Evidence-based policy making

The Netherlands has long been an example of a highly and centrally institutionalized labor market paying considerable attention to equity concerns. Fracturing of the labor force by the rapid demise of the single-earner model and accelerating immigration, falling union density, and reductions in welfare state provisions have shrunk labor’s market power centrally and decentrally. Wages lagged far behind productivity growth, job security strongly declined and wage inequality increased. This comes to the fore with a lack of offensive union power when after 2016 labor demand accelerated and the economy and employment quickly reached new heights after the pandemic crisis.

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 moderate. However, labor force participation rates fell sharply, though recovering for women since 2020. Youth unemployment remains high, an overwhelming proportion of the labor force continues to work in the informal sector, labor movement out of agriculture is slow, and there is little evidence of a sustained rise in wages for either unskilled rural or factory workers.

In the first two decades of the 2000s, Turkey has relied on structural change from traditional to modern sectors on the one hand and educational compositional change on the other hand to create formal employment in the modern sector. In 2000 the share of formally employed salaried employees in total employment was less than 40% for men and 30% for women. By 2021, this ration converged to 60% for men and women. Formal employment has increased for both men and women and the gender gap in formal employment declined substantially until 2020. However, relying on structural change and education to improve job quality has likely run its course. Since Covid-19, time-related underemployment has increased from virtually zero to 10% of the labor force and wages are stagnating if not declining.

China experienced significant economic progress over the past few decades, with an annual average GDP growth of approximately 8.6%. 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. However, they still face significant barriers to live in cities permanently, resulting in surging waves of return migration in recent years. Additionally, China faces a low fertility rate of 1.01 births per woman, although the population control policy has been relaxed. Millions of people are employed in the food delivery and courier industry, yet with little social benefit and insurance, which poses potential challenges for China’s labor market stability.

In 2024, Italy's labor market has reached record-high levels of employment and permanent contracts, marking a significant recovery from past downturns. Yet, persistent challenges remain. Youth unemployment and labor market duality remain high, and wages and productivity have stagnated for over two decades. Although several major labor market reforms have aimed to increase flexibility and reduce segmentation, many of their effects remain contested. Female participation has risen and long-term unemployment has declined, yet regional disparities remain deep and persistent, with the south lagging behind. Self-employment is widespread but often low income and non-entrepreneurial, while undeclared work continues to weigh on labor standards and fiscal capacity. Targeted reforms are needed to improve labor market inclusion, reduce fragmentation, and support sustainable growth.

In the early 2000s, Hungary’s employment rate in the working-age population was below 60%. That is now a distant memory, as labor force participation is among the highest in the EU, unemployment is consistently low, and the purchasing power of wages keeps growing at a high rate. While undoubtedly a success story, it is also a cautionary tale of coerced activation, labor market segmentation, rising inequalities, declining social mobility, and strained employment relations.

The privilege or disadvantage of individuals is not determined by a single social identity. The sexual division of labor affects women’s and men’s labor supply, the industries and occupations they enter, their earnings and progress. However, being a racial/ethnic or sexual minority (along with class and age) also influences job opportunities. Evidence shows that minority women’s experiences are unique and jointly determined by their gender and minority status, although the gender effect appears to precede that of minority.

There is little to no consensus in the academic literature over whether centralised, standardised exams are better for students than teacher assessments. While a growing body of evidence from economics highlights bias in teacher assessments, educationalists and psychologists point to the harm caused by high-stakes exam-related stress and argue that exams and teacher assessments generally agree very closely. This lack of academic consensus is reflected in policy: a wide variety of assessment methods are used across (and even within) countries. Policymakers should be aware of the potential for inequalities in non-blind assessments and consider carefully the consequences of relying on a single method of assessment.

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 gross domestic produc (GDP). Despite the initial impact, Covid-19 did not have a lasting negative effect, on average, on women’s participation. At the same time, some countries have made significant progress in increasing participation rates for women, including those who have started from a lower level.

Arguments for increasing gender diversity on corporate 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, mainly in Europe, has increased female representation on boards. Current research does not unambiguously 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, in turn, 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.

Machine learning (ML) improves economic policy analysis by addressing the complexity of modern data. It complements traditional econometric methods by handling numerous control variables, managing interactions and non-linearities flexibly, and uncovering nuanced differential causal effects. However, careful validation and awareness of limitations such as risk of bias, transparency issues, and data requirements are essential for informed policy recommendations.

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.

The relationship between technology and employment has always been a source of concern, at least since the first industrial revolution. However, while process innovation can be job-destroying (provided that its direct labor-saving effect is not compensated through market mechanisms), product innovation can imply the emergence of new firms, new sectors, and thus new jobs (provided that its welfare effect dominates the crowding out of old products). Nowadays, the topic is even more relevant because the world economy is undergoing a new technological revolution centred on automation and the diffusion of Artificial Intelligence (AI).

Over the past decades, academics worldwide have conducted experiments with fictitious job applications to measure discrimination in hiring. This discrimination leads to underutilization of labor market potential and higher unemployment rates for individuals from vulnerable groups. Collectively, the insights from the published research suggest that three groups face more discrimination than ethnic minorities: people with disabilities, less physically attractive people, and older people. The discrimination found in Western economies generally persists across countries and is stable over time, although some variation exists.

Artificial intelligence (AI) has streamlined processes, improved workforce allocation, and created new jobs to meet the needs of digitalization and automation. Individuals with AI capital experience greater employment opportunities and higher wages, particularly in high-skilled roles and large firms. Training in AI helps reduce gender-based digital disparities, empowers individuals, and enhances their employability. Policymakers should promote inclusive AI development policies to prevent widening AI-related divides and unemployment, and to ensure equitable opportunities.

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, Finland 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.

There is a strong link between mothers’ primary school completion (8 or more years of schooling) and better socioeconomic outcomes, such as improved child health and reduced teenage fertility, but establishing causality is challenging. A 1997 compulsory schooling law in Turkey, which extended education from five to eight years, provides a natural experiment to identify causal effects. Empirical evidence suggests that increased female education from such reform significantly improves many socioeconomic outcomes of mothers and their children. While suggested mechanisms include changes in healthcare services utilization and risky pregnancy behaviors, such as smoking, thorough investigation of underlying channels is lacking.

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 due to 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.

Internal 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.

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.