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.

  • Youth bulges and youth unemployment

    Youth bulges are not a major factor explaining current levels of youth unemployment

    David Lam, May 2014
    The youth population bulge is often mentioned in discussions of youth unemployment and unrest in developing countries. But the youth share of the population has fallen rapidly in recent decades in most countries, and is projected to continue to fall. Evidence on the link between youth bulges and youth unemployment is mixed. It should not be assumed that declines in the relative size of the youth population will translate into falling youth unemployment without further policy measures to improve the youth labor market.
  • Who owns the robots rules the world

    Workers can benefit from technology that substitutes robots or other machines for their work by owning part of the capital that replaces them

    Richard B. Freeman, May 2015
    Robots, that is any sort of machinery from computers to artificial intelligence programs that provides a good substitute for work currently performed by humans, can increasingly replace workers, even highly skilled professionals, and thus reduce opportunities for good jobs and pay. But, with appropriate policies, the higher productivity due to robots can improve worker well-being by raising incomes and creating greater leisure for workers. Consider the way Google reduces the need for reference librarians and research assistants, or the way massive open online courses reduce the need for professors and lecturers. How these new technologies affect worker well-being and inequality depends on who owns them.
  • What can be expected from productive inclusion programs?

    Grants and training programs are great complements to social assistance to help people out of poverty

    Jamele Rigolini, October 2016
    Productive inclusion programs provide an integrated package of services, such as grants and training, to promote self-employment and wage employment among the poor. They show promising long-term impacts, and are often proposed as a way to graduate the poor out of social assistance. Nevertheless, neither productive inclusion nor social assistance will be able to solve the broader poverty challenge independently. Rather, the future is in integrating productive inclusion into the existing social assistance system, though this poses several design, coordination, and implementation challenges.
  • Upgrading technology in Central and Eastern European economies

    Existing policies in Eastern Europe will not sufficiently promote technological innovation

    Slavo Radosevic, February 2017
    The future growth of Central and Eastern Europe (CEE) depends on upgrading technology, exporting and coupling domestic technology efforts while improving their position in global value chains. Current policies in the region are not geared to these tasks, despite the availability of huge financial opportunities in the form of EU structural funds. Existing policies are overly focused on research and development (R&D) and neglect sources of productivity growth, such as management practices, skills, quality, and engineering. The challenge is how to design industrial and innovation policies so that they promote modernization and drive structural change.
  • Trade, foreign investment, and wage inequality in developing countries

    Exposure to foreign trade raises the skill premium in countries with a large stock of educated workers and reduces it in others

    Alessandro Cigno, November 2015
    Liberalization of foreign trade and investment raises the domestic ratio of skilled to unskilled wages (skill premium) if the country has a sufficiently well-educated workforce, but lowers it otherwise. Wide wage inequality is undesirable on equity grounds, especially in poor countries where the bottom wage is close to the breadline; but it gives parents an incentive to invest in their children’s education. The incentive will be ineffective, however, if parents cannot borrow for their child’s education because of underdeveloped credit markets or because they are too poor to finance the investment from their own income and savings.
  • Trade liberalization and poverty reduction

    Trade can reduce poverty when accompanied by appropriate policies and institutions

    Devashish Mitra, June 2016
    Economic growth is essential, though not sufficient, for poverty reduction in developing countries. Research based on many different approaches and including both cross-
country and intra-country studies shows that international trade can contribute to economic growth, and thus can help many poor people escape poverty. However, the domestic environment has to be conducive to realizing the poverty-reduction benefits of increased trade. Complementary domestic policies and institutions needed include regulations that foster labor mobility, adequate financial development, and good public infrastructure.
  • The welfare impact of rising food prices

    The welfare impact of rising food prices differs for net food consumers and net producers

    Ralitza Dimova, March 2015
    Dramatic food price spikes in recent years have stimulated debate on the welfare implications of food price risk. According to the Food and Agriculture Organization of the United Nations, the number of undernourished people in sub-Saharan Africa rose to a record 265 million in 2009. There is a gradually developing policy consensus in favor of income redistribution to the poor in developing countries hit by the food price crisis. This recommendation makes sense when the poor are net food consumers, but it ignores the possibility that some poor people are net producers of food and so are likely to benefit from rising food prices.
  • 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.
  • The labor market in India since the 1990s

    Productivity growth and low unemployment have not been matched by comparable rises in wages

    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 low. However, labor force participation rates have fallen sharply, especially for women. In addition, youth unemployment remains stubbornly high, an overwhelming proportion of the labor force continues to work in the informal sector, and there is little evidence of a sustained rise in wages for either unskilled rural or factory workers.
  • The labor market in Brazil, 2001–2015

    An ongoing crisis threatens Brazil’s recent increased earnings and its decreased inequality and gender and ethnic gaps

    From 2001 to 2015, Brazil experienced a profound reduction in income inequality. The commodities boom and some institutional changes in the early 2000s kick-started the Brazilian labor market, increasing the quantity of formal jobs and earnings, especially for the poorest workers. Significant increases in average schooling and the real minimum wage helped reduce ethnic, gender, and regional earnings gaps, though all remain rather high. However, since 2014 a major fiscal crisis has negatively affected GDP and the labor market, seriously threatening these achievements.
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