share has decreased for low-skilled workers, this has been concurrent with an increase for high-skilled workers. Globalization leading to a growing skill premium and an increasing complementarity between capital and skill through the advancement of technology explains the polarization of labor income shares across the skill spectrum.

Trade regulation can create jobs in the sectors it protects or promotes, but almost always at the expense of destroying a roughly equivalent number of jobs elsewhere in the economy. At a product-specific or micro level and in the short term, controlling trade could reduce the offending imports and save jobs, but for the economy as a whole and in the long term, this has neither theoretical support nor evidence in its favor. Given that protection may have other—usually adverse—effects, understanding the difficulties in using it to manage employment is important for economic policy.

How does tax evasion affect the distribution of income? In the standard analysis of tax evasion, all the benefits are assumed to accrue to tax evaders. However, tax evasion has other impacts that determine its true effects. As factors of production move from tax-compliant to tax-evading (informal) sectors, these market adjustments generate changes in relative prices of products and factors, thereby affecting what consumers pay and what workers earn. As a result, at least some of the gains from evasion are shifted to consumers of goods produced by tax evaders, and at least some of the returns to tax evaders are competed away via lower wages.

The micro- and macroeconomic effects of the declining power of trade unions have been hotly debated by economists and policymakers, although the empirical evidence does little to suggest that the impact of union decline on economic aggregates and firm performance is an overwhelming cause for concern. That said, the association of declining union power with rising earnings inequality and the loss of an important source of dialogue between workers and their firms have proven more worrisome if no less contentious. Causality issues dog the former association and while the diminution in representative voice seems indisputable any depiction of the non-union workplace as an authoritarian “bleak house” is more caricature than reality.

Experiences during the Great Recession support the view that the UK labor market is relatively flexible. Unemployment rose less and recovered faster than in most other European economies. However, this success has been accompanied by a stagnation of productivity and wages; an open question is whether this represents a cyclical phenomenon or a structural problem. In addition, the effects of the planned exit of the UK from the EU (Brexit), which is quite possibly the greatest current threat to the stability of the UK labor market, are not yet visible in labor market statistics.

The number of people holding non-traditional jobs (independent contractors, temporary workers, “gig” workers) has grown steadily as technology increasingly enables short-term labor contracting and fixed employment costs continue to rise. For many firms that need less than a full-time person for short-term work and for many workers who value flexibility this has created a great deal of surplus. During slack economic periods, non-traditional work also serves as an alternative safety net. Non-traditional jobs will continue to become more common, though policy changes could slow or accelerate the trend.

Ireland was hit particularly hard by the global financial crisis, with severe impacts on the labor market. Between 2007 and 2013, the unemployment rate increased dramatically, from 5% to 15.5%, and the labor force participation rate declined by almost five percentage points between 2007 and 2012. Outward migration re-emerged as a safety valve for the Irish economy, helping to moderate impacts on unemployment via a reduction in overall labor supply. As the crisis deepened, long-term unemployment escalated. However, since 2013, there is clear evidence of a recovery in the labor market with unemployment, both overall and long-term, dropping rapidly.

South Korea has boasted one of the world's most successful economies since the end of World War II. The South Korean labor market has recovered quickly from the depths of the Asian crisis in 1998, and has since remained surprisingly sound and stable. The unemployment rate has remained relatively low, and average real earnings have steadily increased. The South Korean labor market was resilient in the wake of the global financial crisis. However, there are issues that require attention, including high earnings inequality, an aging labor force, increasing part-time jobs, and rising youth unemployment rates.

Economic growth requires factor reallocation across firms and continuous replacement of technologies. Labor market institutions influence economic dynamism by their impact on the supply of a key factor, skilled workers to new and expanding firms, and the shedding of workers from declining and failing firms. Growth-favoring labor market institutions include portable pension plans and other job tenure rights, health insurance untied to the current employer, individualized wage-setting, and public income insurance systems that encourage mobility and risk-taking in the labor market.

Many industrial countries are pursuing so-called green energy policies, which typically imply the replacement of conventional fossil fuel power plants with renewable sources. Such a policy shift may affect employment in different ways. On the one hand, it could create new and additional “green jobs” in the renewables sector; on the other hand, it could crowd out employment in other sectors. An additional consideration is the potential increase in energy prices, which has the potential to stifle labor demand in energy-intensive sectors and reduce the purchasing power of private households.

Over recent decades, Western countries have admitted many immigrants from non-traditional regions (e.g. Philippines, India, China), which has coincided with poor economic integration. Language proficiency is an important determinant of economic integration; in addition to being a component of human capital, it plays a key role in facilitating the transmission of other components of human capital. Examining the strengths and weaknesses of objective and subjective measures of language proficiency is crucial for good integration policy, as is understanding the relationship between these measures and earnings, a key indicator of economic integration.

In the context of growing worldwide inequality, it is important to know what happens when the demand for low-skilled workers changes. Because natural resource shocks are global in nature, but have highly localized impacts on labor prospects in resource extraction areas, they offer a unique opportunity to evaluate low-skilled men's behavior when faced with extreme variations in local labor market conditions. This situation can be utilized to evaluate a broad range of outcomes, from education and income, to marital and fertility status, to voting behavior.

The EU's largest economy, Germany, has managed to find an effective and unique combination of flexibility and rigidity in its labor market. Institutions that typically characterize rigid labor markets are effectively balanced by flexibility instruments. Important developments since 2000 include steadily decreasing unemployment rates (since 2005), increasing participation rates, and (since 2011) moderately increasing labor compensation. The German labor market was remarkably robust to the impacts of the Great Recession, thus providing a useful case study for other developed countries.

Teacher effectiveness is the most important component of the education process within schools for pupil attainment. One estimate suggests that, in the US, replacing the least effective 8% of teachers with average teachers has a present value of $100 trillion. Researchers have a reasonable understanding of how to measure teacher effectiveness; but the next step, understanding the best ways to raise it, is where the research frontier now lies. Two areas in particular appear to hold the greatest promise: reforming hiring practices and contracts, and reforming teacher training and development.

Border enforcement of immigration laws raises the costs of illegal immigration, while interior enforcement also lowers its benefits. Used together, border and interior enforcement therefore reduce the net benefits of illegal immigration and should lower the probability that an individual will decide to illegally migrate. While empirical studies find that border and interior enforcement serve as deterrents to illegal immigration, immigration enforcement is costly and carries unintended consequences, such as a decrease in circular migration, an increase in smuggling, and higher prevalence of off-the-books employment and use of fraudulent and falsified documents.

Governments invest a lot of money in education, so it is important to understand the benefits of this spending. One essential aspect is that education can potentially make people better parents and thus improve the educational and employment outcomes of their children. Interventions that encourage the educational attainment of children from poorer families will reduce inequality in current and future generations. In addition to purely formal education, much less expensive interventions to improve parenting skills, such as parental involvement programs in schools, may also improve child development.

One of the primary considerations in policy debates related to energy development is the projected effect of resource extraction on local workers. These debates have become more common in recent years because technological progress has enabled the extraction of unconventional energy sources, such as shale gas and oil, spurring rapid development in many areas. It is thus crucial to discuss the empirical evidence on the effect of “energy booms” on local workers, considering both the potential short- and long-term impacts, and the implications of this evidence for public policy.

There is evidence that better performing firms tend to enter international markets. Internationally active firms are larger, more productive, and pay higher wages than other firms in the same industry. Positive performance effects of engaging in international activity are found especially in firms from less advanced economies that interact with partners from more advanced economies. Lowering barriers to the international division of labor should therefore be part of any pro-growth policy.

The open science and research transparency movement aims to make the research process more visible and to strengthen the credibility of results. Examples of open research practices include open data, pre-registration, and replication. Open science proponents argue that making data and codes publicly available enables researchers to evaluate the truth of a claim and improve its credibility. Opponents often counter that replications are costly and that open science efforts are not always rewarded with publication of results.

The fiscal sustainability of state pensions is a central concern of policymakers in nearly every advanced economy. Policymakers have attempted to ensure the sustainability of these programs in recent decades by raising retirement ages. However, there are concerns that keeping older workers in the workforce for longer might have negative consequences for younger workers. Since youth unemployment is a pressing problem throughout advanced and developing countries, it is important to consider the impact of these policies on the employment prospects of the young.

The relationship between retirement plan type and job mobility is more complex than typically considered. While differences in plan features and benefit structure may directly affect employees’ mobility decisions (“incentive effect”), the type of plan offered may also affect the types of employees a given employer attracts (“selection effect”), thereby affecting mobility through a second, indirect channel. At the same time, some employees may not be able to accurately assess differences between plan types due to limited financial literacy. These factors have implications for policymakers and employers considering retirement plan offerings.

Despite equal pay legislation dating back 50 years, American women still earn 18% less than their male counterparts. In the UK, with its Equal Pay Act of 1970, and France, which legislated in 1972, the gap is 17% and 10% respectively, and in Australia it remains around 14%. Interestingly, the gender pay gap is relatively small for the young but increases as men and women grow older. Similarly, it is large when comparing married men and women, but smaller for singles. Just what can explain these wage patterns? And what can governments do to speed up wage convergence to close the gender pay gap? Clearly, the gender pay gap continues to be an important policy issue.

Economists have long believed that firms will not pay to develop occupational skills that workers could use in other, often competing, firms. Researchers now recognize that firms that invest in apprenticeship training generally reap good returns. Evidence indicates that financial returns to firms vary. Some recoup their investment within the apprenticeship period, while others see their investment pay off only after accounting for reduced turnover, recruitment, and initial training costs. Generally, the first year of apprenticeships involves significant costs, but subsequently, the apprentice's contributions exceed his/her wages and supervisory costs. Most participating firms view apprenticeships as offering certainty that all workers have the same high level of expertise and ensuring an adequate supply of well-trained workers to cover sudden increases in demand and to fill leadership positions.

The global economy is full of progress paradoxes. Improvements in technology, reducing poverty, and increasing life expectancy coexist with persistent poverty in the poorest countries and increasing inequality and unhappiness in many wealthy ones. A key driver of the latter is the decline in the status and wages of low-skilled labor, with an increasing percentage of prime-aged men (and to a lesser extent women) simply dropping out of the labor force. The trend is starkest in the US, though frustration in this same cohort is also prevalent in Europe, and it is reflected in voting patterns in both contexts.

Governments regulate employment to protect workers and improve labor market efficiency. But, regulations, such as minimum wages and job security rules, can be controversial. Thus, decisions on setting employment regulations should be based on empirical evidence of their likely impacts. Research suggests that most countries set regulations in the appropriate range. But this is not always the case and it can be costly when countries over- or underregulate their labor markets. In developing countries, effective regulation also depends on enforcement and education policies that will increase compliance.

Being the largest economy in the Eurasian region, Russia's labor market affects economic performance and well-being in several former Soviet countries. Over the period 2000–2017, the Russian labor market survived several deep crises and underwent substantial structural changes. Major shocks were absorbed largely via wage adjustments, while aggregate employment and unemployment showed little sensitivity. Workers have paid the price for this rather stable employment situation in the form of volatile wages and a high risk of low pay.

Public sector hiring has been an essential component of the social bargains that have maintained political stability in the Middle East and North Africa (MENA). As these bargains eroded, public sector workforces contracted in relative terms owing to a partial freeze on hiring and the promise of lifetime job security for incumbent workers. This had profound effects on the age composition of the workforce. The upcoming retirement of many workers provides an opportunity to restructure public sector hiring to emphasize meritocratic recruitment processes and performance-based compensation systems.

Rising obesity is a pressing global public health problem responsible for rising health care costs and in some countries one of the leading causes of preventable deaths. There is substantial evidence that obese people are less likely to be employed and, when employed, earn lower wages. There is some evidence that the lower earnings are a result of discriminatory hiring and sorting into jobs with less customer contact. Understanding whether obesity is associated with adverse labor market outcomes and ascertaining the source of these outcomes are essential for designing effective public policy.

In recent decades, women's participation in the labor market has increased considerably in most countries and is converging toward the participation rate of men. Though on a lesser scale, a similar movement toward gender convergence seems to be occurring in the criminal world, though many more men than women still engage in criminal activity. Technological progress and social norms have freed women from the home, increasing their participation in both the labor and the crime market. With crime no longer just men's business, it is important to investigate female criminal behavior to determine whether the policy prescriptions to reduce crime should differ for women.

As the third-largest economy in the world and a precursor of global trends in population aging, Japan's recent experiences provide important lessons regarding how demographic shifts affect the labor market and individuals’ economic well-being. On the whole, the labor market showed a remarkable stability during the financial crisis, despite decades of economic stagnation and sluggish real wage growth. Rapid population aging, however, has brought substantial changes to individuals in the labor market, most notably women, by augmenting labor demand in the healthcare services industry.

