The Chinese labour market: High unemployment coexisting with a labour shortage
Yang Liu, 19 July 2014
In China, both unemployment and a labour shortage have emerged as problems in recent years. This column explains their co-existence by a decrease in the matching efficiency in the labour market. One way to improve the matching efficiency, though difficult to implement in the short-run, is through the creation of more employment agencies. Companies can benefit if they invest more in recruiting activities.
In China, both a labour shortage and unemployment have emerged as problems in recent years. The number of university students scheduled to graduate in June 2014 is 7.27 million, increasing with 280,000 from 2013 (MHRSS 2014). Following 2013 – at the time considered the most difficult year for job seekers in history – 2014 is expected to be even harsher.
Topics: Labour markets
Tags: China, labour shortage, unemployment
Globalisation, job security, and wages
Kerem Cosar, Nezih Guner, James R Tybout, 7 July 2014
Trade liberalisations are often accompanied by labour market reforms, making it difficult to isolate their effects. This column discusses the effects of trade liberalisation, globalisation, and labour-market reforms on the Colombian labour market. Reduced trade frictions increased cross-firm wage inequality and shifted the firm-size distribution rightward, with offsetting effects on overall wage inequality. Average income increased, but the gains were concentrated among employees of large, productive firms with access to export markets. Greater trade openness also increased job turnover.
How does increased openness to international trade affect workers’ wages and job security? This question is central to the public debate concerning the effects of globalisation, but convincing quantitative answers have been difficult to come by. One fundamental reason is that major trade liberalisation episodes have often coincided with labour reforms (Heckman and Pages 2004).
Topics: International trade, Labour markets
Tags: Colombia, exports, globalisation, Inequality, job security, labour market reforms, productivity, trade liberalisation, unemployment, wages
The Great Recession’s long-term damage
Laurence Ball, 1 July 2014
Whereas textbook macroeconomic theory suggests that output should return to potential after a recession, there is mounting evidence that deep recessions have highly persistent effects on output. This column reports estimates of the long-term damage caused by the Great Recession. In most countries in the sample, the loss of potential output – 8.4% on average – has been almost as large as the loss of actual output. In the countries hit hardest by the recession, the growth rate of potential output is much lower today than it was before 2008.
According to macroeconomics textbooks, a fall in aggregate demand causes a recession in which output drops below potential output – the normal level of production given the economy’s resources and technology. This effect is temporary, however.
Topics: Global crisis
Tags: Great Recession, growth, hysteresis, OECD, potential output, unemployment
The great British jobs and productivity mystery
João Paulo Pessoa, John Van Reenen, 28 June 2014
The fall in productivity in the UK following the Great Recession was particularly bad, whereas the hit to jobs was less severe. This column discusses recent research exploring this puzzle. Although the mystery has not been fully solved, an important part of the explanation lies in the flexibility of wages combined with very low investment.
With some economic recovery having finally got underway, the UK is still feeling the repercussions of the so-called ‘Great Recession’. National output, as measured by GDP, fell by over 7% from its peak in January 2008 – the biggest fall since the inter-war years – and only returned to its pre-crisis level in April 2014 (NIESR 2014).
Topics: Europe's nations and regions
Tags: Great Recession, productivity growth, UK, unemployment
Falling real wages in the UK
David Blanchflower, Stephen Machin, 12 May 2014
The pain of the UK’s Great Recession has been spread more evenly than previous downturns, with falling real wages across the distribution. This column asks why this happened, how it compares with the US experience, and what the prospects are for recovering lost wage gains.
There have been unprecedented falls in real wages in the UK since the start of the recession triggered by the financial crisis of 2008. This did not happen in previous economic downturns – median real wage growth slowed down or stalled, but it did not fall.
