There is indisputable evidence that manufacturing employment as a share of total employment in the US has been declining. This column argues that focusing on employment masks important signs of growth of the manufacturing sector. Using most up-to-date data, the authors reason that the US manufacturing base is growing larger, more productive and competitive. The expansion of operations abroad by US manufacturing multinationals leads to particularly strong increases in economic activity – including creation of greater numbers of high-paying manufacturing jobs – by those same firms in the US domestic economy.
Recently, a number of studies, descriptive employment statistics, and statements by US politicians have raised concerns about the strength of US manufacturing. For example, in a January 2014 Journal of Economic Perspectives article, Martin Baily and Barry Bosworth expressed concern about the recent absolute decline in US manufacturing employment, as well as the long-recognised decreasing share of manufacturing within overall US employment.
Employee satisfaction and firm value: A global perspective
Alex Edmans25 July 2014
Happy workers might well be more productive than unhappy ones, but high worker satisfaction could also be a sign that workers are overpaid or underworked. This column examines the link between worker satisfaction and future stock returns in 14 countries. In most but not all countries, employee satisfaction is associated with higher future stock returns. Abnormal returns to companies with high worker satisfaction are significantly increasing in the flexibility of their countries’ labour markets.
Is employee satisfaction good or bad for firm value? While it may seem natural that companies should do better if their workers are happier, this relationship is far from obvious. The 20th-century way of managing workers (e.g. Taylor 1911) is to view them as any other input – just as managers shouldn’t overpay for or underutilise raw materials, they shouldn’t do so with workers. High worker satisfaction may be a sign that workers are overpaid or underworked. However, the world is different nowadays.
Sourcing foreign inputs to improve firm performance
Maria Bas, Vanessa Strauss-Kahn14 July 2014
The rise of trade in intermediate inputs is well documented, but its role in shaping domestic economies is not yet completely understood. This column presents evidence from French firms on the effects of importing intermediate inputs. Firms importing more varieties of intermediate inputs increased their productivity and exported more varieties. Foreign inputs from the most advanced economies have the strongest effect on firm productivity, but imported inputs from all countries help raise the number of export varieties.
Should trade policy fight or promote imports of intermediate inputs? While several studies have shown the recent increase in imports of intermediate goods, their role in shaping domestic economies is not yet completely understood. Following the work of Feenstra and Hanson (1996), a large literature focuses on the impact of imported intermediate inputs on employment and inequality. It concludes that, like outsourcing, imported intermediate inputs have a role (although limited) in explaining job losses and wage reductions.
DynEmp: New cross-country evidence on the role of young firms in job creation, growth, and innovation
Chiara Criscuolo, Peter N. Gal, Carlo Menon26 May 2014
Young firms are known to play a central role in job creation. This column presents the results of a new OECD project on the dynamics of employment (DynEmp) based on an innovative methodology using firm-level data. It confirms that young firms play a central role in creating jobs, and in enhancing growth and innovation. Public policies can help by enabling firms to experiment, and by fostering the reallocation of resources towards the most productive firms. Structural reforms to product, labour, and capital markets, as well as bankruptcy laws that do not overly penalise failure, are particularly relevant.
Since well before the crisis, many OECD economies have been confronted with sluggish productivity growth. In the aftermath of the crisis, job creation has also stalled and has become an important policy issue. Business dynamics are at the core of the creative destruction process. Available evidence points to significant cross-country heterogeneity in the dynamism of businesses, even after taking into account differences in sectoral composition. This raises policymakers’ interest in understanding the role of framework conditions in this area.
Firm age, investment opportunities, and job creation
Manuel Adelino, Song Ma, David Robinson12 February 2014
There is a strong link between entrepreneurship and growth – young firms were responsible for almost all net job creation in the US economy over the last 30 years. This column presents new research into the responsiveness of firms of different ages to investment opportunities. Firms aged 0–23 months create about twice the total number of new jobs in response to local income shocks than firms that are more than six years old.
Hans Degryse, Martin Brown, Daniel Hoewer, María Fabiana Penas
Economists have long been concerned with understanding how firms respond to changing investment opportunities. Indeed, this question is central to ongoing policy discussions about economic growth and job creation, since the way firms create jobs is by increasing investment and employment in response to new economic opportunities. The startup process and economic growth are deeply interconnected – over the last 30 years, young firms were responsible for almost all net job creation in the economy (Haltiwanger et al. 2009, 2013, Stangler and Litan 2009).
Minimum wages: the effects on employment and labour-force turnover
Pierre Brochu, David A Green22 January 2014
Economic research finds little evidence in support of the hypothesis that an increase in minimum wages significantly affects employment – either positively or negatively. This column discusses a study of the impact of minimum-wage changes on turnover rates. Minimum-wage increases are associated with a lower probability that a job will end, and with a lower probability that an unemployed person will find work. The former effect is established only for newly hired workers. Increases in the minimum wages are also associated with more stable jobs for all low educated workers. Thus, the trade-off between fewer jobs with higher wages and more job stability versus easier access to jobs should be taken into account in the minimum-wage policy debates.
On 14 January 2014 a group of 75 economists, including seven Nobel laureates, released a letter calling for an increase in the US minimum wage (Woellert 2014). At the same time, George Osborne, the Conservative Chancellor of the Exchequer in the UK, has called for the minimum wage in that country to rise by more than the rate of inflation this year (BBC 2014). In both cases, the key argument for an increase concerns a need for fairness in insuring that the lowest paid workers share in the benefits of post-recession economic growth.
Africa's recent growth is impressive, yet its rate of stable job creation is anything but. This column argues that Africa needs rapid growth in stable, wage-paying jobs in order to ensure future stable growth and prosperity. African governments must develop and implement targeted jobs strategies – which focus on labour-intensive, competitive industries – to get the most out Africa’s rapid economic emergence.
Africa’s recent economic performance has been impressive. With average annual growth of 5.1% over the past ten years, the continent is the second fastest-growing region in the world (IMF 2012). The share of people in extreme poverty is falling. Since 2000, 31 million African households have joined a 90 million-strong consuming class with discretionary income to spend or save1.
Confronting the jobs crisis under tight fiscal constraints
Benedict Clements, Ruud de Mooij, Gerd Schwartz09 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.
Vocational education facilitates entry into the labour market but hurts employment at older ages
Eric Hanushek, Ludger Woessmann, Lei Zhang21 November 2011
Does vocational education have advantages over general education? This column presents new evidence suggesting that when economies change rapidly and the full life-cycle is taken into perspective, this advantage comes at the disadvantage of reduced employment opportunities in old age.
Responding in part to the economic downturn, the European Commission (2010) recently issued the Bruges Communiqué that called for enhanced vocational education and training (VET). It argued: “If Europe is to maintain its position as the strongest exporter of industrial products in the world, it must have world class VET.
In many OECD countries, the Great Recession has spawned new social programmes allowing employers to temporarily reduce hours works while reimbursing employees for lost income. The authors of CEPR DP8214 investigate how effectively these programmes prevent a surge in unemployment. They find, with a few caveats, significant benefits.