Economists use various metrics for measuring income inequality. Here, the most commonly used measures—the Lorenz curve, the Gini coefficient, decile ratios, the Palma ratio, and the Theil index—are discussed in relation to their benefits and limitations. Equally important is the choice of what to measure: pre-tax and after-tax income, consumption, and wealth are useful indicators; and different sources of income such as wages, capital gains, taxes, and benefits can be examined. Understanding the dimensions of economic inequality is a key first step toward choosing the right policies to address it.

Studies from countries with laws against discrimination on the basis of sexual orientation suggest that gay and lesbian employees report more incidents of harassment and are more likely to report experiencing unfair treatment in the labor market than are heterosexual employees. Both gay men and lesbians tend to be less satisfied with their jobs than their heterosexual counterparts. Gay men are found to earn less than comparably skilled and experienced heterosexual men. For lesbians, the patterns are ambiguous: in some countries they have been found to earn less than their heterosexual counterparts, while in others they earn the same or more.

Work hours are key components in estimating productivity growth and hourly wages as well as being a useful cyclical indicator in their own right, so measuring them correctly is important. The US Bureau of Labor Statistics (BLS) collects data on work hours in several surveys and publishes four widely used series that measure average weekly hours. The series tell different stories about average weekly hours and trends in those hours but qualitatively similar stories about the cyclical behavior of work hours. The research summarized here explains the differences in levels, but only some of the differences in trends.

Conventional wisdom and prevailing economic theory hold that the new owners of a privatized firm will cut jobs and wages. But this ignores the possibility that new owners will expand the firm’s scale, with potentially positive effects on employment, wages, and productivity. Evidence generally shows these forces to be offsetting, usually resulting in small employment and earnings effects and sometimes in large, positive effects on productivity and scale. Foreign ownership usually has positive effects, and the effects of domestic privatization tend to be larger in countries with a more competitive business environment.

Risk aversion is an important factor in many settings, including individual decisions about investment or occupational choice, and government choices about policies affecting environmental, industrial, or health risks. Risk preferences are measured using surveys or incentivized games with real consequences. Reviewing the different approaches to measuring individual risk aversion shows that the best approach will depend on the question being asked and the study's target population. In particular, economists’ gold standard of incentivized games may not be superior to surveys in all settings.

Immigrants are widely perceived to be highly entrepreneurial, contributing to economic growth and innovation, and self-employment is often viewed as a means of enhancing labor market integration and success among immigrants. Accordingly, many countries have established special visas and entry requirements to attract immigrant entrepreneurs. Research supports some of these stances, but expectations may be too high. There is no strong evidence that self-employment is an effective tool of upward economic mobility among low-skilled immigrants. More broadly prioritizing high-skilled immigrants may prove to be more successful than focusing on entrepreneurship.

Compliance with minimum wage laws and non-wage conditions of employment often depends on labor market specific factors. In developing countries, many workers still earn less than the legal minimum and lack access to mandated non-wage benefits. Enforcement has not kept up with regulation growth and compliance has not been measured from a multidimensional perspective. Such an approach would help to understand the impact of institutional variables and country-specific approaches on the level of labor law violation. The difference between de facto and de jure regulation remains particularly pertinent in countries where compliance is low.

In recent decades, the number of university students worldwide who have received some part of their education abroad has been rising rapidly. Despite the popularity of international student exchange programs, however, debate continues over what students actually gain from this experience. A major advantage claimed for study abroad programs is that they can enhance employability by providing graduates with the skills and experience employers look for. These programs are also expected to increase the probability that graduates will work abroad, and so may especially benefit students willing to pursue an international career. However, most of the evidence is qualitative and based on small samples.

Women's representation on corporate boards, political committees, and other decision-making teams is increasing, this is in part because of legal mandates. Evidence on team dynamics and gender differences in preferences (for example, risk-taking behavior, taste for competition, prosocial behavior) shows how gender composition influences group decision-making and subsequent performance. This works through channels such as investment decisions, internal management, corporate governance, and social responsibility.

Government schemes that compensate workers for the loss of income while they are on short hours (known as short-time work compensation schemes) make it easier for employers to temporarily reduce hours worked so that labor is better matched to output requirements. Because the employers do not lay off these staff, the schemes help to maintain permanent employment levels during recessions. However, they can create inefficiency in the labor market, and might limit labor market access for freelancers and those looking to work part-time.

Many countries around the world are making substantial and increasing public investments in children by providing resources for schooling from early years through to adolescence. Recent research has looked at how parents respond to children’s schooling opportunities, highlighting that public inputs can alternatively encourage or crowd out parental inputs. Most evidence finds that parents reduce their own efforts as schooling improves, dampening the efficiency of government expenditure. Policymakers may thus want to focus government provision on schooling inputs that are less easily substituted.

A non-trivial portion of traffic fatalities involve alcohol or illicit drugs. But does substance use—which is linked to depression, suicide, and criminal activity—also reduce academic performance? Recent studies suggest that the consumption of alcohol has a negative effect on the grades of university students. Likewise, there is evidence that marijuana use reduces the academic performance of university students. Although students who use illicit substances are more likely to drop out of high school than those who do not, this may reflect the influence of other, difficult-to-measure factors at the individual level, such as personality.

Immigrants contribute to the economic development of the host country, but they earn less at entry and it takes many years for them to achieve parity of income. For some immigrant groups, the wage gap never closes. There is a wide variation across countries in the entry wage gap and the speed of wage assimilation over time. Wage assimilation is affected by year of entry, immigrant skill, ethnicity, and gender. Policies that facilitate assimilation of immigrant workers provide support for education, language, and employment. Such policies can also reduce barriers to entry, encourage naturalization, and target selection of immigrants.

Canada, the US, and most Western countries are looking to STEM (science, technology, engineering, and mathematics) immigrants to boost innovation and economic growth. Canada in particular has welcomed many STEM immigrants over the past quarter of a century. In the US, there is an ongoing debate about whether the H–1B visa program is being used effectively to attract more STEM immigrants. Interestingly, significant differences exist between the two countries in earnings and likely the innovation activity of highly educated immigrants, which highlights the likely role of immigration policy in determining such outcomes.

For decades, pension systems were based on the rising revenue generated by an expanding population (the so-called demographic dividend). As changes in fertility and longevity created new population structures, however, the dividend disappeared, but pension systems failed to adapt. They are kept solvent by increasing redistributions from the shrinking working-age population to retirees. A simple and transparent structure and individualization of pension system participation are the key preconditions for an intergenerationally just old-age security system.

A key way for the world’s poor to escape poverty is to earn more for their labor. Most of the world’s poor people are self-employed, but because there are few opportunities in most developing countries for them to earn enough to escape poverty, they are working hard but working poor. Two key policy planks in the fight against poverty should be: raising the returns to self-employment and creating more opportunities to move from self-employment into higher paying wage employment.

More than half of private sector employees in the developing world do not receive legally mandated labor benefits. These regulations have typically been enacted by democratically elected governments, and are valued by both formal and informal workers. Increasing public enforcement (e.g. inspections, fines, and workers’ access to the judiciary) can be a powerful tool to reduce violations (e.g. increase the number of employees earning above the minimum wage). Which factors determine enforcement, and whether enforcement produces more social benefits than costs, are, however, unanswered questions.

Firms in the new EU member states of Eastern Europe are more productive than those in other transition economies, but with a diminishing advantage. The least productive firms benefit the most from membership, although the situation is reversed in the case of foreign-owned firms. Foreign direct investment fails to promote knowledge and technology spillovers beyond the receiving firms. The dominance of multinational enterprises in the new EU member states enhances the threat of corporate state capture and asymmetric infrastructure development, whilst access to finance remains a constricting issue for all firms.

Globalization and automation have brought about a tremendous increase in productivity, with enormous benefits, but also a dramatic reallocation of jobs, skills, and incomes, which might jeopardize the full realization of those benefits. Current social policies may not be adequate to successfully redistribute the gains from automation and globalization or to advance the reallocation of jobs and skills. Under certain circumstances, an unconditional basic income might be a better alternative for achieving these goals. It is simple, transparent, and has low administrative costs, though it may require higher taxes or a cut/reallocation of other public expenditures.

Employment and labor force participation (LFP) rates have increased throughout Europe since the 1990s, with little interruption from the Great Recession. While many credit labor market reforms for this progress, ongoing educational expansion might actually be more important. This implies that the overall employment rate of an economy can change if the share of the population with tertiary education increases, even in the absence of any labor market reforms or effects of the business cycle. Taking this compositional effect into account makes it possible to disentangle the impact of reforms.

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.

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.

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 to men.

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.

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 immigrant groups.

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.

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.

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.

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.

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.

The goal of school tracking (assigning students to different types of school by ability) is to increase educational efficiency by creating more homogeneous groups of students that are easier to teach. However, there are concerns that, if begun too early in the schooling process, tracking may improve educational attainment at the cost of reduced intergenerational social mobility. Recent empirical evidence finds no evidence of an efficiency–equality trade-off when tracking is postponed.

Formal schooling increases earnings and provides other individual benefits. However, societal benefits of education may exceed individual benefits. Research finds that higher average education levels in an area are correlated with higher earnings, even for local residents with minimal education. Science, technology, engineering, and mathematics (STEM) graduates appear to generate especially strong external effects, due to their role in stimulating innovation and economic growth. Several strategies to test for causality find human capital externalities do exist.

Arguments for increasing gender diversity on boards of directors by gender quotas range from ensuring equal opportunity to improving firm performance. The introduction of gender quotas in a number of countries has increased female representation on boards. Current research does not justify gender quotas on grounds of economic efficiency. In many countries the number of women in top executive positions is limited, and it is not clear from the evidence that quotas lead to a larger pool of female top executives, who are the main pipeline for boards of directors. Thus, other supplementary policies may be necessary if politicians want to increase the number of women in senior management positions.

A fundamental question in economic policy is how labor supply responds to changes in remuneration. The responsiveness of labor supply determines the size of the employment impact and efficiency loss of progressive income taxation. It also affects predictions about the impacts of policies ranging from fiscal responses to business cycles to government transfer programs. The characteristics of jobs held by independent contractors provide an opportunity to overcome problems faced by earlier studies and help answer this fundamental question.

Environmental regulations such as air quality standards can lead to notable improvements in ambient air quality and to related health benefits. But they impose additional production costs on firms and may reduce productivity, earnings, and employment, especially in sectors exposed to trade and intensive in labor and energy. Growing empirical evidence suggests that the benefits are likely to outweigh the costs.

Taxpayer effects are a central part of the total economic costs and benefits of immigration, but they have not received much study. These effects are the additional or lower taxes paid by native-born households due to the difference between tax revenues paid and benefits received by immigrant households. The effects vary considerably by immigrant attributes and level of government involvement, with costs usually diminishing greatly over the long term as immigrants integrate fully into society.

Women consistently work less in the labor market and earn lower wages than men. While economic empowerment of women is an important objective in itself, women's economic activity also matters as a condition for sustained economic growth. The political debate on the labor market impacts of international trade typically differentiates workers by their educational attainment or skills. Gender is a further dimension in which the impacts of trade liberalization can differ. In a globalizing world it is important to understand whether and how trade policy can contribute toward enhancing gender convergence in labor market outcomes.

The use of anonymous job applications (or blind recruitment) to combat hiring discrimination is gaining attention and interest. Results from field experiments and pilot projects in European countries (France, Germany, the Netherlands, and Sweden are considered here), Canada, and Australia shed light on their potential to reduce some of the discriminatory barriers to hiring for minority and other disadvantaged groups. But although this approach can achieve its primary aims, there are also important cautions to consider.

Common proxies, such as years of education, have been shown to be ineffective at capturing cross-country differences in skills acquisition, as well as the role they play in the labor market. A large body of research shows that direct measures of skills, in particular cognitive and socio-emotional ones, provide more adequate estimations of individuals’ differences in potential productive capacity than the quantity of education they receive. Evidence shows that cognitive skills in particular are quite relevant to explain wages, while socio-emotional skills are more associated with labor force and education participation decisions.

The importance of benefit portability is increasing in line with the growing number of migrants wishing to bring acquired social rights from their host country back to their country of residence. Failing to enable such portability risks impeding international labor mobility or jeopardizing individuals’ ability to manage risk across their life cycle. Various instruments may establish portability. But which instrument works best and under what circumstances is not yet well-explored.

Central Europe has experienced one of the most impressive growth and convergence stories of recent times. In particular, this has been achieved on the back of foreign-owned, capital-intensive manufacturing production in the automotive sector. With large domestic supplier networks and high skill intensity, the presence of complex industry yields many economic benefits. However, this developmental path is now reaching its limits with the exhaustion of the available skilled workforce, limited investments in upgrading and research, and persistent regional inequalities.

Big Data refers to data sets of much larger size, higher frequency, and often more personalized information. Examples include data collected by smart sensors in homes or aggregation of tweets on Twitter. In small data sets, traditional econometric methods tend to outperform more complex techniques. In large data sets, however, machine learning methods shine. New analytic approaches are needed to make the most of Big Data in economics. Researchers and policymakers should thus pay close attention to recent developments in machine learning techniques if they want to fully take advantage of these new sources of Big Data.

