Utilising a Demand-led Approach in a Local Labour Market

Traditional labour market activation policies have tended to be focused on labour supply and improving the opportunities for new entrants or re-entrants to obtain appropriate paid employment. This emphasis was encouraged in the 1980s and 1990s by shifts in the location and nature of employment (deindustrialisation), growing and persistent levels of unemployment and policy concerns with labour market disadvantage. More recently, the need to ensure international competitiveness, often by minimising local labour costs and enhancing labour flexibility, has been accompanied by a concern amongst employers at the impact of skill shortages. One response has been to shift the policy focus from supply to demand, essentially by seeking to understand the changing nature of local labour demand and by developing appropriate labour market initiatives. This paper analyses the case study provided by a labour market initiative in a regional labour market in New Zealand to assess the utility of such an approach. The Waitakere Employment and Skills Project (WESP) is a collaborative approach to labour demand, involving a number of economic development and local/national government agencies, as well as a university research team (including the author).     

Long-Term Effects of Labour Market Entry Conditions: The Case of Korea

This study investigates the effects of labour market conditions at the time of graduation, proxied by the local unemployment rate, on long-term family and labour market outcomes in Korea. The examination yields four main findings. Labour market entry conditions have strong and persistent effects among high school graduates. Male college graduates have a persistently lower probability of working at large firms if the demand for local labour shrinks at the time of graduation. Self-employment can be persistently hampered by adverse economic conditions at graduation. Family formation and childbearing are temporarily affected by labour market entry conditions, especially for less educated women. The first three findings highlight the notable segmentation of the Korean labour market into protected jobs in large firms – mostly part of business groups (chaebols) – and unprotected jobs.     

China’s expansion of higher education: The labour market consequences of a supply shock

In the decade 1998–2008 China expanded enrolment in higher education almost six-fold. For the examination of its short term labour market consequences, this unprecedentedly huge and sudden policy change might be regarded as a natural experiment. After providing a theoretical framework for analysis, the paper uses urban labour market surveys to analyse how the labour market adjusted to the supply shock. Three outcomes are examined: the effect of the expansion on wages, on unemployment, and on access to ‘good jobs’. The shock is found to reduce relative wages, raise the unemployment rate, and reduce the proportion in good jobs, but only for the entry-year or entry-period cohort of graduates. The effect is fairly powerful for entrants, especially university rather than college graduates, but incumbent graduates are largely protected from the supply shock. An attempt is made to examine the labour market effects of the quantitative expansion on educational quality. The paper provides insight into the operation of China's labour market in recent years.     

Institutional wage-setting,labour demand and labour supply: Causal estimates from a South African pseudo-panel

Unemployment in South Africa has multiple causes. This article uses a district pseudo-panel to estimate the elasticity of labour demand, labour supply and unemployment with respect to wages. We assess whether hiring decisions are more sensitive to increases in wages of low-paid workers than high-paid workers, and whether wage growth prompts entry into the labour market. These channels combine to result in the positive causal effect of wage growth on unemployment. The research investigates whether these effects are dominated by districts in which unionisation rates are high and employment is concentrated in large firms. Wage growth of middle-paid to highly paid workers – as opposed to low-paid workers – reduces local labour demand and raises local unemployment. Bargaining arrangements correspond closely to the spatial wage distribution; in turn, a large part of the impact that wage growth has on labour market outcomes is determined by these wage-setting institutions.     

A Flexicurity Labour Market in the Great Recession: The Case of Denmark

Flexicurity labour markets are characterised by flexible hiring/firing rules, a generous social safety net, and active labour market policies. How can such labour markets cope with the consequences of the Great Recession? This paper takes a closer look at this question considering the case of Denmark. It is found that employment adjustment is not particularly large in international comparison, but a larger burden of adjustment is along the extensive (number of employees) rather than the intensive (hours) margin. The level of job creation is high, and remains so despite the crisis, although job creation is pro-cyclical and job-separation counter-cyclical. As a consequence most unemployment spells remain short. Comparative evidence does not suggest that flexicurity markets are more prone to persistence. Crucial for this is the design of the social safety net and in particular the active labour market policy. However, it is a challenge to maintain the efficiency of the activation system in a period with high unemployment.     

