Labor markets and institutions

Institutions have important consequences for the performance of households, companies, governments, and entire markets—they determine the welfare of nations. Contributions to this subject area explore the underlying mechanisms and the politico-economic determinants of such structures. Many provide background analyses that offer evidence on how new institutions and policies would affect labor markets.

  • Working in family firms

    Family firms offer higher job security but lower wages than other firms

    Thomas Breda, April 2018
    Family firms are ubiquitous in most countries. The differences in objectives, governance, and management styles between those firms and their non-family counterparts have several implications for the workforce, which scholars have only recently started to investigate. Family firms offer greater job security, employ different management practices, have a comparative advantage to avoid conflicts when employment relations are more hostile, and provide insurance to workers through implicit contracts when labor market regulation is limited. But all this also comes at a cost.
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  • Working hours: Past, present, and future

    Work hours have been falling in developed countries—But where will they go in the future?

    Peter Dolton, November 2017
    Working hours across the world are falling, but considerable variation remains. In some countries people work 70% more hours per year, on average, than in other countries. Much of this variation is due to differences in the prevalence of part-time work and patterns of female labor market participation. Looking ahead, the question of how reducing working hours will affect productivity is significant. In addition, how individuals divide up their leisure and work time and what the appropriate work−life balance is in an increasingly technological future are important concerns.
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  • Women in crime

    Over the last 50 years women have been increasing their participation in the labor market and in the crime market

    Nadia Campaniello, November 2014
    In recent decades, women’s participation in the labor market has increased considerably in most countries and is converging toward the participation rate of men. Though on a lesser scale, a similar movement toward gender convergence seems to be occurring in the criminal world, though many more men than women still engage in criminal activity. Technological progress and social norms have freed women from the home, increasing their participation in both the labor market and the crime market. With crime no longer just men’s business, it is important to investigate female criminal behavior to determine whether the policy prescriptions to reduce crime should differ for women.
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  • Why is youth unemployment so high and different across countries?

    Young people experience worse labor market outcomes than adults worldwide but the difference varies greatly internationally

    Francesco Pastore, January 2018
    In Germany, young people are no worse off than adults in the labor market, while in southern and eastern European countries, they fare three to four times worse. In Anglo-Saxon countries, both youth and adults fare better than elsewhere, but their unemployment rates fluctuate more over the business cycle. The arrangements developed in each country to help young people gain work experience explain the striking differences in their outcomes. A better understanding of what drives these differences in labor market performance of young workers is essential for policies to be effective
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  • Why does part-time employment increase in recessions?

    Jobs can change quickly from full- to part-time status, especially during economic downturns

    Daniel Borowczyk-Martins, October 2017
    The share of workers employed part-time increases substantially in economic downturns. How should this phenomenon be interpreted? One hypothesis is that part-time jobs are more prevalent in sectors that are less sensitive to the business cycle, so that recessionary changes in the sectoral composition of employment explain the increase in part-time employment. The evidence shows, however, that this hypothesis only accounts for a small part of the story. Instead, the growth of part-time work operates mainly through reductions in working hours in existing jobs.
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  • 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.
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  • Who benefits from the minimum wage—natives or migrants?

    There is no evidence that increases in the minimum wage have hurt immigrants

    Madeline Zavodny, December 2014
    According to economic theory, a minimum wage reduces the number of low-wage jobs and increases the number of available workers, allowing greater hiring selectivity. More competition for a smaller number of low-wage jobs will disadvantage immigrants if employers perceive them as less skilled than native-born workers—and vice versa. Studies indicate that a higher minimum wage does not hurt immigrants, but there is no consensus on whether immigrants benefit at the expense of natives. Studies also reach disparate conclusions on whether higher minimum wages attract or repel immigrants.
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  • What makes a good job? Job quality and job satisfaction

    Job satisfaction is important to well-being, but intervention may be needed only if markets are impeded from improving job quality

    Andrew E. Clark, December 2015
    Many measures of job satisfaction have been trending downward. Because jobs are a key part of most people’s lives, knowing what makes a good job (job quality) is vital to knowing how well society is doing. Integral to worker well-being, job quality also affects the labor market through related decisions on whether to work, whether to quit, and how much effort to put into a job. Empirical work on what constitutes a good job finds that workers value more than wages; they also value job security and interest in their work. Policy to affect job quality requires information on the cost of the different aspects of job quality and how much workers value them.
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  • 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.
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  • Wage policies in the public sector during wholesale privatization

    Does the transition to market economies imply growing wage inequality and, if so, along what dimensions?

    Jelena Nikolic, October 2017
    Examining the implications of changes in public sector wage-setting arrangements due to privatization is a relatively new area of economics research, with few studies having analyzed the effects of public sector restructuring on relative wages in developed countries. There is, however, a growing empirical literature that measures the effects of transitioning from central planning to market-based systems on public–private sector wage differentials. Policymakers can learn from this evidence about the ways in which ownership transformation affects the distribution of wages in both the public and private employment sectors.
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