Do workplace programs help reduce worker sickness absence? Many programs are based on the principle that the employee’s decision to report an absence can be influenced if it is costly to be absent. Firms can reduce absenteeism by implementing broad programs, including performance pay, general improvements of working conditions, and strengthening workers’ loyalty to the firm. Specific programs, such as grading partial absence, seem to be effective at reducing long-term absences. However, firms will be less inclined to implement such programs if they can shift the financial burden to social security programs.

Measuring employment and unemployment is essential for economic policy. Internationally agreed measures (e.g. headcount employment and unemployment rates based on standard definitions) enhance comparability across time and space, but changes in real labor markets and policy agendas challenge these traditional conventions. Boundaries between different labor market states are blurred, complicating identification. Individual experiences in each state may vary considerably, highlighting the importance of how each employed or unemployed person is weighted in statistical indices.

There are more informal workers than formal workers across the globe, and yet there remains confusion as to what makes workers or firms informal and how to measure the extent of it. Informal work and informal economic activities imply large efficiency and welfare losses, in terms of low productivity, low earnings, sub-standard working conditions, and lack of social insurance coverage. Rather than quibbling over definitions and measures of informality, it is crucial for policymakers to address these correlates of informality in order to mitigate the negative efficiency and welfare effects.

Since 1991, the Australian economy has experienced sustained economic growth. Aided by the commodities boom and strong public finances, the Australian economy negotiated the global financial crisis without falling into recession. Over this period there were important structural changes, with increasing labor force participation among the elderly and the continuing convergence of employment and unemployment patterns for men and women. However, some recent negative trends include a rise in unemployment, especially long-term unemployment, a deteriorating youth labor market, and a stagnant gender earnings gap.

The economic crisis in the early 1990s brought about a dramatic increase in unemployment and a similar decrease in labor force participation. Unemployment declined afterwards, but stabilized at around 6–7%—more than twice as high as before the crisis. Today, the unemployment rate is lower than the EU average, though Sweden no longer stands out in this respect. The 2008 financial crisis had small effects on the Swedish labor market. Employment in industry declined sharply and then remained stagnant, but employment in the service sectors has continued to grow steadily.

The role of social interactions in modifying individual behavior is central to many fields of social science. In education, one essential aspect is that “good” peers can potentially improve students’ academic achievement, career choices, or labor market outcomes later in life. Indeed, evidence suggests that good peers are important in raising student attainment, both in compulsory schooling and university. Interventions that change the ability group composition in ways that improve student educational outcomes without exacerbating inequality therefore offer a promising basis for education policies.

Economists have shown that international trade increases economic growth, with trade liberalization and integration having characterized the last 50 years. While trade can increase national welfare, recent estimates from both developed and developing countries show that labor market adjustment costs matter. Regulating trade, defined as adding or removing tariffs and other trade barriers, is not the best way to help lower-income workers who suffer from trade-induced losses. Policies that reduce adjustment costs may increase aggregate welfare more than regulating trade flows does.

Discrimination is a complex, multi-factor phenomenon. Evidence shows widespread discrimination on various grounds, including ethnic origin, sexual orientation, gender identity, religion or beliefs, disability, being over 55 years old, or being a woman. Combating discrimination requires combining the strengths of a range of anti-discrimination policies while also addressing their weaknesses. In particular, policymakers should thoroughly address prejudice (taste-based discrimination), stereotypes (statistical discrimination), cognitive biases, and attention-based discrimination.

China experienced significant economic progress over the past few decades with an annual average GDP growth of approximately 10%. Population expansion has certainly been a contributing factor, but that is now changing as China rapidly ages. Rural migrants are set to play a key role in compensating for future labor shortages, but inequality is a major issue. Evidence shows that rural migrants have low-paying and undesirable jobs in urban labor markets, which points to inefficient labor allocation and discrimination that may continue to impede rural–urban migration.

Non-experimental evaluations of programs compare individuals who choose to participate in a program to individuals who do not. Such comparisons run the risk of conflating non-random selection into the program with its causal effects. By randomly assigning individuals to participate in the program or not, experimental evaluations remove the potential for non-random selection to bias comparisons of participants and non-participants. In so doing, they provide compelling causal evidence of program effects. At the same time, experiments are not a panacea, and require careful design and interpretation.

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.

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.

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 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.

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 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.

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 theoretical insights.

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.

Decreased transportation costs have led to the transmission of ideas and values across national borders that has helped reduce the barriers to international labor mobility. In this context, high-skilled individuals are more likely to vote with their feet in response to high income taxes. It is thus important to examine the magnitude of tax-driven migration responses in developed countries as well as the possible consequences of income tax competition between nation states. More specifically, how does the potential threat of migration affect a country’s optimal income tax policies?

Understanding the impacts of climate change on time allocation is a major challenge. The best approach comes from looking at how people react to short-term variations in weather. Research suggests rising temperatures will reduce time spent working and enjoying outdoor leisure, while increasing indoor leisure. The burden will fall disproportionately on workers in industries more exposed to heat and those who live in warmer regions, with the potential to increase existing patterns of inequalities. This is likely to trigger an adaptation, the scope and mechanisms of which are hard to predict, and will undoubtedly entail costs.

In Germany, young people are no worse off than adults in the labor market, while in southern and eastern European countries, they fare three to four times worse. In Anglo-Saxon countries, both youth and adults fare better than elsewhere, but their unemployment rates fluctuate more over the business cycle. The arrangements developed in each country to help young people gain work experience explain the striking differences in their outcomes. A better understanding of what drives these differences in labor market performance of young workers is essential for policies to be effective.

Reaching the policy goal of improving student achieve­ment by adding resources to the school system has often proven elusive. By contrast, ample evidence indicates that central exit exams constitute an important feature of a school system’s institutional framework, which can hold students, teachers, schools, and administrators accountable for student outcomes. While critics point to issues such as teaching test-only skills, which may leave students ill-prepared for the real world, the evidence does not bear this out. Overall, central exams are related to better student achievement, favorable labor market outcomes, and higher economic growth.

The Netherlands is an example of a highly institutionalized labor market that places considerable attention on equity concerns. The government and social partners (unions and industry associations) seek to adjust labor market arrangements to meet the challenges of increased international competition, stronger claims on labor market positions by women, and the growing population share of immigrants and their children. The most notable developments since 2001 are the significant rise in part-time and flexible work arrangements as well as rising inequalities.

Following a decline in employment and participation rates during the 1980s and 1990s, Israel managed to reverse these trends during the last 15 years. This was accompanied by a substantial decrease in unemployment. New labor force participants are mostly from the low end of the education distribution, and many are relatively old. They entered the labor force in response to cuts in welfare payments and increases in the mandatory retirement age. Net household income for all population groups has increased due to growth in labor income; however, inequality between households has increased.

Countries are not perfectly integrated market areas. Even if institutional differences are much smaller within than between countries, there are persistent local cultural differences. These differences act as barriers that reduce economic exchange: bilateral migration, trade, and knowledge diffusion flows are smaller, and individuals discriminate against unfamiliar dialects. They also act as natural limits to the degree of integration of a labor market, and they cannot (and perhaps should not) be easily affected by policy. Local dialects, shaped over centuries, provide a unique opportunity to measure these barriers.

In many transition countries, the collapse of communism ushered in language reforms to adapt to the newfound independence from the Soviet Union and openness to the rest of the world. Such reforms may have implications for individuals’ economic opportunities, since foreign language proficiency may enhance or signal productivity in the labor market. Recent empirical evidence documents positive labor market returns to English language skills in transition countries. However, Russian language proficiency also remains economically valuable, and nationalist language policies may lead to future loss of economic opportunities.

There is growing concern that much of the empirical research in labor economics and other applied areas may not be reproducible. Correspondingly, recent years have seen an increase in replication studies published in economics journals. Despite this increase, there are many unresolved issues about how replications should be done, and how to interpret their results. Replications have demonstrated a potential for clarifying the reliability and robustness of previous research. Much can be done to encourage more replication research, and to exploit the scientific value of existing replication studies.

Austria is an interesting economy due to its strong industrial relations with institutionalized collective bargaining over wage negotiations and working conditions. Currently, Austria’s GDP per capita is high, but unemployment, although comparably low on an international scale, is not declining in the aftermath of the financial crisis. The labor market is also characterized by an increasing share of mostly low-skilled foreign workers. High marginal labor taxes discourage low-skilled workers from leaving social assistance.

The Italian labor market suffered a sizable negative shock from the double-dip recession and has since experienced a moderate recovery beginning in 2014. Despite some improvement, unemployment remains higher than pre-crisis levels, especially for young workers. Female participation has been slowly increasing. Regional heterogeneity is still high, with the stagnating south unable to catch up with the north. Real earnings have been increasing, but productivity is stable at relatively low levels compared to other European countries. Finally, undeclared employment is high, especially in the south.

Organizational characteristics and management styles vary dramatically both across and within sectors, which leads to huge variation in job design and complexity. Complex jobs pose a challenge for management and workers; an incentive structure aimed at unlocking workers’ potential can effectively address this challenge. However, the heterogeneity of job complexity and the inherent difficulty in devising a correct set of incentives may result in misalignment between job demands and incentivized behaviors, and in complaints by employers about the lack of skilled workers.

Working hours across the world are falling, but considerable variation remains. In some countries people work 70% more hours per year, on average, than in other countries. Much of this variation is due to differences in the prevalence of part-time work and patterns of female labor market participation. Looking ahead, the question of how reducing working hours will affect productivity is significant. In addition, how individuals divide up their leisure and work time and what the appropriate work−life balance is in an increasingly technological future are important concerns.

The 2008 financial crisis and subsequent Great Recession created a second major employment shock in less than a generation in several transition economies. In particular, youth unemployment rates, which are usually higher than adult rates in normal times, reached extremely high levels and partly tended to persist over time. Improving youth labor market performance should therefore be a top priority for policymakers in affected transition countries. Better understanding of the dynamics of national and regional youth unemployment rates and other associated indicators is particularly important for designing effective policy approaches.

The level of financial literacy in developed countries is low and contributes to growing wealth inequality. Benefits from increasing the level of financial literacy include more effective saving for retirement and better debt management. However, there are significant costs in terms of time and money of acquiring financial literacy, which imply that the net value of acquiring financial literacy is heterogeneous in the population. This potentially makes designing effective interventions difficult.

The majority of individuals released from prison face limited employment opportunities and do not successfully reintegrate into society. The inability to find stable work is often cited as a key determinant of failed re-entry (or “recidivism”). However, empirical evidence that demonstrates a causal impact of job opportunities on recidivism is sparse. In fact, several randomized evaluations of employment-focused programs find increases in employment but little impact on recidivism. Recent evidence points to wages and job quality as important determinants of recidivism among former prisoners.

Although small- and medium-sized enterprises (SMEs) represent more than 90% of all enterprises and play an important role in employment generation, they lack access to affordable formal finance. Conventionally, market failures and information imperfections are seen as major causes of this misallocation. However, the role of social and political factors in resource allocation, including access to formal finance, has recently become more widely accepted. Firm-level evidence from post-communist economies, for example, shows that political connectedness improves access to bank credit, but is not associated with enterprise growth.

The share of workers employed part-time increases substantially in economic downturns. How should this phenomenon be interpreted? One hypothesis is that part-time jobs are more prevalent in sectors that are less sensitive to the business cycle, so that recessionary changes in the sectoral composition of employment explain the increase in part-time employment. The evidence shows, however, that this hypothesis only accounts for a small part of the story. Instead, the growth of part-time work operates mainly through reductions in working hours in existing jobs.

Both the availability and sheer volume of data sets containing individual molecular genetic information are growing at a rapid pace. Many argue that these data can facilitate the identification of genes underlying important socio-economic outcomes, such as educational attainment and fertility. Opponents often counter that the benefits are as yet unclear, and that the threat to individual privacy is a serious one. The initial exploration presented herein suggests that significant benefits to the understanding of socio-economic outcomes and the design of both social and education policy may be gained by effectively and safely utilizing genetic data.

Developing countries have long been struggling to fight informality, focusing on instruments such as labor legislation enforcement, temporary contracts, and changes in taxes imposed on small firms. However, improvements in the labor force’s schooling and skill level may be more effective in reducing informality in the long term. Higher-skilled workers are typically employed by larger firms that use more capital, and that are more likely to be formal. Additionally, when skilled and unskilled workers are complementary in production, unskilled workers’ wages tend to increase, adding yet another force toward reducing informality.

Since the end of World War II, occupational licensing has been one of the fastest growing labor market institutions in the developed world. The economics literature suggests that licensing can influence wage determination, the speed at which workers find employment, pension and health benefits, and prices. Moreover, there is little evidence to show that licensing improves service quality, health, or safety in developed nations. So, why is occupational licensing growing when there are such well-established costs to the public?

