13/11/18 1 Economic Policy #08 Labour Market Policy Labour Market Policy •  Labor market: defini=ons and indicators •  Efficiency of labor market •  Policies – ac=ve labor market policies – regula=ons of labor market – labor taxa=on – social policy incen=ves EP#08: Labor Market Policy 2 Defini=ons Total popula=on P Working age popula=on (15-64): T Labour Force A Self-employed Employment: E Inac=ve I Employees Unemployed U less than a year more than a year full =me job (permanent or temporary) part-=me job (permanent or temporary) EP#08: Labor Market Policy 3 13/11/18 2 Basic indicators •  Par$cipa$on rate: A/T •  Employment rate: E/T •  Unemployment rate: U/A EU-27 (2016) •  P = 510,3 mil. •  T = 333,2 mil. (15 u* : expansionary policy • u < u* : restrictive policy •  Lower u* => labor market policy, structural policy •  Move u closer to u* => stabiliza=on policy EP#08: Labor Market Policy 11 The NAIRU in OECD countries The NAIRU in OECD countries 23 Source: OECD, Economic Outlook, n 80, June 2011. %ofthelaborforce The NAIRU in OECD countries 23 Source: OECD, Economic Outlook, n 80, June 2011. %ofthelaborforce EP#08: Labor Market Policy 12 13/11/18 5 The Beveridge curve (BC) © 2003 South-Western 4 DistinguishingBetween Types of Unemployment Figure 13.3 •  Cyclical fluctua=ons move up and down the unemployment-vacancy combina=on along given BC. •  Change in the efficiency of the labor market cause shij of the BC. EP#08: Labor Market Policy 13 The Beveridge curve in EU 09.11.17 21:06File:BevCurve Figure1.PNG - Statistics Explained Stránka 1 z 1http://ec.europa.eu/eurostat/statistics-explained/index.php/File:BevCurve_Figure1.PNG (jvs_q_nace2) and (lfsq_urgan) " /> File:BevCurve Figure1.PNG Size of this preview: 800 × 496 pixels. Original file ​(988 × 613 pixels, file size: 36 KB, MIME type: image/png) File history Click on a date/time to view the file as it appeared at that time. Date/TimeDate/Time ThumbnailThumbnail DimensionsDimensions UserUser CommentComment current 16:35, 19 December 2016 988 × 613 (36 KB) Ronkopi (Talk | contribs) You cannot overwrite this file. File usage The following file is a duplicate of this file (more details): File:BC Figure2.PNG The following page links to this file: Job vacancy and unemployment rates - Beveridge curve Retrieved from "http://ec.europa.eu/eurostat/statistics-explained/index.php?title=File:BevCurve_Figure1.PNG&oldid=320136" These shijs in the BC are sugges=ve of structural changes in the labor market. EP#08: Labor Market Policy 14 Labor market regula=ons •  Regula=on of dismissal •  Minimal wages •  Taxa=on •  Social policy incen=ves EP#08: Labor Market Policy 15 13/11/18 6 Minimal wages •  Most countries in the world have some form of minimum wage, the scale, eligibility and opera=onal details change from country to country. •  A large body of theore=cal and empirical research examines the effects of the minimum wage –  In theory: no clear-cut predic=ons (depends on compe==veness of labor markets –  Empirical results: also point in both direc=on – posi=ve and nega=ve effects of the minimum wage on employment EP#08: Labor Market Policy 16 EP#08: Labor Market Policy 17 | Click for the Finfacts Ireland Portal Homepage | Finfacts Business News Centre Home News Irish Irish Economy EU Economy US Economy UK Economy Global Economy International Property Innovation Analysis/Comment Asia Economy Finfacts changes from 2015 RSS FEED How to use our RSS feed Follow Finfacts on Twitter NEWS : GLOBAL ECONOMY Last Updated: May 7, 2015 - 2:47 PM Tweet Minimum wage levels in OECD countries By Michael Hennigan, Finfacts founder and editor May 7, 2015 - 8:40 AM Email this article Printer friendly page The Organisation for Economic Cooperation and Development (OECD) has published a new briefing on minimum wages (MW) in the 34-member country OECD area and it contains comparisons for minimum wage levels between countries, as well as the differing tax and contributions paid by employers and workers. It also highlights the need for governments to co-ordinate minimum wages with other policies, especially taxes and benefits, and regularly adjust them in light of economic and job market developments. Minimum wage levels compared to the median wage (the mid-point where 50% of a population are above and 50% below) vary widely across OECD countries, ranging from 40% or lower in Czech Republic, Mexico, United States, Estonia and Japan to more than 60% in Slovenia, France, Chile and Turkey. This translates into take-home pay of less than US$3 per hour in Mexico, Latvia, Chile and Estonia, Hungary and the Czech Republic to over $9 in Luxembourg and Australia. The briefing also examines family incomes that a minimum-wage job accrues after accounting for tax burdens and government transfers. "On this measure, countries differ enormously and in some countries incomes of full-time minimum-wage earners can be well