Job polarisation and the decline of middle-class workers’ wages
Michael Boehm 08 February 2014
Employment in traditional middle-class jobs has fallen sharply over the last few decades. At the same time, middle-class wages have been stagnant. This column reviews recent research on job polarisation and presents a new study that explicitly links job polarisation with the changes in workers' wages. Job polarisation has a substantial negative effect on middle-skill workers.
The decline of the middle class has come to the forefront of debate in the US and Europe in recent years. This decline has two important components in the labour market. First, the number of well-paid middle-skill jobs in manufacturing and clerical occupations has decreased substantially since the mid-1980s. Second, the relative earnings for workers around the median of the wage distribution dropped over the same period, leaving them with hardly any real wage gains in nearly 30 years.
Labour markets Poverty and income inequality
jobs, middle class, labour, routine and non-routine tasks
Why don’t African firms create more jobs?
Leonardo Iacovone, Vijaya Ramachandran 07 February 2014
There is an urgent need for job creation in Africa yet something seems to be stunting firm growth. This column shows that African firms are about 20% smaller than their counterparts in other locations. It suggests small firms put the brake on growth as the burden of dealing with government and labour costs may increase with size, or perhaps as they start facing trust issues between managers and workers.
There is an urgent need for job creation in Africa. Many economies on the continent suffer high rates of under-employment and/or low-productivity employment. In addition, because of demographic factors, many countries anticipate that large numbers of youth will enter the workforce in the near future. This may be beneficial to economic growth but also a potential threat to social stability.
Development Labour markets
Africa, firms, jobs
Social job-search networks and the transition from school to stable employment
Francis Kramarz, Oskar Nordström Skans 17 October 2013
Modest recoveries in employment following the crisis mask severe youth unemployment. Because labour market struggles during the early stages of working life can have persistent negative effects, understanding job-finding networks among youth is key to forming pro-employment policies. This column analyses the transition from schooling to working life of Swedish youth. Close familial ties are important in job searches, especially among the less educated. Preliminary evidence suggests that family association can signal worker ability.
The challenges faced by young workers transitioning from school into stable employment are a major concern throughout the OECD. The search for stable employment is a time-consuming process, particularly in countries without highly developed apprenticeship systems. Many young workers – especially the least educated – are caught struggling for years.
Considering the importance of this process we know surprisingly little about the strategies used by young job searchers looking for entry jobs. Two key insights arise from the large body of research on job-finding networks:
unemployment, jobs, youth unemployment, graduates
Moving towards a single contract? Pros, cons and mixed feelings
Nicolas Lepage-Saucier, Juliette Schleich, Étienne Wasmer 29 July 2013
In hard times, firms tend to offer precarious temporary contracts rather than safer, long-term contracts. In light of this, this column looks at reforming employment protection. Overall, the debate amongst economists focuses far too much on the convergence of these two types of contracts. Policymakers would do well to begin looking at other, more attractive and more implementable options.
Dualism – the division of the labour market between highly paid primary workers in stable jobs and secondary workers in low paying precarious positions – has remained at the forefront of public debates in Europe, where it is pervasive. Between 1985 and 2008, European countries (with the exception of Denmark) experienced an increase in the share of temporary contracts (12% on average in OECD countries): it was particularly high in Spain (24.9% in 2010, from Eurostat) and in the Netherlands (18.5% in 2010, from Eurostat).
jobs, layoffs, precarious employment
Short-time work: Does it save jobs?
Almut Balleer, Britta Gehrke, Wolfgang Lechthaler, Christian Merkl 12 July 2013
During the Great Recession, 25 of 33 OECD countries have used some version of short-time work, a form of publicly subsidised working-time reductions. This column argues that despite its popularity, knowledge of the macroeconomic effects of this measure is limited. Using Germany as a case study, it’s clear that the existence of a short-time work system stabilises the economy and reduces job losses by roughly 20% during a recession. However, short-time work is a lot less effective for Anglo-Saxon labour markets.
Short-time work means that the government subsidises the reduction of the working time of an employee to prevent firing. Many countries allow a firm to use this instrument when the demand for its products is lower than its production potential. Since more firms face a shortfall of demand in recessions, there is a rule-based component of short-time work. This is similar to the income-tax system where the tax bill drops automatically with lower income (without modifying the tax code). In addition, policymakers facilitate the access to short-time work in recessions.