Unemployment in Europe is excessively high on average, and is divergent across countries and population groups within countries. On the one hand, over the past decades, national governments have implemented incomplete institutional reforms to amend dysfunctional labor markets. On the other hand, EU supranational policies—those that transcend national boundaries and governments—have offered only limited financial support for active labor market policies, instead of promoting structural reforms aimed at improving the functioning of European labor markets. Better coordination and a wider scope of EU supranational policies is needed to fight unemployment more effectively.

Immigrants who start with low earnings, such as family-based immigrants, experience higher earnings growth than immigrants who are recruited for specific jobs (employment-based immigrants). This occurs because family-based immigrants with lower initial earnings invest in human capital at higher rates than natives or employment-based immigrants. Therefore, immigrants who start at low initial earnings invest in new human capital that allows them to respond to the ever-changing needs of the host country’s economy.

Examining the implications of changes in public sector wage-setting arrangements due to privatization is a relatively new area of economics research, with few studies having analyzed the effects of public sector restructuring on relative wages in developed countries. There is, however, a growing empirical literature that measures the effects of transitioning from central planning to market-based systems on public–private sector wage differentials. Policymakers can learn from this evidence about the ways in which ownership transformation affects the distribution of wages in both the public and private employment sectors.

The 20th century witnessed the birth of modern family planning and its effects on the fertility of hundreds of millions of couples around the world. In 1979, China formally initiated one of the world’s strictest family planning programs—the “one child policy.” Despite its obvious significance, the policy has been significantly understudied. Data limitations and a lack of detailed documentation have hindered researchers. However, it appears clear that the policy has affected China’s economy and society in ways that extend well beyond its fertility rate.

The literature on the economics of religion finds that increased religious participation or religious density is associated with positive socio-economic outcomes such as increased earnings, educational attainment, and lower engagement in risky behaviors. The literature suggests that this relationship is causal, and that the gains from religion often tend to be accrued among low-skill or marginalized youth groups. In turn, as education and income increase, societies become more secular. Will the positive outcomes associated with religion disappear as western societies become more secularized?

In the presence of rigid prices, movements in the exchange rate help to absorb external shocks and to reduce changes in net exports. However, they also affect firms’ competitiveness, marginal costs, and labor demand. In countries where labor market institutions hinder wage adjustment (for example due to high union density or more rigid collective bargaining agreements), firms are less competitive: labor demand is then more sensitive to external shocks, increasing the risk of unemployment.

The link between air pollution and human health is well-documented in the epidemiology and economic literature. Recently, an increasing body of research has shown that air pollution—even in relatively low doses—also affects educational outcomes across several distinct age groups and varying lengths of exposure. This implies that a narrow focus on traditional health outcomes, such as morbidity and mortality, may understate the true benefit of reducing pollution, as air pollution also affects scholastic achievement and human capital formation.

In many countries, reducing unemployment is among the most important policy goals. In this context, monitoring job search by the unemployed and providing job search assistance can play a crucial role. However, more and more stringent monitoring and sanctions are not a panacea. Policymakers must consider possible downsides, such as unemployed people accepting less stable and lower-paying jobs. Tying “moderate” monitoring to job search assistance may be the essential ingredient to make this approach successful.

Imported products tend to have lower prices than locally produced ones for a variety of reasons, including lower labor costs and better technology in the exporting country. The reduced prices may lead to wage losses for individuals who work in the production of a local version of the imported item. On the other hand, lower prices may be beneficial to households if the cheaper product is in their consumption basket. These welfare gains through consumption, on average, are found to be larger in magnitude than the wage effect for some developing countries.

Workers can contribute to total firm production directly through their own output or indirectly through their influence on the output of co-workers. Workers with positive productivity spillover effects cause individuals around them to perform better and increase overall team production. In contrast to the “peer effects” literature, workers with positive productivity spillovers may not be the workers with the highest levels of personal output. Such productivity spillovers are important for team success even though they play only a minor role in determining worker pay.

The adverse effects of unemployment are a cause for concern for all demographic groups but they will be most acute for those experiencing the highest unemployment rates. In particular, high levels of unemployment are observed for a range of immigrant groups across many countries. However, there is considerable variation both across and within countries. It is therefore important to determine the factors that are most likely to cause high rates of unemployment, especially from a migration perspective, and to identify appropriate policy responses (e.g. enhancing human capital and improving job search effectiveness).

In addition to the traditional education system targeting children and youth, one potentially important vehicle to improve literacy and numeracy skills is adult literacy programs (ALPs). In many developing countries, however, these programs do not seem to achieve these hoped for, ex ante, objectives and have therefore received less attention, if not been largely abandoned, in recent years. But, evidence shows that ALPs do affect other important socio-economic outcomes such as health, household income, and labor market participation by enhancing participants’ health knowledge and income-generating activities.

Research finds that hot weather causes a fall in birth rates nine months later. Evidence suggests that this decline in births is due to hot weather harming reproductive health around the time of conception. Birth rates only partially rebound after the initial decline. Moreover, the rebound shifts births toward summer months, harming infant health by increasing third trimester exposure to hot weather. Worse infant health raises health care costs in the short term as well as reducing labor productivity in the longer term, possibly due to lasting physiological harm from the early life injury.

By supporting aggregate demand, including by easing financial constraints that affect businesses and house­holds, accommodative monetary policy increased employment during the 2008 financial crisis and its aftermath. But, monetary policies that ease financial pressures also reduce necessary restructuring that normally contributes to productivity growth. One reason why productivity growth has been weaker in the aftermath of the crisis is that aggressive monetary policy actions have weakened underlying supply-side performance and labor productivity.

The discussion on how economic activity affects employment in large and small businesses is critical for the formulation of labor policies, especially during recessions. Knowing how firm size is related to job creation and job destruction is important to design effective policies aimed at dampening employment fluctuations. Recent evidence for developed countries indicates that large firms are proportionately more sensitive to cycles than small firms; however, this pattern is not confirmed for periods of credit constraint or in a developing country context, where small businesses might be more sensitive due to more extreme credit constraints.

Companies frequently hire new employees based on referrals from existing employees, who often recommend friends or family members. There are numerous possible benefits from this, such as lower turnover, possibly higher productivity, lower recruiting costs, and beneficial commonalities related to shared employee values. On the other hand, hiring through employee referrals may disadvantage under-represented minorities, entail greater firm costs in the form of higher wages, lead to undesirable commonalities, and reflect nepotism. A growing body of research explores these considerations.

Recent studies show that even irrelevant relative pay information—earnings compared to the past or to others—significantly affects workers’ willingness to work (labor supply) and effort. This effect stems mainly from those whose pay compares unfavorably; accordingly, earning less compared to others or less than in the past significantly reduces one’s willingness to work and effort exerted on the job. Comparing favorably, however, has mixed effects—with usually no effect on effort, but positive or no effects on labor supply. Understanding when relative pay increases labor supply and effort can thus help firms devise optimal payment structures.

Why do different population groups (e.g. rural vs. urban, youth vs. elderly and men vs. women) experience the same objective labor status differently? One hypothesis is that people are more concerned with relative deprivation than objective deprivation and they value their own status relative to the status of their peers—the reference group. One way to test this hypothesis in the labor market is to measure individual differences in labor status while controlling for characteristics that define population groups. This measure is called “relative labor deprivation” and can help policymakers to better understand how labor claims are generated.

Life skills, sometimes referred to as noncognitive skills or personality traits (e.g. conscientiousness or locus of control—the belief to influence events and their outcomes), affect labor market productivity. Policymakers and academics are thus exploring whether such skills should be taught at the high school or college level. A small portfolio of recent studies shows encouraging evidence that education could strengthen life skills in adolescence. However, as no uniform approach exists on which life skills are most important and how to best measure them, many important questions must be answered before life skill development can become an integral part of school curricula.

Good-looking political candidates win more votes around the world. This holds for both male and female candidates. Candidate appearance may be especially important for uninformed voters, as it is easy to observe. Voters may favor good-looking candidates because they expect them to be more competent or persuasive, but it can also be that voters simply enjoy laying their eyes on beautiful politicians. As politicians on the right have been deemed more attractive in Europe, the US, and Australia, the importance of beauty in politics favors conservative parties. A related finding is that voters use beauty as a cue for conservatism.

Entrepreneurship is an important lever for spurring transition in the economies of the former Soviet Union and Central and Eastern Europe. Utilizing diversity, in terms of religion or gender, can positively affect entrepreneurial development. Programs that encourage entrepreneurial initiatives (such as business start-ups) in culturally diverse localities should rank high on the policy agenda. Prompting women to start a business, along with female-friendly measures (including targeted legislation), can positively affect entrepreneurial behaviour and the performance of existing enterprises.

Countries with strong industrial relations institutions and well-established social dialogue often perform well in terms of economic growth and social cohesion. The weak and fragmented bargaining and low levels of union coverage in Central and Eastern Europe (CEE) raise concerns about these countries’ potential to maintain competitiveness, tackle demographic and macroeconomic challenges, and catch up with Western European economic and social standards. There is evidence that unions in CEE continue to protect their members and generate wage premiums, despite their institutional weaknesses.

To align employees’ interests with the firm’s goals, employers often use performance-based pay, but designing such a compensation plan is challenging because performance is typically multifaceted. For example, a sales employee should be incentivized to sell the company’s product, but a focus on current sales without rewarding the salespeople according to the quality of the product and/or customer service may result in fewer future sales. To solve this problem, firms often increase the number of metrics by which they evaluate their employees, but complex compensation plans may be difficult for employees to understand.

The motherhood wage penalty denotes the difference in wages between mothers and women without children that is not explained by differences in human capital characteristics and labor market experience. As part of the gender pay gap, the motherhood wage penalty can represent a significant cost to being female and having children. If ignored, it may undermine policy initiatives aiming to increase fertility rates in post-socialist countries, such as the costly “baby bonus,” which is a government payment to new parents to assist with the costs of childrearing.

Whether or not international trade exposes workers to economic insecurity depends on the nature of the trade exposure of the firm, or industry, in which the worker is employed. Import-competing industries experience higher levels of risk to workers’ incomes and employment, while firms that import intermediate production stages (“offshoring”) display bigger employment responses to small changes in workers’ wages, and are more likely to shut down home factories. But offshoring also helps firms weather economic shocks. Offshoring firms are more likely to survive and provide greater employment stability to their workers.

Since 1989, post-communist countries have undergone profound changes in their political, economic, and social structures and institutions. Across a range of development outcomes—in terms of the speed and success of reforms—transition is an “unhappy process.” The “happiness gap,” i.e. the difference in average happiness levels between the populations of transition and non-transition economies, is closing, but at a slower pace than the process of economic convergence. Economic growth, as the determinant of a country’s collective well-being, has been superseded by measurements of institutional quality and social development.

Stability and change are essential elements of social reality and economic progress. Cross-sectional surveys are a means of providing information on specific issues at a particular point in time, though without providing any information about the prevailing stability. Limited information on change can be obtained by retrospective questioning, but this is often impaired by “recall bias.” However, valid information on change is essential for assessing whether phenomena such as poverty are permanent or only temporary. Panel data analyses can address these problems as well as provide an essential tool for effective policy design.

Traditional models of the labor market typically assume that wages are set by the market, not the firm. However, over the last 15 years, a growing body of empirical research has provided evidence against this assumption. Recent studies suggest that a monopsonistic model, where individual firms and not the market set wages, may be more appropriate. This model attributes more wage-setting power to firms, particularly during economic downturns, which helps explain why wages decrease during recessions. This holds important implications for policymakers attempting to combat lost worker income during economic downturns.

International migration alters the socio-economic conditions of the individuals and families migrating as well as the host and sending countries. The data to study and to track these movements, however, are largely inadequate or missing. Understanding the reasons for these data limitations and recently developed methods for overcoming them is crucial for implementing effective policies. Improving the available information on global migration patterns will result in numerous and wide-ranging benefits, including improved population estimations and providing a clearer picture of why certain migrants choose certain destinations.

Job polarization can pose serious problems for emerging economies that rely on worker reallocation from low-skilled to middle-skilled jobs to converge toward advanced economies. Evidence from Central and Eastern European (CEE) countries shows that structural change and education expansion can prevent polarization, as they enable a shift from manual to cognitive work and prevent the “hollowing out” of middle-skilled jobs. However, in CEE countries they have also led to a high routine cognitive content of jobs, which makes such jobs susceptible to automation and computerization in the future.

The rural non-farm sector plays an important role in diversifying income for rural households in developing countries and has the potential to emerge as a major source of employment. In some cases it has outgrown the agricultural sector, in part due to the expansion of credit through microfinance institutions that are supported by governments, donor agencies, and businesses. However, future expansion of the rural non-farm sector requires increased flexibility in credit contracts, as well as decreasing the cost of credit and the delivery of complementary inputs, e.g. skills training.

