Evidence-based policy making

IZA World of Labor is an online platform that provides policy analysts, journalists, academics and society generally with relevant and concise information on labor market issues. Based on the latest research, it provides current thinking on labor markets worldwide in a clear and accessible style. IZA World of Labor aims to support evidence-based policy making and increase awareness of labor market issues, including current concerns like the impact of Covid-19, and longer-term problems like inequality.

 

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Relative deprivation and individual well-being
Low status and a feeling of relative deprivation are detrimental to health and happiness

People who are unable to maintain the same standard of living as others around them experience a sense of relative deprivation that has been shown to reduce feelings of well-being. Relative deprivation reflects conditions of worsening relative poverty despite striking reductions in absolute poverty. The effects of relative deprivation explain why average happiness has been stagnant over time despite sharp rises in income. Consumption taxes on status-seeking spending, along with official and traditional sanctions on excess consumption and redistributive policies may lessen the negative impact of relative deprivation on well-being.

  • Public or private job placement services — Are private ones more effective? Updated

    Outsourcing to the private sector can only be effective if the service quality can be contracted on

    Gesine Stephan , May 2024
    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.
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  • Entrepreneurship for the poor in developing countries Updated

    Well-designed entrepreneurship programs show promise for improving earnings and livelihoods of poor workers

    Yoonyoung Cho , May 2024
    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.
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  • The labor market in Brazil, 2001–2022 Updated

    Brazil’s long-lasting recession has hurt the poor and has reversed inequality trends

    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.
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  • The importance of informal learning at work Updated

    On-the-job learning is more important for workers’ human capital development than formal training

    Andries De Grip , March 2024
    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.
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  • Compensating displaced workers Updated

    Job displacement is a serious earnings risk and the displaced are typically poorly insured

    Donald O. Parsons , February 2024
    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.
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  • Trans people, well-being, and labor market outcomes Updated

    Transitioning across gender is related to greater life and job satisfaction but also affects acceptance in one’s society

    Nick Drydakis , January 2024
    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.
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  • Labor market institutions and policies in old and new EU members Updated

    After three recessions, a new emphasis on the importance of collective institutions and social dialogue is emerging

    Riccardo Rovelli , January 2024
    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.
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  • Multiple job-holding: Career pathway or dire straits? Updated

    Moonlighting responds to economic needs, but can generate new skills and careers

    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.
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  • Rethinking the skills gap Updated

    Better understanding of skills mismatch is essential to finding effective policy options

    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.
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  • Climate change, natural disasters, and migration Updated

    The relationship between climate change, natural disasters, and migration is not straightforward and presents many complexities

    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.
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  • Employers and the gender wage gap

    Sorting across workplaces, and unequal rewards within them, are major causes of the gender wage gap

    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.
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  • How are minimum wages set? Updated

    Countries set minimum wages in different ways, and some countries set different wages for different groups of workers

    Richard Dickens , September 2023
    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.
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  • Should the earned income tax credit rise for childless adults? Updated

    The earned income tax credit boosts income and work effort among low-income parents, especially single mothers, and has contributed to the steep rise in employment among single mothers in the 1990s.

    Harry J. Holzer , September 2023
    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.
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  • Do institutions matter for entrepreneurial development? Updated

    In post-Soviet countries, well-functioning institutions are needed to foster productive entrepreneurial development and growth

    Ruta Aidis , August 2023
    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.
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  • How should job displacement wage losses be insured? Updated

    Wage losses upon re-employment can seriously harm long-tenured displaced workers if they are not properly insured

    Donald O. Parsons , July 2023
    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.
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  • Instruction time and educational outcomes

    The quality of instruction and the activities it replaces determine the success of increased instruction time

    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.
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  • Oct 10, 2024 - Oct 11, 2024

    IZA/ECONtribute Workshop on the Economics of Education

    Online

    The 8th IZA/ECONtribute Workshop on the Economics of Education will convene international scholars focusing on the development of skills within both formal and informal educational contexts and their valuation in the labor market. The conference will feature a select group of presenters, alongside a poster session for local researchers from the host institutions. Presentations and the keynote speech will be accessible via Zoom to an external audience.