below commonly used poverty lines. In these cases, even working very long hours may not enable families to escape income poverty as conventionally measured." The OECD said that for example, a half-time MW job in Australia, Ireland and the United Kingdom can be sufficient to take a family with two children out of poverty, and out-of work benefits in Japan provide income close to the poverty threshold even when no-one in a twoparent family works. However, in most countries, a single full-time MW job leaves two-parent families below the poverty line and employment of both parents is needed to ensure that children do not grow Custom Search Search GLOBAL ECONOMY Latest Headlines Strong Swiss franc gloom deepens for exporters Global investors shift focus to China; EM outflows surge to $1tn in 13 months Global oil glut will continue into 2016 Stable growth momentum in OECD area but slowing expected in China Prices for major food commodities in July lowest since September 2009 Global manufacturing in July weakest level in two years US, China and UK lead top 25 target countries for foreign direct investment Budget surpluses rare in developed countries from 1980s; Italy, France, Greece had none in 60 and 40 years Singapore, London and Shanghai top cities for new FDI projects in 2014; Dublin in 11th place Exchange rates shuffle as Dublin ranked 49th most expensive city; Paris at 46; Berlin at 105 Western consumer groups under pressure in China and India Developing countries facing “structural slowdown” likely to last for years OECD BEPS Tax Project: Amazon books UK sales in UK; Australia proposes up to 100% in penalties Emerging Markets Index falls to 12-month low in May as manufacturing contracts US and world economies slowing in 2015 — OECD Global manufacturing production rose slightly in May; Trade flows weak GDP growth in OECD area slowed to 0.3% in the first quarter of 2015 Only one quarter of workers worldwide have stable employment contracts Automatic Exchange of Tax Information: OECD says countries won't be able to game system Gates Foundation loses in Swiss family's shares coup Minimum wage levels in OECD countries Brent oil benchmark over $68 a barrel - up almost 50% in 2015 Global growth slows and manufacturing dips to 21Relax v Luhačovicích: wellness, masáž a polopenze 5 020 Kč Více o akci -50% Recommend 1 Pohádkové apartmány v přírodě Orlických hor 2 890 Kč -38% | Click for the Finfacts Ireland Portal Homepage | Finfacts Business News Centre Home News Irish Irish Economy EU Economy US Economy UK Economy Global Economy International Property Innovation Analysis/Comment Asia Economy Finfacts changes from 2015 RSS FEED How to use our RSS feed Follow Finfacts on Twitter NEWS : GLOBAL ECONOMY Last Updated: May 7, 2015 - 2:47 PM Tweet Minimum wage levels in OECD countries By Michael Hennigan, Finfacts founder and editor May 7, 2015 - 8:40 AM Email this article Printer friendly page The Organisation for Economic Cooperation and Development (OECD) has published a new briefing on minimum wages (MW) in the 34-member country OECD area and it contains comparisons for minimum wage levels between countries, as well as the differing tax and contributions paid by employers and workers. It also highlights the need for governments to co-ordinate minimum wages with other policies, especially taxes and benefits, and regularly adjust them in light of economic and job market developments. Minimum wage levels compared to the median wage (the mid-point where 50% of a population are above and 50% below) vary widely across OECD countries, ranging from 40% or lower in Czech Republic, Mexico, United States, Estonia and Japan to more than 60% in Slovenia, France, Chile and Turkey. This translates into take-home pay of less than US$3 per hour in Mexico, Latvia, Chile and Estonia, Hungary and the Czech Republic to over $9 in Luxembourg and Australia. The briefing also examines family incomes that a minimum-wage job accrues after accounting for tax burdens and government transfers. "On this measure, countries differ enormously and in some countries incomes of full-time minimum-wage earners can be well below commonly used poverty lines. In these cases, even working very long hours may not enable families to escape income poverty as conventionally measured." The OECD said that for example, a half-time MW job in Australia, Ireland and the United Kingdom can be sufficient to take a family with two children out of poverty, and out-of work benefits in Japan provide income close to the poverty threshold even when no-one in a twoparent family works. However, in most countries, a single full-time MW job leaves two-parent families below the poverty line and employment of both parents is needed to ensure that children do not grow Custom Search Search GLOBAL ECONOMY Latest Headlines Strong Swiss franc gloom deepens for exporters Global investors shift focus to