Teachers are perhaps the most important determinant of education quality. But what makes a teacher effective? Developing countries expend substantial resources on certifying teachers and retaining those who become certified; moreover, policymakers and aid donors prioritize increasing the prevalence of certified teachers. Yet there is little evidence that certification improves student outcomes. In fact, augmenting a school's teaching corps with contract teachers hired outside the civil service and without formal qualifications may be more effective in boosting student performance.

Homeownership has important economic implications for society and individuals. At the social level is the greater civic engagement that homeowners tend to exhibit, while at the individual level an important outcome associated with housing tenure is better education outcomes, especially for children. The causal impact of tenure, in particular of homeownership, on education is mediated through a range of mechanisms. Evidence for the direct benefit of homeownership itself is less clear, though positive impacts associated with homeownership are stronger for low-income households.

Compulsory schooling laws are a common policy tool to achieve greater participation in education, particularly from marginalized groups. Raising the compulsory schooling requirement forces students to remain in school which, on balance, is good for them in terms of labor market outcomes such as earnings. But the usefulness of this approach rests with how the laws affect the distribution of years of schooling, and the wider benefits of the increase in schooling. There is also evidence that such a policy has an intergenerational impact, which can help address persistence in poverty across generations.

Informal employment accounts for more than half of total employment in Latin America and the Caribbean, and an even higher percentage in Africa and South Asia. It is associated with lack of social insurance, low tax collection, and low productivity jobs. Lowering payroll taxes is a potential lever to increase formal employment and extend social insurance coverage among the labor force. However, the effects of tax cuts vary across countries, often resulting in large wage shifts but relatively small employment effects. Cutting payroll taxes requires levying other taxes to compensate for lost revenue, which may be difficult in developing economies.

Differences in wages between men and women, white and black workers, or any two distinct groups are a controversial feature of the labor market, raising concern about discrimination by employers. Decomposition methods shed light on those differences by separating them into: (i) composition effects, which are explained by differences in the distribution of observable variables, e.g. education level; and (ii) structural effects, which are explained by differences in the returns to observable and unobservable variables. Often, a significant structural effect, such as different returns to education, can be indicative of discrimination.

Politicians typically focus on short-term economic issues; but, a nation’s long-term economic well-being is directly linked to its rate of economic growth. In turn, its growth rate is directly linked to the economically relevant skills of its population. Until recently, however, economists have found it hard to confirm this through empirical analysis because of difficulties in measuring the skills of different societies. International tests of mathematics and science achievement now offer reliable measures of a population’s relevant cognitive skills.

Broadband infrastructure enables fast access to the internet, which, evidence suggests, has significant effects on economic growth. However, labor market related issues have not received as much consideration. These include quantifying employment effects of broadband infrastructure roll-out and questions about who exactly are the winners and losers in the labor market, and whether skills in information and communication technologies (ICT) are reflected in labor market outcomes such as wages. Understanding these complementary issues allows for policy conclusions that go beyond simply encouraging the subsidization of broadband internet infrastructure.

Skills are widely regarded as being necessary for boosting productivity, stimulating innovation, and creating new jobs, while skill mismatches are often cited as being responsible for a lack of dynamism in the labor market. However, heavy investments in technical and vocational training programs are seldom a “silver bullet.” Recent evidence on skill building not only points to the core importance of foundational skills (both cognitive and social) for success in the labor market, but also emphasizes how jobs themselves can lead to learning and shape social competencies that, in turn, ignite innovation and create more jobs.

The future growth of Central and Eastern Europe (CEE) depends on upgrading technology, exporting and coupling domestic technology efforts while improving their position in global value chains. Current policies in the region are not geared to these tasks, despite the availability of huge financial opportunities in the form of EU structural funds. Existing policies are overly focused on research and development (R&D) and neglect sources of productivity growth, such as management practices, skills, quality, and engineering. The challenge is how to design industrial and innovation policies so that they promote modernization and drive structural change.

Linear regression is a powerful tool for investigating the relationships between multiple variables by relating one variable to a set of variables. It can identify the effect of one variable while adjusting for other observable differences. For example, it can analyze how wages relate to gender, after controlling for differences in background characteristics such as education and experience. A linear regression model is typically estimated by ordinary least squares, which minimizes the differences between the observed sample values and the fitted values from the model. Multiple tools are available to evaluate the model.

Most religions in transition economies were marginalized by their former communist regimes. Today, some of these countries are experiencing a revival of religiosity, while others are prone to secularization. Religious norms affect individual decision making with respect to human capital investment, economic reforms, marital stability, employment, and other contexts. This implies that the interests of both religious and non-religious communities may differ and must be taken into account when designing and implementing economic policies, which is a challenge for policymakers.

Managers are supervising more and more workers, and firms are getting flatter. However, not all firms have been keen on increasing the number of subordinates that their bosses manage (referred to as the “span of control” in human resource management), contending that there are limits to leveraging managerial ability. The diversity of firms’ organizational structure suggests that no universal rule can be applied. Identifying the factors behind the choice of firms’ internal organization is crucial and will help firms properly design their hierarchy and efficiently allocate scarce managerial resources within the organization.

Older people in developed countries are living longer and healthier lives. A prolonged and healthy mature period of life is often associated with continued and active participation in the labor market. At the same time, active grandparents can offer their working offspring a free, flexible, and reliable source of childcare. However, while grandparent-provided childcare helps young parents (especially young mothers) overcome the negative effects of child rearing on their labor market participation, it can sometimes conflict with the objective of providing additional income through employment for older workers, most notably older women.

Employment tribunals or labor courts are responsible for enforcing employment protection legislation and adjudicating rights-based disputes between employers and employees. Claim numbers are high and, in Great Britain, have been rising, affecting both administrative costs and economic competitiveness. Reforms have attempted to reduce the number of claims and to improve the speed and efficiency of dealing with them. Balancing employee protection against cost-effectiveness remains difficult, however. Gathering evidence on tribunals, including on claim instigation, resolution, decision making, and post-tribunal outcomes can inform policy efforts.

Foreign direct investment (FDI) has been argued to improve company performance and stimulate growth and employment. Transition economies of Central and Eastern Europe (CEE) faced a desperate need to join the global economy, to improve their competitiveness and to create jobs through FDI. So, did the FDI come, and did it deliver what was expected? FDI levels were high for CEE, and for some resource-rich transition countries (e.g. Russia and some of Central Asia), but primarily delivered significant benefits (e.g. employment) for the former. FDI arrived much later to other transition countries (e.g. the former Soviet republics and the Balkans) and had much less impact.

Charity rating agencies often focus on overhead cost ratios in evaluating charities, and donors appear to be sensitive to these measures when deciding where to donate. Yet, there appears to be a tenuous connection between this widely-used metric and a charity’s effectiveness. There is evidence that a focus on overhead costs leads charities to underinvest in important functions, especially skilled workers. To evaluate policies that regulate overhead costs, it is necessary to examine whether donors care about overhead costs, whether they are good measures of charity effectiveness, and what effects a focus on overhead costs has on charities.

The increase in agricultural employment in Central Asia and Trans-Caucasus over the last two decades has had a detrimental effect on agricultural labor productivity and rural family incomes. Transition countries in the former USSR cannot, however, encourage exits from agriculture (as, for instance, in east Germany or the Czech Republic) due to the risk of mass rural–urban migration, which may exacerbate growing urban unemployment. With large rural populations, state budgets would be unable to deal with a new wave of unemployed in urban areas.

Policymakers rely on entrepreneurs to create jobs, provide incomes, innovate, pay taxes to support public revenues, create competition in industries, and much more. Due to its highly heterogeneous nature, the choice of entrepreneurship measures is critically important, impacting the diagnosis, analysis, projection, and understanding of potential and existing policy. Some key aspects to measure include the how (self-employment, new firm formation), why (necessity, opportunity), and what (growth). As such, gaining better insight into the challenges of measuring entrepreneurship is a necessary and productive investment for policymakers.

In a typical country, one in five people suffers from a mental illness, the great majority from depression or crippling anxiety. Mental illness accounts for half of all illness up to age 45 in rich countries, making it the most prevalent disease among working-age people; it also accounts for close to half of disability benefits in many countries. Mentally ill people are less likely to be employed and, if employed, more likely to be out sick or working below par. If mentally ill people received treatment so that they had the same employment rate as the rest of the population, total employment would be 4% higher, adding many billions to national output.

Gender wage gaps and women’s underrepresentation in leadership positions exist at remarkably similar magnitudes across countries at all levels of income per capita. Women’s educational attainment and labor market participation have improved, but this has been insufficient to close the gaps. A combination of economic forces, cultural and social norms, discrimination, and unequal legal rights appear to be contributing to gender inequality. A range of policy options (such as quotas) have been implemented in some countries; some have been successful, whereas for others the effects are still unclear.

Most of the data available to economists is observational rather than the outcome of natural or quasi experiments. This complicates analysis because it is common for observationally distinct individuals to exhibit similar responses to a given environment and for observationally identical individuals to respond differently to similar incentives. In such situations, using maximum likelihood methods to fit an economic model can provide a general approach to describing the observed data, whatever its nature. The predictions obtained from a fitted model provide crucial information about the distributional outcomes of economic policies.

Recently, large companies like Google have made substantial investments in the well-being of their workers. While evidence shows that better performing companies have happier employees, there has been much less research on whether happy employees contribute to better company performance. Finding causal relations between employee well-being and company performance is important for firms to justify spending corporate resources to provide a happier work environment for their employees. While correlational and laboratory studies do find a positive relationship, the evidence remains sparse.

The quantity and quality of educational investment matter for labor market outcomes such as earnings and employment. Yet, not everyone knows this, and navigating the education system can be extremely complex both for students and their parents. A growing economic literature has begun to test whether interventions designed to improve information about the costs and benefits of education and application processes have an effect on students’ behavior. So far, findings have been mixed, although the positive findings arising from some very carefully targeted interventions give cause for hope.

In 2002, the EU set targets for expanding childcare coverage, but most of the post-socialist countries are behind schedule. While childcare expansion places a heavy financial burden on governments, low participation in the labor force by mothers, especially those with children under the age of three, implies a high potential impact. However, the effectiveness of childcare expansion may be limited by some common characteristics of these countries: family policies that do not support women’s labor market re-entry, few flexible work opportunities, and cultural norms about family and gender roles shaped by the institutional and economic legacy of socialism.

Citizenship laws are changing in many countries. Although cross-national differences in the laws regulating access to citizenship are today not as large as they were several decades ago, they are still very apparent. Globally, there is convergence over some citizenship policy dimensions, but there is not a general convergence over “liberal” or “restrictive” approaches to citizenship policy. A growing body of research has put forward various comparative measures of citizenship and migrant integration policies. However, selecting the “right” index is a challenging task, and the underlying dynamics of citizenship laws are not easy to interpret as they differ across countries.

Public schemes for sickness benefits and disability insurance are often criticized for the lack of incentive they provide for preventive and reintegration activities by employers. To stimulate the interest of employers in engaging with these schemes, several modes of privatization could be considered, including the provision of sickness benefits by employers, “experience rating” of disability insurance costs, employer self-insurance, or insurance by private insurance providers. These types of employer incentives seem to lower sickness rates, but they also come at the risk of increased under-reporting and less employment opportunities for workers with disabilities or bad health conditions. Policymakers should be aware of this trade-off.

The number of immigrants from developing countries living in richer, more developed countries has increased substantially during the last decades. At the same time, the quality of institutions in developing countries has also improved. The data thus suggest a close positive correlation between average emigration rates and institutional quality. Recent empirical literature investigates whether international migration can be an important factor for institutional development. Overall, the findings indicate that emigration to institutionally developed countries induces a positive effect on home-country institutions.

Information from longitudinal surveys transforms snapshots of a given moment into something with a time dimension. It illuminates patterns of events within an individual’s life and records mobility and immobility between older and younger generations. It can track the different pathways of men and women and people of diverse socio-economic background through the life course. It can join up data on aspects of a person’s life, health, education, family, and employment and show how these domains affect one another. It is ideal for bridging the different silos of policies that affect people’s lives.

The privatization of state-owned enterprises (SOE) in transition economies has often been found to improve employment and productivity of privatized SOEs, despite policymakers’ fears regarding possible job cuts. This positive effect can be enhanced if privatization also promotes firms’ exports. A recent firm-level analysis of China reveals that privatization has indeed a positive effect on export propensity, employment, and productivity in both the short and long term. The effect mostly stems from changes in firms’ attitudes about profits and risks due to competitive pressure.

There are pronounced and persistent wage differences between men and women in all parts of the world. A significant element of these wage disparities can be attributed to differences in worker and workplace characteristics, which are likely to mirror differences in worker productivity. However, a large part of these differences remains unexplained, and it is common to attribute them to discrimination by the employer that is rooted in prejudice against female workers. Yet recent empirical evidence suggests that, to a large extent, the gaps reflect “monopsonistic” wage discrimination—that is, employers exploiting their wage-setting power over women—rather than any sort of prejudice.

