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April 28, 2015

The FutureWork Opinion Series - Pierre Cahuc

In this opinion series, part of our FutureWork campaign, we are asking key figures from the IZA World of Labor community to speculate on the future of the global labor economic landscape. Our Subject Editor for Institutions, Pierre Cahuc, gives his responses.

1. What do you see as the most significant trends for the world of work in the next five years?
Nobody can predict the future, but the recent past shows important trends in the world of work in developed countries. The most striking phenomena are the very high unemployment rates of young people in many countries, aging populations, and the progressive disappearance of jobs involving routine tasks. There are also important changes in labor markets institutions, such as a drop in the prevalence of unions and the decentralization of wage bargaining.

2. What is the biggest policy challenge facing decision makers in your field and in your region?
Unemployment amongst young and unskilled people is certainly the biggest policy challenge in France, and in many European countries. Policymakers need to take vital action to facilitate the entry of these segments of the population into employment. Such policies must be related to education and vocational training but also to issues related to the global regulation of labor markets, such as wage formation and employment protection legislation. Several of IZA World of Labor’s articles provide valuable recommendations to act efficiently on these issues.

3. Why is more evidence-based debate and policy making needed?
The predictions of economic analysis are often ambiguous due to the absence of empirical results. For instance, it can be argued that increasing wages is favorable because it is a means to increase the demand for the goods produced by firms. On the other hand, it can also be argued that higher labor costs reduce incentives to recruit workers and therefore destroy jobs. We need convincing empirical contributions to know what is really going on and to then take relevant actions.

4. What are the biggest barriers to policymakers adopting evidence-based decision making and how can they be overcome?
I think that the biggest barrier is the lack of confidence in economic analysis. In many fields, there is not enough empirical evidence, and some research studies yield results that are difficult to understand. It is difficult for decisions makers to trust results that they do not understand. Economists must produce more convincing empirical work and disseminate their results to make them understandable by a large audience.

5. What are the biggest opportunities of wider adoption of evidence-based policy making?
Opportunities are numerous. Many politicians still run elections with economic programs that would have catastrophic consequences if they were implemented because they rely on ideological arguments without the empirical counterpart. And sometimes, they are elected! The last election in Greece is a recent good example. Dissemination of economic knowledge based on empirical evidence is a way to limit the frequency of such economically disastrous events.

Look out for more opinions from IZA World of Labor experts throughout this week. Follow us on social media to keep up to date with our FutureWork campaign, and tweet your opinions to us @IZAWorldOfLabor

Please note:
We recognize that IZA World of Labor articles may prompt discussion and possibly controversy. Opinion pieces, such as the one above, capture ideas and debates concisely, and anchor them with real-world examples. Opinions stated here do not necessarily reflect those of the IZA.