Development

Low-income countries differ from higher-income countries in that they have large informal sectors, greater prevalence of self-employment and subsistence agriculture, low female labor participation rates and poor labor market conditions. As labor is most often the only asset of someone in poverty, policies that are not associated with job creation may fail to reduce poverty. Contributions to this subject area deal with the potential of labor economics to address those challenges.

  • Migration and human capital accumulation in China

    Migration may generate detrimental long-term impacts by widening the urban–rural educational gap

    The difference in educational attainment between China's urban- and rural-born populations has widened in recent years, and the relatively low educational attainment of the rural-born is a significant obstacle to raising labor productivity. Rural-to-urban migration does not create incentives to enroll in higher education as the availability of low-skill employment in urban areas makes remaining in school less attractive. In addition, the child-fostering and urban schooling arrangements for children of migrants further inhibit human capital accumulation.
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  • The labor market in South Africa, 2000–2017

    The legacy of apartheid and demand for skills have resulted in high, persistent inequality and high unemployment

    The South African economy was on a positive growth trajectory from 2003 to 2008 but, like other economies around the world, it was not spared from the effects of the 2008 global financial crisis. The economy has not recovered and employment in South Africa has not yet returned to its pre-crisis levels. Overall inequality has not declined, and median wages seem to have stagnated in the post-apartheid period. Labor force participation has been stable and although progress has been made, gender imbalances persist.
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  • International trade regulation and job creation Updated

    Trade policy is not an employment policy and should not be expected to have major effects on overall employment

    Trade regulation can create jobs in the sectors it protects or promotes, but almost always at the expense of destroying a roughly equivalent number of jobs elsewhere in the economy. At a product-specific or micro level and in the short term, controlling trade could reduce the offending imports and save jobs, but for the economy as a whole and in the long term, this has neither theoretical support nor evidence in its favor. Given that protection may have other—usually adverse—effects, understanding the difficulties in using it to manage employment is important for economic policy.
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  • Do firms benefit from apprenticeship investments? Updated

    Why spending on occupational skills can yield economic returns to employers

    Robert Lerman, October 2019
    Economists have long believed that firms will not pay to develop occupational skills that workers could use in other, often competing, firms. Researchers now recognize that firms that invest in apprenticeship training generally reap good returns. Evidence indicates that financial returns to firms vary. Some recoup their investment within the apprenticeship period, while others see their investment pay off only after accounting for reduced turnover, recruitment, and initial training costs. Generally, the first year of apprenticeships involves significant costs, but subsequently, the apprentice's contributions exceed his/her wages and supervisory costs. Most participating firms view apprenticeships as offering certainty that all workers have the same high level of expertise and ensuring an adequate supply of well-trained workers to cover sudden increases in demand and to fill leadership positions.
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  • Designing labor market regulations in developing countries Updated

    Labor market regulation should aim to improve the functioning of the labor market while protecting workers

    Gordon Betcherman, September 2019
    Governments regulate employment to protect workers and improve labor market efficiency. But, regulations, such as minimum wages and job security rules, can be controversial. Thus, decisions on setting employment regulations should be based on empirical evidence of their likely impacts. Research suggests that most countries set regulations in the appropriate range. But this is not always the case and it can be costly when countries over- or underregulate their labor markets. In developing countries, effective regulation also depends on enforcement and education policies that will increase compliance.
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  • Public employment in the Middle East and North Africa

    Does a changing public sector workforce in the MENA region provide an opportunity for efficient restructuring?

    Public sector hiring has been an essential component of the social bargains that have maintained political stability in the Middle East and North Africa (MENA). As these bargains eroded, public sector workforces contracted in relative terms owing to a partial freeze on hiring and the promise of lifetime job security for incumbent workers. This had profound effects on the age composition of the workforce. The upcoming retirement of many workers provides an opportunity to restructure public sector hiring to emphasize meritocratic recruitment processes and performance-based compensation systems.
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  • Compliance with labor laws in developing countries Updated

    Non-compliance with labor legislation is widespread and this has critical implications for understanding labor markets in developing countries

    Compliance with minimum wage laws and non-wage conditions of employment often depends on labor market specific factors. In developing countries, many workers still earn less than the legal minimum and lack access to mandated non-wage benefits. Enforcement has not kept up with regulation growth and compliance has not been measured from a multidimensional perspective. Such an approach would help to understand the impact of institutional variables and country-specific approaches on the level of labor law violation. The difference between de facto and de jure regulation remains particularly pertinent in countries where compliance is low.
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  • Do school inputs crowd out parents’ investments in their children?

    Public education tends to crowd out parents’ time and money, but careful policy design may mitigate this

    Birgitta Rabe, May 2019
    Many countries around the world are making substantial and increasing public investments in children by providing resources for schooling from early years through to adolescence. Recent research has looked at how parents respond to children’s schooling opportunities, highlighting that public inputs can alternatively encourage or crowd out parental inputs. Most evidence finds that parents reduce their own efforts as schooling improves, dampening the efficiency of government expenditure. Policymakers may thus want to focus government provision on schooling inputs that are less easily substituted.
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  • Redesigning pension systems Updated

    The institutional structure of pension systems should follow population developments

    Marek Góra, April 2019
    For decades, pension systems were based on the rising revenue generated by an expanding population (the so-called demographic dividend). As changes in fertility and longevity created new population structures, however, the dividend disappeared, but pension systems failed to adapt. They are kept solvent by increasing redistributions from the shrinking working-age population to retirees. A simple and transparent structure and individualization of pension system participation are the key preconditions for an intergenerationally just old-age security system.
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  • Self-employment and poverty in developing countries Updated

    The right policies can help the self-employed to boost their earnings above the poverty level and earn more for the work they do

    Gary S. Fields, March 2019
    A key way for the world’s poor to escape poverty is to earn more for their labor. Most of the world’s poor people are self-employed, but because there are few opportunities in most developing countries for them to earn enough to escape poverty, they are working hard but working poor. Two key policy planks in the fight against poverty should be: raising the returns to self-employment and creating more opportunities to move from self-employment into higher paying wage employment.
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