Since the 1970s, many countries have established free or highly subsidized education for all preschool children in the hope of improving children’s learning and socio-economic life chances and encouraging mothers to join the labor force. Evaluations reveal that these policies can increase maternal employment in the short term and may continue to do so even after the child is no longer in preschool by enabling mothers to gain more job skills and increase their attachment to the labor force. However, their effectiveness depends on the policy design, the country context, and the characteristics of mothers of preschoolers.

Should one expect a worker’s productivity, and thus wage, to depend on the productivity of his/her co-workers in the same workplace, even if the workers carry out completely independent tasks and do not engage in team work? This may well be the case because social interaction among co-workers can lead to productivity spillover through knowledge spillover or peer pressure. The available empirical evidence suggests that, due to such peer effects, co-worker productivity positively affects a worker’s own productivity and wage, particularly in lower-skilled occupations.

The objective of providing vocational training for the unemployed is to increase their chances of re-employment and human capital accumulation. In comparison to mandatory course assignment by case workers, the awarding of vouchers increases recipients’ freedom to choose between different courses and makes non-redemption a possibility. In addition, vouchers may introduce market mechanisms between training providers. However, empirical evidence suggests that voucher allocation mechanisms prolong the unemployment duration of training participants. But, after an initial period of deterioration, better long-term employment opportunities are possible.

Can a company attract a different type of employee by changing its compensation scheme? Is it sufficient to pay more to increase employees’ motivation? Should a firm provide evaluation feedback to employees based on their absolute or their relative performance? Laboratory experiments can help address these questions by identifying the causal impact of variations in personnel policy on employees’ productivity and mobility. Although they are collected in an artificial environment, the qualitative external validity of findings from the lab is now well recognized.

Good policy requires reliable scientific knowledge, but there are many obstacles. Most econometric estimates lack adequate statistical power; some estimates cannot be replicated; publication selection bias (the selective reporting of results) is common; and there is wide variation in the evidence base on most policy issues. Meta-regression analysis offers a way to increase statistical power, correct the evidence base for a range of biases, and make sense of the unceasing flow of contradictory econometric estimates. It enables policymakers to develop evidence-based policies even when the initial evidence base lacks credibility.

Large and sudden economic and political changes, even if potentially positive, often entail enormous social and health costs. Such transitory costs are generally underestimated or neglected by incumbent governments. The mortality crisis experienced by the former communist countries of Europe—which caused ten million excess deaths from 1990 to 2000—is a good example of how the transition from a low to a high socio-economic level can generate huge social costs if it is not actively, effectively, and equitably managed from a public policy perspective.

Unemployment insurance can be an efficient tool to provide protection for workers against unemployment and foster formal job creation in developing countries. How much workers value this protection and to what extent it allows a more efficient job search are two key parameters that determine its effectiveness. However, evidence shows that important challenges remain in the introduction and expansion of unemployment insurance in developing countries. These challenges range from achieving coverage in countries with high informality, financing the scheme without further distorting the labor market, and ensuring progressive redistribution.

Productive inclusion programs provide an integrated package of services, such as grants and training, to promote self-employment and wage employment among the poor. They show promising long-term impacts, and are often proposed as a way to graduate the poor out of social assistance. Nevertheless, neither productive inclusion nor social assistance will be able to solve the broader poverty challenge independently. Rather, the future is in integrating productive inclusion into the existing social assistance system, though this poses several design, coordination, and implementation challenges.

Tournaments are commonly used in the workplace to determine promotion, assign bonuses, and motivate personal development. Tournament-based contracts can be very effective in eliciting high effort, often outperforming other compensation contracts, but they can also have negative consequences for both managers and workers. The benefits and disadvantages of workplace tournaments have been identified in an explosion of theoretical, empirical, and experimental research over the past 30 years. Based on these findings, suggestions and guidelines can be provided for when it might be beneficial to use tournaments in the workplace.

Compared to developing economies, European transition economies had high levels of human capital when their transitions began, but a lack of resources and policies to protect poor families hampered children’s access to education, especially for non-compulsory school grades. Different phenomena associated with transition also negatively affected children’s education: e.g. parental absence due to migration, health problems, and alcohol abuse. These findings call for a greater policy focus on education and for monitoring of the schooling progress of children in special family circumstances.

Social networks, or “job-referral” networks, can help make labor markets become more efficient. Outside the firm, they help workers obtain employment after displacement and secure higher-paying jobs. They can also match highly-skilled workers to more productive employment. Inside the firm, referrals facilitate employment relationships that are more stable, productive, and profitable. In aggregate, referral networks help “grease the wheels” of a labor market that can be beset by a range of information problems. However, such networks can also be segmented along racial, ethnic, and socio-economic lines, which brings into question the effect they may have on inequality between and within different groups of workers.

Universal completion of secondary education by 2030 is among the targets set by the United Nations’ Sustainable Development Goals. Higher expected adult wages traced to schooling may play a major role in reaching this target as they are predicted to induce increased school enrollment for children whose families wish to optimally invest in their children’s future. However, low incomes and the obligation to meet immediate needs may forestall such investment. Studies suggest that school enrollment in developing countries is positively correlated with higher expected future wages, but poor families continue to under-enroll their children.

A statistical association between more education and better health outcomes has long been observed, but in the absence of experimental data researchers have struggled to find a causal effect. Schooling reforms such as raising school leaving age, which have been enacted in many countries, can be viewed as a form of natural experiment and provide a possible method of identifying such an effect. However, the balance of evidence so far is that these reforms have had little impact on long-term health. Thus, policymakers should be cautious before anticipating a health effect when introducing reforms of this nature.

Activation programs, such as job search assistance, training, or work experience programs for unemployed workers, typically initially produce negative employment effects. These so-called “lock-in effects” occur because participants spend less time and effort on job search activities than non-participants. Lock-in effects need to be offset by sufficiently large post-participation employment or earnings for the programs to be cost-effective. They represent key indirect costs that are often more important than direct program costs. The right timing and targeting of these programs can improve their cost-effectiveness by reducing lock-in effects.

Evidence suggests that immigrants face an initial decline in their occupational status when they enter the host country labor market but that their position improves as they acquire more country-specific human, cultural, and occupational capital. High-skilled immigrants from countries that are economically, linguistically, and culturally different from the host country experience the greatest decline and the steepest subsequent increase in their occupational status. In the context of sharp international competition to attract high-skilled immigrants, this adjustment pattern is contradictory and discourages potential high-skilled migrants.

The internet has transformed the way in which voters access and receive political information, such that it has circumvented the filtering of information previously undertaken by editorial offices. Consequently, consumers have had to learn how to filter relevant information themselves. The introduction phase of the internet coincided with a decreasing voter turnout, possibly due to “information overload” or less-focused political information. However, the subsequent rise of social media may help reverse the negative effect on turnout. But this poses challenges for regulatory policy. Understanding the internet’s effects on the consumption of information is also relevant for how voters view labor policies.

Standardized testing has become the accepted means of measuring a school’s quality. However, the associated rise in test-based accountability creates incentives for schools, teachers, and students to manipulate test scores. Illicit behavior may also occur in institutional settings where performance standards are weak. These issues are important because inaccurate measurement of student achievement leads to poor or ineffective policy conclusions. The consequences of mismeasured student achievement for policy conclusions have been documented in many institutional contexts in Europe and North America, and guidelines can be devised for the future.

Millions of people enter (or remain in) countries without permission as they flee violence, war, or economic hardship. Regularization policies that offer residence and work rights have multiple and multi-layered effects on the economy and society, but they always directly affect the labor market opportunities of those who are regularized. Large numbers of undocumented people in many countries, a new political willingness to fight for human and civil rights, and dramatically increasing refugee flows mean continued pressure to enact regularization policies.

As migration rates increase across the world, the choice of whether to retire in the host or home country is becoming a key decision for up to 15% of the world’s population, and this proportion is growing rapidly. Large waves of immigrants who re-settled in the second half of the 20th century are now beginning to retire. Although immigrants’ location choice at retirement is an area that has barely been studied, this decision has crucial implications for health care and social protection expenditures, both in host and origin countries.

The Great Recession that began in 2008–2009 dramatically increased youth unemployment. But did it have long-lasting, adverse effects on the careers of youths? Are cohorts that graduate during a recession doomed to fall permanently behind those that graduate at other times? Are the impacts different for low- and high-educated individuals? If recessions impose penalties that persist over time, then more government outlays are justified to stabilize economic activity. Scientific evidence from a variety of countries shows that rigid labor markets can reinforce the persistence of these setbacks, which has important policy implications.

More than 100 million women and girls in the world have had their genitals cut for cultural, religious, or other non-medical reasons. Even though international organizations condemn female genital mutilation (FGM), or cutting, as a violation of human rights, and most nations have banned it, it remains prevalent in many African countries, and is slow to decline. This persistence raises questions about the effectiveness of international and national laws prohibiting the practice as well as the potential role of returning migrants in changing embedded cultural norms. Does migration change migrants’ opinions and attitudes to this custom? If so, do they transfer the new norms to their origin countries?

Immigrants can initially face significant difficulties integrating into the economy of the host country, due to information gaps about the local labor market, limited language proficiency, and unfamiliarity with the local culture. Settlement in a region where economic and social networks based on familiar cultural or language factors (“ethnic capital”) exist provides an effective strategy for economic integration. As international migration into culturally diverse countries increases, ethnic networks will be important considerations in managing immigration selection, language proficiency requirements, and regional economic policies.

International labor mobility has resulted in sweeping socio-economic changes in many developing countries. When a family member migrates for work and sends back remittances, household income may rise, and with it investment in children’s schooling. Emigration flows may also alter local labor market conditions and wage rates, which can in turn affect children’s labor supply. Whether there is more or less child labor as a result of migration may depend on the skill composition of the migrants and on how family members respond to wage changes.

Global value chains (GVCs) describe the cross-national activities and inputs required to bring a product or service to the market. While they can boost exports and productivity, the resulting labor market impacts vary significantly across developing countries. Some experience large-scale manufacturing employment, while others see a shift in demand for labor from manufacturing to services, and from lower to higher skills. Several factors shape the way in which a country’s labor market will be impacted by GVC integration, including the type of sector, lead firms’ strategies, domestic skills base, and the institutional environment.

Developing countries often face two well-known structural problems: high youth unemployment and high inequality. In recent decades, policymakers have increased the share of government spending on education in developing countries to address both of these issues. The empirical literature offers mixed results on which type of education is most suitable to improve gainful employment and reduce inequality: is it primary, secondary, or tertiary education? Investigating recent literature on the returns to education in selected developing countries in Africa can help to answer this question.

Public transport infrastructure has not kept up with the demands of growing populations in cities in developing countries. Infrastructure provision has historically been biased against less affluent areas, so access to formal jobs is often difficult and costly for a large part of the lower-income population. As a result, low-income workers may be discouraged from commuting to formal jobs, lack information on job opportunities, and face discrimination. Through these channels, constrained accessibility can result in higher rates of job informality. Reducing informality can be a target for well-designed transport policies.

Higher wages increase labor costs but also improve the productivity of the labor force in several ways. If firms take this into account and set their wages accordingly, the resulting wages could fail to adjust demand and supply but may induce phenomena like over-education, discrimination, regional wage differentials, and a tendency for larger firms to pay higher wages. All these phenomena are quantitatively important and well-established empirically. Efficiency wage theory provides an integrated theoretical explanation rather than a sundry list of reasons, and offers an efficiency argument for progressive income taxation.

The evidence is mixed on whether informal labor in developing countries benefits from trade and labor market reforms. Reforms lead to higher wages and improved employment conditions in the informal sector in some cases, and to the opposite effect in others. At a cross-country level, lifting trade protection boosts informal-sector employment. The direction and size of the impacts on informal-sector employment and wages are determined by capital mobility and the interactions between trade and labor market reforms and public policies, such as monitoring the formal sector. To guarantee best practice policymakers need to take these interdependencies into account.

Most OECD countries have recently introduced product market reforms with the objective of lowering barriers to entry and increasing competition in many sectors, such as telecommunications, utilities, and transport. The timing and extent of regulatory reform have varied significantly, starting in the US in the early 1980s and in the mid-1990s in many European countries. Will these developments improve economic performance in terms of creating jobs, fostering investment, and encouraging innovations—all of which are important factors for policymakers?

Childhood obesity has been rising steadily in most parts of the world. Popular speculation attributes some of that increase to rising maternal employment. Employed mothers spend less time at home and thus less time with their children, whose diets and physical activity may suffer. Also, children of working mothers may spend more time in the care of others, whose childcare quality may vary substantially. While a majority of US studies support this hypothesis and have clear policy implications, recent studies in other countries are less conclusive, largely because institutional arrangements differ but also because methodologies do.

