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.
What makes a good job? Job quality and job satisfaction
Job satisfaction is important to well-being, but intervention may be needed only if markets are impeded from improving job quality
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.
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Promoting internal whistleblowing in organizations
Internal whistleblowing results in reduced fraud, a better brand image, and a higher overall performance
Eve-Angeline LambertYannick Gabuthy , November 2024Internal whistleblowing refers to the decision of an employee observing a misconduct in a firm to report it through an internal channel, i.e. via a hotline or directly to an identified ombudsman. Whistleblowing is highly beneficial to firms in various ways. However, employees may be reluctant to blow the whistle, both for moral reasons and due to a fear of retaliation. Consequently, a firm aiming at encouraging whistleblowing in order to save judicial or reputation costs, fines, and to spare its reputation should consider a wide range of possible measures in addition to developing a global ethical culture.MoreLess -
Fertility decisions and alternative types of childcare Updated
Relative costs and family characteristics determine the effectiveness of different forms of childcare
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.MoreLess -
The shadow economy in industrial countries Updated
Reducing the size of the shadow economy requires reducing its attractiveness while improving official institutions
Dominik H. Enste , October 2024The 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.MoreLess -
Entrepreneurs and their impact on jobs and economic growth Updated
Productive entrepreneurs can invigorate the economy by creating jobs and new technologies, and increasing productivity
Alexander S. Kritikos , October 2024Entrepreneurs, 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.
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Using instrumental variables to establish causality Updated
Even with observational data, causality can be recovered with the help of instrumental variables estimation
Grigory AleksinSascha O. Becker , September 2024Randomized 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.MoreLess -
Estimating the return to schooling using the Mincer equation Updated
The Mincer equation gives comparable estimates of the average monetary Returns of one additional year of education
Harry Anthony Patrinos , August 2024The 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.MoreLess -
Does increasing the minimum wage reduce poverty in developing countries? Updated
Whether raising minimum wages reduces—or increases—poverty depends on the characteristics of the labor market and Households
T. H. Gindling , August 2024Raising 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.MoreLess -
Sexual harassment in the workplace Updated
The #MeToo movement brought heightened attention to sexual harassment and a search for new approaches to combat it
Joni Hersch , July 2024Workplace 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.MoreLess -
Unemployment benefits and unemployment Updated
The challenge of unemployment benefits is to protect workers while minimizing undesirable side effects
Robert MoffittWonsik Ko , June 2024All 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.MoreLess -
The effects of public sector employment on the economy Updated
The size and wage level of the public sector affect overall employment volatility and the economy
Vincenzo CaponiSimone Nobili , June 2024Public 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.MoreLess -
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 2024Expenditures 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.MoreLess -
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 2024Can 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.MoreLess -
The labor market in Brazil, 2001–2022 Updated
Brazil’s long-lasting recession has hurt the poor and has reversed inequality trends
Sergio Pinheiro FirpoAlysson Lorenzon Portella , April 2024In 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.MoreLess -
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 2024Although 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.MoreLess -
Compensating displaced workers Updated
Job displacement is a serious earnings risk and the displaced are typically poorly insured
Donald O. Parsons , February 2024Job 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.MoreLess -
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 2024Acceptance 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.MoreLess -
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 2024Old 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.MoreLess -
Multiple job-holding: Career pathway or dire straits? Updated
Moonlighting responds to economic needs, but can generate new skills and careers
Konstantinos PouliakasWieteke S. Conen , December 2023Multiple 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.MoreLess -
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.MoreLess -
Climate change, natural disasters, and migration Updated
The relationship between climate change, natural disasters, and migration is not straightforward and presents many complexities
Linguère Mously MbayeAssi Okara , November 2023The 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.MoreLess -
Employers and the gender wage gap
Sorting across workplaces, and unequal rewards within them, are major causes of the gender wage gap
John ForthNikolaos Theodoropoulos , October 2023In 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.MoreLess -
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 2023The 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.MoreLess -
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 2023The 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.MoreLess -
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 2023Since 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.MoreLess -
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 2023Job 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.MoreLess -
Instruction time and educational outcomes
The quality of instruction and the activities it replaces determine the success of increased instruction time
Andrés Barrios Fernández , July 2023Increasing 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.MoreLess -
How to support adult caregivers?
Caregiving for older adults is detrimental to caregivers’ well-being and requires policy interventions to support them
Joan Costa-Font , June 2023Some 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.MoreLess -
The widespread impacts of remittance flows Updated
Remittances have the potential to lift developing economies
Catalina Amuedo-DorantesSusan Pozo , May 2023Remittances 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.MoreLess
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Fewer exam retakes, better results?
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Rising temperatures hurt Europe’s economy
New study highlights the productivity impact of global warming -
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Air pollution cuts job seekers’ wage demands
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The hidden cost of teacher selection reform in Colombia
Do productivity signals reduce disability-related hiring discrimination?
How education drives the economic success of immigrants from China in the US
Unintended consequences: How Pinochet’s policies empowered Chilean women
The long-run effects of affirmative action bans
How fast internet is shaping local culture and harmful traditional norms?
Effects of parental death on labor market outcomes and gender inequalities
Are employers eager to hire the unemployed?
The surprising effects of education on family dynamics for men and women
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10 years of IZA World of Labor
How political connections shape firm outcomes in Germany
Escaping the debt trap: Long-run effects of individual debt relief
Empowering local talent
ChatGPT in the workplace: Who's adopting and what's holding others back?
Small children, big problems
How perceived inequality shapes well-being
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