IZA World of Labor

Evidence-based policy making

IZA World of Labor provides policymakers and society with relevant and succinct information based on sound empirical evidence to help in formulating good policies and best practices. It provides expert know-how in an innovative structure, and a clear and accessible style.

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Does emigration increase the wages of non-emigrants in sending countries?

Emigration can increase the wages of non-emigrants, but may eventually lead to lower productivity and wage losses

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.
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  • How does grandparent childcare affect labor supply?

    Childcare provided by grandparents helps young working mothers, but reduces the labor supply of older women

    Giulio Zanella, March 2017
    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.
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  • Does broadband infrastructure boost employment?

    Broadband infrastructure has differing effects on workers of different skills

    Oliver Falck, March 2017
    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.
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  • For long-term economic development, only skills matter

    Economic growth determines a nation’s long-term economic well-being and crucially depends on skills

    Eric A. Hanushek, March 2017
    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.
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  • Do payroll tax cuts boost formal jobs in developing countries?

    Payroll tax cuts in developing economies might be beneficial to the formal sector, even when the informal sector is large

    Carmen Pagés, March 2017
    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.
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