Apprenticeships are the most common form of non-academic training in sub-Saharan Africa. Most apprenticeships are provided by the private sector, for a fee, and lead to self-employment rather than to wage jobs. Where the effects have been measured, they show that earnings are not higher, on average, for people who did an apprenticeship than for those who did not. This presents a conundrum. Why would people pay for apprenticeship training that does not benefit them? Research reveals that apprenticeships do benefit some people more than others. Especially striking is that the returns to apprenticeships can fall with the level of education.

In addition to the heart-breaking human costs, violent civil rebellion is a cause of chronic economic under-development. Employment programs with former combatants and at-risk youth have improved their livelihoods, but not their support for non-violence and respect for law. Rebel groups provide security and social benefits that formal employment does not offer, possibly making switching out of rebellion into formal employment unappealing. However, a jobs program that addressed the psycho-social motivations to join rebel groups resulted in significant reductions in crime and violence. This is an important step forward in our understanding of how to lure people away from violent rebellion.

Economic growth is essential, though not sufficient, for poverty reduction in developing countries. Research based on many different approaches and including both cross-country and intra-country studies shows that international trade can contribute to economic growth, and thus can help many poor people escape poverty. However, the domestic environment has to be conducive to realizing the poverty-reduction benefits of increased trade. Complementary domestic policies and institutions needed include regulations that foster labor mobility, adequate financial development, and good public infrastructure.

In addition to regular marriage, Australia, Brazil, and 11 US states recognize common law (or de facto) marriage, which allows one or both cohabiting partners to claim, under certain conditions, that an informal union is a marriage. France and some other countries also have several types of marriage and civil union contracts. The policy issue is whether to abolish common law marriage, as it appears to discourage couple formation and female labor supply. A single conceptual framework can explain how outcomes are affected by the choice between regular and common law marriage, and between various marriage and civil union contracts.

Economic self-interest and social considerations are the key determinants of public support for market reforms in transition countries. However, political strategies that rely mainly on public support for pushing through economic reforms have limited relevance if the prevailing institutional environment is weak or corrupt. Poor governance and under-developed democracy significantly reduce the level of support. A good institutional framework allows the potential gains from reforms to be realized in a beneficial way, while corruption and poor governance deny the prospect of gains for individuals and for society.

Policy evaluation aims at assessing the causal effect of an intervention (for example job-seeker counseling) on a specific outcome (for example employment). Frequently, the causal channels through which an effect materializes can be important when forming policy advice. For instance, it is essential to know whether counseling affects employment through training programs, sanctions, job search assistance, or other dimensions, in order to design an optimal counseling process. So-called “mediation analysis” is concerned with disentangling causal effects into various causal channels to assess their respective importance.

Family and kinship networks are important in helping people get jobs and start companies, as statistics for developing countries show. Promising new research has begun to assess the positive and negative effects of these family and kinship ties on entrepreneurial success. To what extent, and why, are family networks used, and do they result in better economic outcomes for entrepreneurs? Results point to the need for policymakers to identify and emulate efficient informal networks in order to develop innovative support policies for vulnerable entrepreneurs, especially for those who are attached to weak or inefficient networks.

Current cohorts of young adults entered adulthood during an international labor and housing market crisis of a severity not experienced since the Great Depression. Concerns have arisen over the impacts on young adults’ employment, income, wealth, and living arrangements, and about whether these young adults constitute a “scarred generation” that will suffer permanent contractions in financial well-being. If true, knowing the mechanisms through which young adults’ finances have been affected has important implications for policy measures that could improve the financial well-being of today’s young adults in the present and future.

About one in five workers across OECD countries is employed part-time, and the share has been steadily increasing since the beginning of the economic and financial crisis in 2007. Part-time options play an important economic role by providing more flexible working arrangements for both workers and firms. Part-time employment has also contributed substantially to increasing the employment rate, especially among women. However, part-time work comes at a cost of lower wages for workers, mainly because part-time jobs are concentrated in lower paying occupations and sectors, while the impact on firms’ productivity is still not very clear.

Randomized control trials are often considered the gold standard to establish causality. However, in many policy-relevant situations, these trials are not possible. Instrumental variables affect the outcome only via a specific treatment; as such, they allow for the estimation of a causal effect. However, finding valid instruments is difficult. Moreover, instrumental variables estimates recover a causal effect only for a specific part of the population. While those limitations are important, the objective of establishing causality remains; and instrumental variables are an important econometric tool to achieve this objective.

Temporary work agencies use training as a recruitment and retention argument when qualified labor is scarce. However, short job assignments present a major obstacle for employers and employees to increase investment in training. As temporary agency workers are mainly low-qualified and often previously unemployed, paid work in combination with training should lead to more sustainable employment. Adjustments in labor market institutions could make the provision of training more attractive for both staffing agencies and temporary agency workers.

Entrepreneurship is essential to job creation and to productivity growth and therefore is an important matter for government policy. However, policymakers face a difficult challenge because successful growth for a few firms—which cannot easily be identified in advance—is accompanied by widespread failure for most other new firms. Predicting which firms will fail and which will succeed is nearly impossible. Instead of futilely trying to pick winners, governments can play a useful role in facilitating the growth of the most promising firms by setting the conditions for efficient trial-and-error experimentation across firms.

A pieceworker receives a fixed rate for each unit (“piece”) produced or action performed. In part, the rate reflects a cost of monitoring output. A timeworker receives a fixed wage rate per hour that, in the short term, does not vary with output performance. From the 18th century up to the last third of the 20th century these were the two dominant payment methods in the manufacturing and production industries. Yet, today the incidence of piecework in advanced economies is very small, having lost considerable ground to time rates and to other forms of incentive pay. What caused this transformation, and has the movement away from piecework gone too far?

Female-led ventures that are market-expanding, export-oriented, and innovative contribute substantially to local and national economic development, as well as to the female entrepreneur’s economic welfare. Female-led ventures also serve as models that can encourage other high-potential female entrepreneurs. The supply of high-potential entrepreneurial ventures is driven by individuals’ entrepreneurial attitudes and institutional factors associated with a country’s conditions for entrepreneurial expansion. A systematic assessment of those factors can show policymakers the strengths and weaknesses of the environment for high-potential female entrepreneurship.

Turning unemployment into self-employment is a suitable alternative to traditional active labor market policies in many developed countries. Start-up subsidies can assist unemployed workers in setting up their own business. This option can be especially interesting for people whose work is undervalued in paid employment or in situations where job offers are limited because of group-specific labor market constraints or structural changes. Furthermore, start-up subsidies are potentially associated with a “double dividend” if the subsidized businesses prosper, strengthen the economy, and create additional jobs in the future.

University autonomy and funding is an important aspect in university-level education due to its impact on graduates’ competencies, and on the quality and quantity of research produced. Political factors influence the amount of autonomy allotted to public universities in specific countries. There is sufficient evidence to suggest that an increase in autonomy for universities would provide better educational outcomes and have a direct impact on labor market productivity. However, the debate on autonomy has been overshadowed by discussions on tuition fees and student aid in political circles.

Women’s labor force participation has rapidly increased in most countries, but mothers still struggle to achieve a satisfactory work−life balance. Childcare allows the primary caregiver, usually the mother, to take time away from childrearing for employment. Family policies that subsidize childcare and increase its availability have different effects on female labor supply across countries. For policymakers to determine how well these policies work, they should consider that policy effectiveness may depend on country-specific pre-reform female employment and earnings, and childcare availability, costs, and quality.

Policymakers often propose a minimum wage as a means of raising incomes and lifting workers out of poverty. However, improvements in some young workers’ incomes as a result of a minimum wage come at a cost to others. Minimum wages reduce employment opportunities for youths and create unemployment. Workers miss out on on-the-job training opportunities that would have been paid for by reduced wages upfront but would have resulted in higher wages later. Youths who cannot find jobs must be supported by their families or by the social welfare system. Delayed entry into the labor market reduces the lifetime income stream of young unskilled workers.

Low fertility rates are a cause of social concern in many developed countries, with growing youth unemployment often being considered a primary cause. However, economic theory is not conclusive about whether deterioration in youth employment prospects actually discourages family formation or for how long the effect might persist. In addition, recessions can affect the divorce rate. Therefore, understanding the relationship between labor market conditions and family formation can provide important insights into the type of policies that would be most effective in promoting fertility.

Policymakers in many OECD countries are increasingly concerned about high and rising inequality. Much of the evidence (as far back as Adam Smith’s The Wealth of Nations) points to the importance of skills in tackling wage inequality. Yet a recent strand of the research argues that (cognitive) skills explain little of the cross-country differences in wage inequality. Does this challenge the received wisdom on the relationship between skills and wage inequality? No, because this recent research fails to account for the fact that the price of skill (and thus wage inequality) is determined to a large extent by the match of skill supply and demand.

Early studies often found that offering economic incentives for undertaking prosocial and intrinsically motivated activities can crowd out motivation to perform these activities. More recent work highlights nuanced and important features related to whether crowding out (or substitution) is likely to occur. In many cases, incentives succeed in encouraging more prosocial behavior and are also cost-effective. However, although the substitution of external incentives for intrinsic motivation may not be a concern in many contexts, the substitution of one prosocial activity for another or shifts in activities over time or location may warrant further attention.

Gravity models have long been popular for analyzing economic phenomena related to the movement of goods and services, capital, or even people; however, data limitations regarding migration flows have hindered their use in this context. With access to improved bilateral (country to country) data, researchers can now use gravity models to better assess the impacts of migration policy, for instance, the effects of visa restriction policies on migration flows. The specification, estimation, and interpretation of gravity models are illustrated in different contexts and limitations of current practices are described to enable policymakers to make better informed decisions.

Migrants’ remittances to developing countries have increased in recent decades, partly due to reduced transactions costs and improved living conditions in host countries. The feminization of international migration represents yet another explanation. Despite the difficulties female migrants encounter in the labor market, their total remittances may be higher and more resilient than those of male migrants, owing to these women’s stronger links to family members left behind and self-insurance motives. Policymakers need to understand how this new and significant upward trend in female migration could affect the economic and social development of home countries.

Economists typically predict that people are inherently selfish; however, experimental evidence suggests that this is often not the case. In particular, delegating a choice (such as a wage) to the performing party may imbue this party with a sense of responsibility, leading to improved outcomes for both the delegating entity and the performing party. This strategy can be risky, as some people will still choose to act in a selfish manner, causing adverse consequences for productivity and earnings. An important issue to consider is therefore how to encourage a sense of responsibility in the performing party.

Profit sharing can lead to higher productivity and thus to higher firm profitability and employee wages. It may also enhance employment stability by enabling firms to adjust wages during downturns rather than lay off workers. While adoption of profit sharing increases earnings fluctuations, it also increases earnings growth in the longer term. As with any group incentive plan, profit sharing may result in some workers benefiting from the effort of others without themselves exerting greater effort (“free-rider problem”). However, there is evidence that in team-based production workplaces, profit sharing may reduce shirking and thus contribute to productivity growth.

Imagine a government confronted with a controversial policy question, like whether it should cut the level of unemployment benefits. Will social welfare rise as a result? Will some groups be winners and other groups be losers? Will the welfare gap between the employed and unemployed increase? “Happiness data” offer a new way to make these kinds of evaluations. These data allow us to track the well-being of the whole population, and also sub-groups like the employed and unemployed people, and correlate the results with relevant policy changes.

Allowing workers to control their work hours (working-time autonomy) is a controversial policy for worker empowerment, with concerns that range from increased shirking to excessive intensification of work. Empirical evidence, however, supports neither view. Recent studies find that working-time autonomy improves individual and firm performance without promoting overload or exhaustion from work. However, if working-time autonomy is incorporated into a system of family-friendly workplace practices, firms may benefit from the trade-off between (more) fringe benefits and (lower) wages but not from increased productivity.

Female labor market participation rates have increased substantially in many countries over the last decades, especially those of mothers with young children. This trend has triggered an intense debate about its implications for children’s well-being and long-term educational outcomes. The overall effect of maternal and paternal employment on children’s cognitive and educational attainment is not obvious: on the one hand, children may benefit from higher levels of family income, on the other hand, parental employment reduces the amount of time parents spend with their children.

Firms regularly use incentives to motivate their employees to be more productive. However, often little attention is paid to the language used in employment contracts to describe these incentives. It may be more effective to present incentives as entitlements that can be lost by failing to reach a performance target, rather than as additional rewards that can be gained by reaching that target. However, emphasizing the potential losses incurred as a result of failure may entail hidden costs for the employer, as it may damage the trust relationship between a firm and its employees.

Upon arrival in a host country, immigrants often have lower obesity rates (as measured for instance by BMI—body mass index) than their native counterparts do, but these rates converge over time. In light of the worldwide obesity epidemic and the flow of immigrants into host countries with higher obesity rates, it is important to understand the consequences of such assimilation. Policymakers could benefit from a discussion of the impact of immigrant obesity on labor market outcomes and the use of public services. In particular, policies could find ways to improve immigrants’ access to health care for both the prevention and treatment of obesity.