Europe's nations and regions Labour markets
Germany, jobs, Eurozone crisis, short-time work
Policy-related uncertainty: At the root of the lost resilience of Eurozone labour markets?
Alfonso Arpaia, Alessandro Turrini 02 March 2013
Is policy-related uncertainty at the root of lacklustre Eurozone job creation? This column presents evidence that is consistent with this idea. The main implications for policy are straightforward: credible solutions to the Eurozone debt crisis will alleviate the critical unemployment situation of a number of Eurozone countries. How? Not only by helping to kick start investment and production, but also by an additional, direct boost to job creation that is linked to confidence.
The Eurozone, in contrast to the US, exhibited remarkable labour market resilience in the aftermath of the Lehman shock that lead to the Great Recession. Conversely, as the debt crisis developed, labour markets in the Eurozone weakened and unemployment started growing above what was predicted on the basis of GDP growth (Figure 1).
Figure 1 Unemployment changes, actual and predicted on the basis of the Okun law, Eurozone
Europe's nations and regions Labour markets
jobs, Eurozone crisis
The next productivity revolution: The ‘industrial internet’
Marco Annunziata 07 December 2012
Today’s technological innovation is regarded by many as all about social media and entertainment, with no impact on economic growth. This column argues that such scepticism is premature. A closer look at selected industries suggests that the ‘industrial internet‘ – a network that binds together intelligent machines, software analytics and people – through accelerated adoption of sensors and software analytics, will have a powerful impact on productivity and growth.
The largest advanced economies are struggling with weak growth prospects and daunting fiscal challenges. Looking at the macroeconomic equation, there is no easy way out. Looking at the microeconomic level, however, suggests that it is innovation that might come to the rescue.
Frontiers of economic research
global crisis, internet, jobs, industrial internet
Jobless recoveries and the disappearance of routine occupations
Henry Siu, Nir Jaimovich 06 November 2012
The US economy is recovering. But what explains the stubborn malaise in its labour market? This column argues that future recovery from recession will likely be jobless because technological advances and mechanisation now enable troubled firms to shed middle-income jobs in favour of machines and automation. If these jobs are not recouped during subsequent economic recovery, future recoveries may well remain jobless.
Economic recoveries aren’t what they used to be. Since the end of the Great Recession in June 2009:
Global crisis Labour markets Poverty and income inequality
unemployment, Great Depression, jobs, Great Recession, labour
Youth unemployment in Europe: More complicated than it looks
Jacob Funk Kirkegaard 13 October 2012
Youth unemployment in the Eurozone looks like a social and economic disaster in the making – 30%, 40%, even 50% of young people sitting on their hands instead of building skills and experience. This column argues the headline numbers are misleading. While youth unemployment is a serious problem, a large share of EZ youth are not in the labour force, so the headline figures overstate the labour-market ‘scar tissue’ that will be left over from the crisis.
Hardly a day goes by without a reminder of youth unemployment rates in excess of 50% in Greece, Spain, Italy, and other parts of the European periphery. Sometimes the reminders are in the form of rants by economists or pundits about the moral deficiency of EZ demands for austerity and the risks of a lost generation of young people. The challenge for Europe’s youth is stark, and demands for government action are long overdue, especially in liberalising the insider biases that make it hard for outsiders to get jobs.
Labour markets Macroeconomic policy Poverty and income inequality
US, Europe, jobs, youth unemployment
Confronting the jobs crisis under tight fiscal constraints
Benedict Clements, Ruud de Mooij, Gerd Schwartz 09 September 2012
Many advanced country governments face the dual challenge of promoting job growth while pushing ahead with spending cuts. This column discusses how well-designed fiscal policy reforms can help boost employment without busting the government budget.
The economic and social consequences of job losses since the onset of the global crisis have been enormous, as Ben Bernanke recently pointed out (Bernanke 2012). Unemployment rates have soared to an average of 11% in the Eurozone in mid-2012, and youth unemployment has reached alarming levels in many places, exceeding 50% in Greece and Spain.
employment, fiscal policy, jobs, austerity