China; EM outflows surge to $1tn in 13 months Global oil glut will continue into 2016 Stable growth momentum in OECD area but slowing expected in China Prices for major food commodities in July lowest since September 2009 Global manufacturing in July weakest level in two years US, China and UK lead top 25 target countries for foreign direct investment Budget surpluses rare in developed countries from 1980s; Italy, France, Greece had none in 60 and 40 years Singapore, London and Shanghai top cities for new FDI projects in 2014; Dublin in 11th place Exchange rates shuffle as Dublin ranked 49th most expensive city; Paris at 46; Berlin at 105 Western consumer groups under pressure in China and India Developing countries facing “structural slowdown” likely to last for years OECD BEPS Tax Project: Amazon books UK sales in UK; Australia proposes up to 100% in penalties Emerging Markets Index falls to 12-month low in May as manufacturing contracts US and world economies slowing in 2015 — OECD Global manufacturing production rose slightly in May; Trade flows weak GDP growth in OECD area slowed to 0.3% in the first quarter of 2015 Only one quarter of workers worldwide have stable employment contracts Automatic Exchange of Tax Information: OECD says countries won't be able to game system Gates Foundation loses in Swiss family's shares coup Minimum wage levels in OECD countries Brent oil benchmark over $68 a barrel - up almost 50% in 2015 Global growth slows and manufacturing dips to 21Relax v Luhačovicích: wellness, masáž a polopenze 5 020 Kč Více o akci -50% Recommend 1 Pohádkové apartmány v přírodě Orlických hor 2 890 Kč -38% EP#08: Labor Market Policy 18 OECD Employment Outlook 2015 -… slideshare.net Ranking of OECD countries by na… statista.com A Different Way of Looking at the Minimum Wage – … motherjones.com Note to American Enterprise Instit… cepr.net The Minimum Wage in Ireland | Public Policy, Public… publicpolicy.ie The minimum wage and Am… lasvegasgleaner.com The Ratio of Minimum to Media Full-Time Wage: … hamiltonproject.org Minimum wage rates in OECD countri… researchgate.net Czech Republic Has Toughest Minimum Wage - Prag… news.expats.cz Minimum Wages Do Not Correlate With Higher… Medium ... minimum wages or equivalents. Interactive versions of the above charts are here and here. Data for both charts (all OECD countries) is available here. NavštívitNavštívit 1200 × 900 - Na obrázky se mohou vztahovat autorská práva. Další informace Související obrázky: Zobrazit nápovědu 13/11/18 7 CS. Studies based on natural experiments •  D. Card and A. Krueger: Minimum Wages and Employment: A Case Study of the Fast-Food Industry in New Jersey and Pennsylvania. American Economic Review 84(4), September 1994: 772-793 •  Research ques=on: How do employers in a low-wage labor market respond to an increase in the minimum wage? •  Approach: Compare employment of teenagers in New Jersey and eastern Pennsylvania before and ajer the increase in the minimum wage in NJ from $4.25 to $5.05 on April 1, 1992. EP#08: Labor Market Policy 19 CS. Studies based on natural experiments (cont.) •  Data: Phone survey of fast-food restaurants in NJ and eastern Pennsylvania •  Results of difference-in-differences approach: Employment in Typical Fast-Food Restaurants NJ E Penn Before change 20.4 23.3 Ajer change 21.0 21.2 Difference 0.6 -2.1 Difference-in-Differences = 0.6 – (-2.1) = 2.7 EP#08: Labor Market Policy 20 Regula=on of dismissal •  Employment protec=on legisla=on (EPL): legal restric=ons on dismissals and compensa=ons to workers in case of early termina=on of employment contract •  The OECD uses following indicators: –  Regula=ons under permanent contract –  Strictness of collec=ve dismissals –  Regula=ons under temporary contracts EP#08: Labor Market Policy 21 13/11/18 8 EP#08: Labor Market Policy 22 Among the OECD countries, Germany, Belgium, and the Netherlands have the most stringent restrictions overall on individual and collective dismissals according to the OECD indicators, with France and Italy not far behind despite recent reforms. Among all countries considered, China has the tightest regulations, with overall regulations of regular workers also far above the OECD average in Argentina and Indonesia. At the bottom of the distribution, New Zealand and Saudi Arabia have more lax regulations than the US. Canada, the UK, and Brazil also have relatively light regulations. In many countries a significant share of employees are not covered by the protections granted to open-ended contracts, either because they are employed under atypical contracts or because they are in the informal economy. The share of employees on fixed-term contracts, for example, was just 12% for the OECD average in 2011, but was more than 25% in Poland and Spain. Many young people are hired on fixed-term contracts; the OECD average in 2011 revealed one-quarter of employees