Topics: Labour markets, Poverty and income inequality
Tags: Great Recession, Inequality, real wages, UK, unemployment, US, wages
From sick man of Europe to economic superstar: Germany’s resurgence and the lessons for Europe
Christian Dustmann, Bernd Fitzenberger, Uta Schönberg, Alexandra Spitz-Oener, 3 February 2014
In a slow-growth, high-unemployment continent, Germany’s performance stands out. The success is often ascribed to the politically difficult Hartz labour-market reforms. This column discusses evidence to the contrary. The Hartz reforms played no essential role. Rather, the key was the threat of offshoring to central Europe together with the pre-Hartz structure and autonomy of the German labour-market institutions. This structure allowed trade unions to make wage concessions necessary to adapt to the new realities. Other nations should decentralise bargaining to the firm level while keeping workers’ representatives.
In the late 1990s and into the early 2000s, Germany was called ‘the sick man of Europe’ (Bertram 1997). Today, Germany is Europe’s economic superstar.
Topics: Labour markets
Tags: Hartz reforms, unemployment
Labour markets reforms and unemployment: Estimating the effects of wage moderation in the Spanish economy
Miguel Cardoso, Rafael Doménech, Juan Ramón García, Camilo A. Ulloa, 20 December 2013
After witnessing the destruction of almost 18% of its employment during the crisis, the Spanish economy is now recovering. Understanding the effects of the recent labour market reform and wage moderation is crucial in accelerating employment creation. Correctly implemented and accompanied by appropriate policies at the European level, labour and products market structural policies could be the solution to the anomalously high unemployment rate in Spain
With its huge unemployment rate, if there is a country in need of assessment of labour markets reforms and wage moderation, it is Spain. In the third quarter of 2013 the unemployment rate reached 26% of the labour force, more than twice the Eurozone’s 12.1%.
Topics: Europe's nations and regions, Global crisis, Labour markets
Tags: labour-market flexibility, reforms, unemployment
A penny spent is a penny earned (by someone else): Measuring GDP
S Borağan Aruoba, Francis X. Diebold, Jeremy J Nalewaik, Frank Schorfheide, Dongho Song, 3 December 2013
GDP can be estimated by measuring either expenditure or income. Since a penny spent is a penny earned, both methods should give the same answer, but there is substantial measurement error in both estimates. This column presents a new method of measuring US GDP that blends these two estimates. According to the new measure, GDP growth is about twice as persistent as the current headline measure implies. The new measure also makes the current recovery look stronger, especially in 2013.
“A growing number of economists say that the government should shift its approach to measuring growth. The current system emphasises data on spending, but the bureau also collects data on income. In theory the two should match perfectly – a penny spent is a penny earned by someone else.
Topics: Frontiers of economic research
Tags: data, GDP, measurement, national income accounting, unemployment, US
Currency wars and the euro
Jens Nordvig, 25 November 2013
Having promised to do ‘whatever it takes’ to ensure the survival of the euro, the ECB now faces the problem of record high unemployment combined with a strong currency. There is accumulating evidence that the ECB is more willing to fight currency appreciation than the Bundesbank would have been. Capital inflows have been a key source of recent upward pressure on the euro. Should this continue, the ECB may need to intervene more aggressively in order to promote economic recovery in the Eurozone.
A new battle for the ECB to fight
Last year, the ECB entered an existential battle for the euro. By promising to do ‘whatever it takes’ to safeguard the euro, the ECB managed to calm sovereign debt markets and engineer a much-needed easing of overall credit conditions in the Eurozone.
Topics: EU institutions, Exchange rates, Monetary policy
Tags: Bundesbank, Currency wars, ECB, euro, eurozone, unemployment
Can temporary in-work support help the long-term unemployed enter sustained work?
Richard Dorsett, 21 November 2013
Individuals moving from long-term unemployment into work face a number of challenges. This column discusses the use of temporary in-work support during this transition. Recent experimental evidence has shown the potential for such support to have a positive long-term effect. It can increase not only employment entry but also employment retention, and so may provide a means of addressing the low pay, no pay cycle.
There is growing awareness among policymakers that, in order to break the so-called ‘low pay, no pay’ cycle, labour market programmes must do more than just encourage job entry. To help the unemployed achieve long-term self-sufficiency, they must also support them in work.
Topics: Labour markets
Tags: hysteresis, incentives, low pay, tax credits, unemployment