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A bidirectional relationship between
informality and inequality exists; in transition and emerging countries,
higher informality decreases inequality
Higher inequality reduces capital
accumulation and increases the informal economy, which creates additional
employment opportunities for low-skilled and deprived people. As a result,
informal employment leads to beneficial effects on income distribution by
providing sources of income for unemployed and marginalized workers. Despite
this positive feedback, informality raises problems for public finances and
biases official statistics, reducing the effectiveness of redistributive
policies. Policymakers should consider the links between inequality and
informality because badly designed informality-reducing policies may
increase inequality.
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What is there to learn about discrimination in
hiring?
Anti-discrimination policies play an important
role in public discussions. However, identifying discriminatory practices in
the labor market is not an easy task. Correspondence testing provides a
credible way to reveal discrimination in hiring and provide hard facts for
policies, and it has provided evidence of discrimination in hiring across
almost all continents except Africa. The method involves sending matched
pairs of identical job applications to employers posting jobs—the only
difference being a characteristic that signals membership to a group.
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Firm-sponsored training benefits both workers
and firms through higher wages, increased productivity and innovation
Workers participating in firm-sponsored training
receive higher wages as a result. But given that firms pay the majority of
costs for training, shouldn’t they also benefit? Empirical evidence shows
that this is in fact the case. Firm-sponsored training leads to higher
productivity levels and increased innovation, both of which benefit the
firm. Training can also be complementary to, and enhance, other types of
firm investment, particularly in physical capital, such as information and
communication technology (ICT), and in organizational capital, such as the
implementation of high-performance workplace practices.
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Individual bonuses do not always raise
performance; it depends on the characteristics of the job
Economists have for a long time argued that
performance-based bonuses raise performance. Indeed, many firms use bonuses
tied to individual performance to motivate their employees. However, there
has been heated debate among human resources professionals recently, and
some firms have moved away from individual performance bonuses toward fixed
wages only or collective performance incentive schemes such as
profit-sharing or team incentives. The appropriate approach depends on each
company's unique situation, and managers need to realize that individual
bonus plans are not a panacea to motivate employees.
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Workers care about employers’ social causes, but
the public sector does not attract particularly motivated employees
Employees are more willing to work and put
effort in for an employer that genuinely promotes the greater good. Some are
also willing to give up part of their compensation to contribute to a social
cause they share. Being able to attract a motivated workforce is
particularly important for the public sector, where performance is usually
more difficult to measure, but this goal remains elusive. Paying people more
or underlining the career opportunities (as opposed to the social aspects)
associated with public sector jobs is instrumental in attracting a more
productive workforce, while a proper selection process may mitigate the
negative impact on intrinsic motivation.
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The efficacy of hiring strategies hinges on a
firm’s simultaneous use of other policies
When an employer fills a vacancy with one of
its own workers (through promotion or horizontal transfer), it forgoes the
opportunity to fill the position with a new hire from outside the firm.
Although firms use both internal and external hiring methods, they
frequently favor insiders. Internal and external hires differ in observable
characteristics (such as skill levels), as do the employers making the
hiring decisions. Understanding those differences helps employers design and
manage hiring policies that are appropriate for their organizations.
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Sexual orientation seems to affect job access
and satisfaction, earning prospects, and interaction with colleagues
Studies from countries with laws against
discrimination on the basis of sexual orientation suggest that gay and
lesbian employees report more incidents of harassment and are more likely to
report experiencing unfair treatment in the labor market than are
heterosexual employees. Both gay men and lesbians tend to be less satisfied
with their jobs than their heterosexual counterparts. Gay men are found to
earn less than comparably skilled and experienced heterosexual men. For
lesbians, the patterns are ambiguous: in some countries they have been found
to earn less than their heterosexual counterparts, while in others they earn
the same or more.
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Greater representation of women may better
represent women’s preferences but may not help economic performance
Women's representation on corporate boards,
political committees, and other decision-making teams is increasing, this is
in part because of legal mandates. Evidence on team dynamics and gender
differences in preferences (for example, risk-taking behavior, taste for
competition, prosocial behavior) shows how gender composition influences
group decision-making and subsequent performance. This works through
channels such as investment decisions, internal management, corporate
governance, and social responsibility.
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What evidence exists on whether bad bosses
damage workers’ performance, or good bosses enhance it?
A good boss can have a substantial positive
effect on the productivity of a typical worker. While much has been written
about the peer effects of working with good peers, the effects of working
with good bosses appear much more substantial. A good boss can enhance the
performance of their employees and can lower the quit rate. This may also be
relevant in situations where it is challenging to employ incentive pay
structures, such as when quality is difficult to observe. As such, firms
should invest sufficiently in the hiring of good bosses with skills that are
appropriate to their role.
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Gender quotas for women on boards of directors
improve female share on boards but firm performance effects are mixed
Arguments for increasing gender diversity on
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 has increased female representation on boards. Current research
does not 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 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.
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