aged 15– 24, although the share was as high as 40% in the EU. In the emerging economies, the informal sector accounts for about 30% of total employment in China rising to more than 50% in Mexico and more than 80% in India in the second decade of the 2000s. Moreover, in countries with rigid regulations on permanent contracts, the hiring and firing of temporary workers accounts for a large majority of gross worker flows. For example, in France, 78% of hires and 71% of separations (dismissals and voluntary quits) in 2011 were due to the start or end of fixed-term contracts. As there are so many different types of atypical contracts, collecting standardized information on their regulations is difficult. The OECD indicators cover only certain aspects of regulations for standard fixed-term and temporary work agency contracts. The indicators of the strictness of the regulation of temporary contracts measure how easily firms can resort to these alternative types of contract to meet their need for flexibility, and ease the constraints imposed by regulations on regular, open-ended contracts. There is a positive correlation between the stringency of regulation on temporary contracts and that of employment protection against individual dismissals. Canada, the US, the UK, and South Africa have the lightest regulations on temporary contracts, while Turkey and Brazil stand out as having more stringent regulations (see ).Figure 2 EP#08: Labor Market Policy 23 Striking a balance between protecting workers and facilitating efficient labor allocation One of the main channels through which employment protection legislation can affect firms’ and workers’ behavior and economic performance is its impact on labor mobility and the efficiency of labor allocation. Theoretical labor market models suggest that if firing costs are positive, the optimal firm strategy is to reduce both job creation and job destruction, resulting in an ambiguous effect on average employment levels . By inhibiting the ability of firms to adapt their workforce to changes in labor demand and technological progress, employment protection legislation could slow growth in productivity at the firm level. At the same time, higher adjustment costs could also slow the reallocation of resources from declining industries and firms to expanding ones, with negative implications for aggregate economic and labor market outcomes. [3] A key factor determining the impact of employment protection legislation on economic performance is how much workforce adjustments within and across firms and sectors drive growth in productivity at the aggregate level. A large body of empirical evidence strongly supports what economist Joseph Schumpeter called “creative destruction.” New firms enter the market with innovative products and processes and create new jobs, displacing unprofitable incumbent firms, which exit the market, destroying jobs. Incumbent firms are also engaged in a continuous process of adapting their workforces in response to new products and processes and changes in markets and competitive forces. This continuous process of firm entry, exit, and adaptation, accompanied by the reallocation of resources from declining to expanding businesses, contributes to technological progress, productivity, and output growth. The impact of employment protection legislation on productivity performance depends on the extent to which firms are exposed to demand and technology shocks. In theory, the potential inefficiencies in the optimal allocation of labor generated by employment protection legislation can be offset by wage adjustments, private payments, and the design of efficient contracts. In practice, however, wage-setting mechanisms and financial market imperfections tend to weaken these offsetting mechanisms, as does uncertainty about future firm performance. Regardless, the potential impact of regulations on firms’ performance and productivity growth should be balanced out against the need to protect workers from unfair behavior by employers. In addition, especially in sectors where technological progress proceeds fairly predictably, employment protection legislation, by promoting job stability, can encourage workers’ commitment and investment in firm-specific human capital, with a positive impact on productivity. By affecting both hiring and firing, employment protection legislation tends to have a disproportionate effect on new entrants to the labor market, as well as on workers (such as women) who re-enter after a period of inactivity. This unequal effect is enhanced when more rigid regulations on permanent contracts are combined with less stringent regulations on temporary and other forms of atypical contracts, as has occurred in some European countries as well as Japan and Korea. Many young workers and those with intermittent careers risk being trapped in temporary contracts, with considerable