Evidence from transition economies shows that formal work may not pay, particularly for low-wage earners. Synthetic measurements of work disincentives, such as the formalization tax rate or the marginal effective tax rate, confirm a significant positive correlation between these measurements and the probability of informal work. These measures are especially informative for impacts at lower wage levels, where informality is highest. Policymakers who want to increase formal work can use these measurements to determine optimal labor taxation rates for low-wage earners and reform benefit design.

Using administrative records data and survey data to enhance each other offers huge potential for scientific and policy-related research. Two recent changes have expanded the potential for creating such linked data: the improved availability of data sources and progress in data-matching technology. These developments are reflected, among other ways, in the growing number of academic papers in labor economics that use linked survey and administrative data. While the number of studies using linked data is still small, the trend is clearly upward. Slowing the growth, however, are concerns about data security and privacy, which impede data access.

Many measures of job satisfaction have been trending downward. Because jobs are a key part of most people’s lives, knowing what makes a good job (job quality) is vital to knowing how well society is doing. Integral to worker well-being, job quality also affects the labor market through related decisions on whether to work, whether to quit, and how much effort to put into a job. Empirical work on what constitutes a good job finds that workers value more than wages; they also value job security and interest in their work. Policy to affect job quality requires information on the cost of the different aspects of job quality and how much workers value them.

Standard hours, a major component of total work hours, vary considerably across Europe. Many countries lowered their standard work hours during the 1980s and 1990s, attempting to boost employment by splitting up a fixed number of worker-hours among more workers. Germany has seen a partial reversal of the trend as several companies increased their standard hours to reduce their labor costs in the early 2000s. The employment effect of increased standard hours depends on the time horizon examined, how wages respond, whether employees collected overtime pay before the change, and the productivity of hours worked, among other factors.

Globalization brings both good and bad job news. The bad news is that jobs will be outsourced from high-cost developed countries into lower-cost locations as soon as the associated economic activity becomes mechanized and predictable. The good news is that globalization creates opportunities that can be realized by people bold enough to transform new ideas and knowledge into innovations. In that way, entrepreneurs will play a vital role in creating the jobs of the future by transforming ideas and knowledge into new products and services, which will be the competitive advantage of the advanced economies.

Children from disadvantaged families have lower levels of school readiness when they enter school than do children from more advantaged families. Many countries have tried to reduce this inequality through publicly provided preschool. Evidence on the potential of these programs to reduce inequality in child development is now quite strong. Long-term studies of large publicly funded programs in Europe and Latin America, and newer studies on state and local prekindergarten programs implemented more recently in the US, find that the programs do improve outcomes for young children, particularly for those from disadvantaged families.

Proponents of minimum wage increases have argued that such hikes can serve as an engine of economic growth and assist low-skilled individuals during downturns in the business cycle. However, a review of the literature provides little empirical support for these claims. Minimum wage increases redistribute gross domestic product away from lower-skilled industries and toward higher-skilled industries and are largely ineffective in assisting the poor during both peaks and troughs in the business cycle. Minimum wage-induced reductions in employment are found to be larger during economic recessions.

Large imbalances between the supply and demand for skills in transition economies are driven by rapid economic restructuring, misalignment of the education system with labor market needs, and underdeveloped adult education and training systems. The costs of mismatches can be large and long-lasting for workers, firms, and economies, with long periods of overeducation implying a loss of human capital for individuals and ineffective use of resources for the economy. To make informed decisions, policymakers need to understand how different types of workers and firms are affected by overeducation and skill shortages.

Liberalization of foreign trade and investment raises the domestic ratio of skilled to unskilled wages (skill premium) if the country has a sufficiently well-educated workforce, but lowers it otherwise. Wide wage inequality is undesirable on equity grounds, especially in poor countries where the bottom wage is close to the breadline; but it gives parents an incentive to invest in their children’s education. The incentive will be ineffective, however, if parents cannot borrow for their child’s education because of underdeveloped credit markets or because they are too poor to finance the investment from their own income and savings.

Immigration officials in rich countries are being asked to become overseas development officials, charged with preventing skilled workers from leaving poor countries, where their skills are needed. Some advocates urge restrictions or taxes on the emigration of doctors and engineers from developing countries. Others urge incentives to encourage skilled workers to remain or return home or policies to facilitate their interactions with home countries. Regulations often reflect compassionate and political sentiments without clear evidence that the regulations achieve the desired development goals and avoid pernicious side effects.

Demographic factors in migrant-sending countries can influence international migration flows. But when migrants move across borders, they can also influence the pace of demographic transition in their countries of origin. This is because migrants, who predominantly move on a temporary basis, encounter new fertility norms in their host countries and then bring them back home. These new fertility norms can be higher or lower than those in their country of origin. So the new fertility norms that result from migration flows can either accelerate or slow down a demographic transition in migrant-sending countries.

Using Google search activity data can help detect, in real time and at high frequency, a wide spectrum of breaking socio-economic trends around the world. This wealth of data is the result of an ongoing and ever more pervasive digitization of information. Search activity data stand in contrast to more traditional economic measurement approaches, which are still tailored to an earlier era of scarce computing power. Search activity data can be used for more timely, informed, and effective policy making for the benefit of society, particularly in times of crisis. Indeed, having such data shifts the relation between theory and the data to support it.

The growth in the number and in the size of remittances and the stability of these monetary transfers have made them a prime target for policymakers. Because remittance flows go directly to households in emigrants’ home countries, one has to wonder about their effects on household decision-making, particularly in relation to the number of children to have. While this is household specific, when considered at the community and country level, there are significant policy implications for remittance-receiving economies. Therefore, it is crucial to more fully understand the relationship between remittance inflows and fertility rates.

The ongoing relationships between emigrants and their families, friends, and business contacts in their home countries can increase outbound and inbound cross-border travel, while cross-border tourism and business and study trips can trigger migration. New communication technologies, such as social media and video chat, only partially substitute for face-to-face meetings. In fact, the greater use of such technologies boosts demand for in-person meetings. Short- and long-term cross-border movements are becoming more complex, creating challenges for measuring immigration and for defining target populations for legislation and public policy.

Estimating the causal effect of immigration on the labor market outcomes of native workers has been a major concern in the literature. Because immigrants decide whether and where to migrate, immigrant populations generally consist of individuals with characteristics that differ from those of a randomly selected sample. One solution is to focus on events such as civil wars and natural catastrophes that generate rapid and unexpected flows of refugees into a country unrelated to their personal characteristics, location, and employment preferences. These “natural experiments” yield estimates that find small negative effects on native workers’ employment but not on wages.

Knowing whether corruption leads to higher emigration rates—and among which groups—is important because most labor emigration is from developing to developed countries. If corruption leads highly-skilled and highly-educated workers to leave developing countries, it can result in a shortage of skilled labor and slower economic growth. In turn, this leads to higher unemployment, lowering the returns to human capital and encouraging further emigration. Corruption also shifts public spending from health and education to sectors with less transparency in spending, disadvantaging lower-skilled workers and encouraging them to emigrate.

Most comparative research suggests that immigrants from post-socialist countries earn less than natives, work in jobs for which they are overqualified, and may experience unhappiness compared with natives, other immigrants, and non-migrants. In contrast, one study presents causal evidence which shows that moving from transition economies to live in the West increases the incomes, life satisfaction, and freedom perceptions of those who move. Credibly assessing whether leaving transition economies improves movers’ quality of life remains a challenging empirical question.

Efficiency is an important consideration for those who manage public services. Costs vary with output and with a variety of other factors. In the case of higher education, for example, factors include quality, student demographics, the scale and scope of the higher education provider, and the size and character of the real estate. But even when taking all these factors into account, costs vary across providers because of differences in efficiency. Such differences offer clues about good practice that can lead to improvements in the system as a whole. The role of efficiency is illustrated by reference to higher education institutions in England.

The occupational choice of return migrants is important to their home country. Return migrants are likely to have acquired human capital while abroad, either through formal training or by working in a more efficient labor market. The employment of these newly acquired skills in the home country can have important economic implications. Examining the choice of return migrants to engage in wage employment, self-employment, entrepreneurial activity, or to remain out of the labor market makes it possible to ascertain whether the initial migration decision benefited the home country as well as the migrants and their families.

Being beautiful gives a person an advantage in many settings. Attractive people earn more and have an easier time getting hired. People spend large amounts of money on goods and services to enhance their beauty. Is this enhancement worth pursuing? Research suggests that the expected improvement in beauty from these goods and services is limited. Therefore, despite the large returns from having an attractive appearance, the cost-effectiveness of investment in beauty enhancement is ambiguous. For the average person, the monetary benefits of plastic surgery, medical treatments to increase height, and expensive clothing are not worth the cost.

In the transition from central planning to a market economy in the 1990s, governments focused on privatizing or closing state enterprises, reforming labor markets, compensating laid-off workers, and fostering job creation through new private firms. After privatization, the focus shifted to creating a level playing field in the product market by protecting property rights, enforcing the rule of law, and implementing transparent start-up regulations. A fair, competitive environment with transparent rules supports long-term economic growth and employment creation through the reallocation of jobs in favor of new private firms.

With university education continuing to expand worldwide, university dropouts will make up a large group in future labor markets. Dropping out is routinely viewed as a negative indicator. However, data on university dropouts does not generally provide information on their labor market outcomes, so empirical evidence is sparse. The studies that have examined the issue show that dropping out can be more of an advantage than not having enrolled in university at all. Many dropouts are more likely than upper secondary school graduates with no university education to progress in their careers. And many graduate later in their life.

Because theoretical arguments differ on the economic impact of collective bargaining agreements in developing countries, empirical studies are needed to provide greater clarity. Recent empirical studies for some Latin American countries have examined whether industry- or firm-level collective bargaining is more advantageous for productivity growth. Although differences in labor market institutions and in coverage of collective bargaining agreements limit the generalizability of the findings, studies suggest that work rules may raise productivity when negotiated at the firm level but may sometimes lower productivity when negotiated at the industry level.

Active labor market programs continue to receive high priority in wealthy countries despite the fact that the benefits appear small relative to the costs. This apparent discrepancy suggests that the programs may have a broader purpose than simply increasing employment—for instance, preventing anti-social behavior such as crime. Indeed, recent evidence shows that participation in active labor market programs reduces crime among unemployed young men. The existence of such effects could explain why it is the income-redistributing countries with greater income equality that spend the most on active labor market programs.

“Matching” is a statistical technique used to evaluate the effect of a treatment by comparing the treated and non-treated units in an observational study. Matching provides an alternative to older estimation methods, such as ordinary least squares (OLS), which involves strong assumptions that are usually without much justification from economic theory. While the use of simple OLS models may have been appropriate in the early days of computing during the 1970s and 1980s, the remarkable increase in computing power since then has made other methods, in particular matching, very easy to implement.

Environmental regulations raise production costs at regulated firms, though in most cases the costs are only a small fraction of a firm’s total costs. Productivity tends to fall, and firms may shift new investment and production to locations with less stringent regulation. However, environmental regulations have had enormous benefits in terms of lives saved and illnesses averted, especially through reductions in airborne particulates. The potential health gains may be even greater in developing countries, where pollution levels are high. The benefits to society from environmental regulation hence appear to be much larger than the costs of compliance.

Population aging in many developed countries has motivated some governments to provide wage subsidies to employers for hiring or retaining older workers. The subsidies are intended to compensate for the gap between the pay and productivity of older workers, which may discourage their hiring. A number of empirical studies have investigated how wage subsidies influence employers’ hiring and employment decisions and whether the subsidies are likely to be efficient. To which groups subsidies should be targeted and how the wage subsidy programs interact with incentives for early retirement are open questions.

Numerous economic studies have considered the relationship between class size and student achievement, the majority of which have focused on elementary schools in the US and Europe. While the general finding is that smaller classes are associated with increased student achievement, a few high-quality studies find no relationship. Further, empirical research on the costs and benefits of smaller classes concludes that other education policies, such as tutoring, early childhood programs, or improving teacher quality would be better investments.

The trend towards labor market flexibility in Europe has typically involved introducing legislation that makes it easier for firms to issue temporary contracts with low firing costs, while not changing the level of protection that is in place for permanent jobs. This has created a strong “dualism” in some European labor markets, which might affect turnover, wage setting, and human capital accumulation. In view of this, some economists propose replacing the existing system of temporary and permanent contracts by a single open-ended contract for new hires, with severance pay smoothly increasing with tenure on the job.

As part of a more general process of employment reallocation from less to more productive employers, job-to-job flows tend to be beneficial for productivity and for workers. Thus, when this rate slows, it is important to understand why. In the US, for example, the job-to-job flow rate is now at an all-time low. While job-to-job flows are a means of boosting wages and productivity, a decline could indicate improvements for workers if it means that they are now better matched to their jobs. Furthermore, when job-to-job flows are lower, firms and workers incur fewer costs related to job transitions, such as job search and hiring costs.