difficulty moving on to more stable contracts with better career prospects. What is the impact of employment protection on employment and labor mobility? Employment protection and employment and unemployment levels Many empirical studies have assessed the impact of employment protection on the labor market and broader economic Change in EPL index (regular contracts) EP#08: Labor Market Policy 24 13/11/18 9 Employment protec=on legisla=on: consequences •  Severance regula=ons make it difficult for firms to reduce employment in the short run => firms are more reluctant to hire in good =mes •  Empirical results: –  EPL nega=vely affects unemployment inflows and ouplows –  countries with stricter EPL dislay higher youth unemployment rates and lower unemployment among prime-aged groups EP#08: Labor Market Policy 25 Employment protec=on and dura=on of unemployment 11.11.17 15:1740173_2013_Article_35_Fig2_HTML.jpg 1 200×568 pixelů Stránka 1 z 1http://media.springernature.com/full/springer-static/image/art%3A10.1186%2F2193-9004-3-2/MediaObjects/40173_2013_Article_35_Fig2_HTML.jpg EP#08: Labor Market Policy 26 Labor taxa=on •  Labor is subject not only to income taxes paid by households but also to a number of social security contribu=ons by both employees and employers. •  Higher taxes raise the real cost of labor faced by firms, leading to lower employment in the sector that pays the tax. •  Net effect depends on the elas=city of labor demand and supply. –  In Europe: wages are set in collec=ve bargaining => flaqer labor supply curve => stronger impact on employment EP#08: Labor Market Policy 27 13/11/18 10 Total tax wedge on a single worker (OECD, 2014) 6 Workers Earning an Average Wage Face a Higher Tax Burden in the Other Industrialized Nations Compared to Workers in the United States Source: OECD Taxing Wages, 2015. The Tax Burden on Average U.S. Workers Is Slightly Below the OECD Average Belgium Austria Germany Hungary France Italy Finland Czech Republic Sweden Slovenia Portugal Slovak Republic Spain Greece Estonia Turkey Denmark Netherlands Luxembourg Norway OECD Average Poland Iceland Japan United States Canada United Kingdom Ireland Australia Switzerland Korea Israel Mexico New Zealand Chile 55.6% 49.4% 49.3% 49.0% 48.4% 48.2% 43.9% 42.6% 42.5% 42.5% 41.2% 41.2% 40.7% 40.4% 40.0% 38.2% 38.1% 37.7% 37.6% 37.0% 36.0% 35.6% 33.5% 31.9% 31.5% 31.5% 31.1% 28.2% 27.7% 22.2% 21.5% 20.5% 19.5% 17.2% 7.0% 0% 10% 20% 30% 40% 50% 60% EP#08: Labor Market Policy 28 Social policy incen=ves •  Taking up a job not only means receiving salary but also paying taxes (if the salary is high enough) and losing eligibility in income maintenance program => some people can by worse off by taking a job. •  Safety net programmes may lead to a welfare trap, inducing people to remain unemployed or stay out of the labor force. •  Experiences of ’work-to-welfare’ in UK and USA indicates importance of this incen=ve aspect. EP#08: Labor Market Policy 29 11.11.17 15:51unemployment benefits oecd - Hledat Googlem Stránka 1 z 7https://www.google.cz/search?q=unemployment+benefits+oecd&client…hVIpqQKHemyAcYQ_AUICygC&biw=1321&bih=1023#imgrc=lmwWM0k03osW4M: Unemployment benefits across OEC… Pinterest - 600 × 771 - Vyhledávání pomocí obrázku Unemployment benefits across OECD Countries NavštívitNavštívit ZobrazitZobrazit obrázekobrázek UložitUložit ZobrazitZobrazit uloženéuložené obrázkyobrázky Související obrázky: Zobrazit Na obrázky se mohou vztahovat autorská práva. - Zobrazit nápovědu zpětnou vazbu Vše Zprávy Obrázky Mapy Nákupy Více Nastavení Nástroje Zobrazit uložené obrázky Bezpečné vyhledávání unemployment benefits oecd Přihlásit se EP#08: Labor Market Policy 30 13/11/18 11 C.S. Feasible supply-side policy: lessons from history •  The case of Netherlands: •  During the 70s the Netherlands was the mother of the Dutch disease, unemployment almost reached 12 % in 1983. A generous social system was proving unsustainable at those rates of unemployment. •  Wassenaar Accord in 1982: long-term agreement between social partners which moderated real wage growth, beqer treated part-=me employment and lower labor taxa=on •  Employment agencies provided more carrot-and-s=ck incen=ves for the unemployed to return to work. EP#08: Labor Market Policy 31 Source: Burda&Wyplosz (2012) C.S. Feasible supply-side policy: lessons from history •  The case of Ireland •  Anaemic growth rates, high budget deficits and unemployment reaching 18 % in the late 1980s. •  R. Dornbusch: “Ireland is a sick man of Europe“. •  In the late 1980s: programme of fiscal consolida=on was adopted, social partners agreed on s=pula=ng modest increase in money wages, government reduced labor taxa=on •  In the early 90s: ALMPs were implemented, products market deregulated. EP#08: Labor Market Policy 32 Source: Burda&Wyplosz (2012) Results EP#08: Labor Market Policy 33 Source: Burda&Wyplosz (2012)