Unemployment and Economic Policy in Denmark in the 1930s

Abstract

The paper examines Danish unemployment and the employment policy in the 1930s. The unemployment data indicate that though the unemployment increased dramatically the rate of unemployment remained low. The official Danish unemployment records definitely underestimated the actual unemployment in the early 1930s, but the discrepancy was hardly as big as some scholars have suggested. The paper furthermore points out that the rather atypical rise in the Danish unemployment from the mid-1930s can be attributed to a rise in the natural rate of unemployment due to an improved unemployment insurance coverage and a more comprehensive registration of the unemployment. The second part of the paper deals with the Danish employment policy. Unemployment remained high on the political agenda, but the employment problem never became the main target for the economic policy. An active employment policy was constrained by the problems of the balance of payments and the political disagreements in parliament. While the macroeconomic policy did help to stabilize the economy and the employment, the number of measures directly targeting the labour market was small, and they seldom gave rise to much job creation.     

The Temporary Staffing Industry and Workforce Development: Assessing a System of Local Experiments

Local workforce authorities in liberal market states are increasingly charged with mitigating long-term unemployment rooted in macroeconomic forces beyond their immediate control. In the US, and now elsewhere, these authorities have begun to establish partnerships with the temporary staffing industry as a means of extending their limited resources and improving job placement outcomes. Such partnerships are especially prominent in the US, where the Department of Labor has sanctioned policy experiments between local workforce authorities and the temporary staffing industry. In order to appraise these experiments, we present case-study evaluations of three diverse and highly touted employment schemes undertaken by American workforce authorities in conjunction with temporary staffing agencies. We find that under even the most favourable circumstances, the modest mechanisms of these programmes are unable to produce appreciable impacts within local labour markets.     

Local Action on Labour Market Integration of New Arrivals: Issues and Dilemmas for Policy

The UK government sets the national framework for migration policy, but many issues concerning labour market integration are dealt with locally. The paper outlines increases and changes in the profile of immigration over recent years and reviews the evidence on selected associated issues and dilemmas-particularly barriers to labour market integration associated with English language support, recognition of qualifications and skills, labour market information and knowledge and employers' attitudes.     

Labour hoarding in a disequilibrium model of the Dutch labour market

Summary This paper presents a method to integrate labour hoarding into a disequilibrium model of the labour market. Disequilibrium indicators for the labour market that include labour hoarding are constructed. These indicators, being important determinants of policy multipliers with respect to employment, are found to be less volatile than the corresponding disequilibrium indicators for the goods market which are available from business surveys. The lower volatility reflects the role of labour hoarding as a buffer between actual and efficient employment levels. Our results indicate that labour hoarding in Dutch enterprises ranges from a minimum of 0.5 per cent of employment in early 1985 to a maximum of 7.0 per cent in 1975. Furthermore, the paper pays special attention to the modelling of mismatch unemployment and to the simulation results of an empirical disequilibrium macromodel of the Dutch economy.The authors thank M.M.G. Fase and two anonymous referees for their useful comments.     

Setting It Right: Employment Protection,Labour Reallocation and Productivity

This paper provides a critical review of the recent empirical evidence on the links between regulations affecting the hiring and firing of workers, labour reallocation and productivity growth. It also reviews how workers affected by labour mobility fare and discusses policy options to support them. The upshot is that stringent employment protection has a sizeable negative effect on labour market flows and, through this channel, hinders productivity growth. At the same time, the evidence also shows that while greater labour market reallocation benefits many workers through higher real wages and better careers, some displaced workers lose out via longer unemployment durations and/or lower real wages in post-displacement jobs. In this context, reforms of employment protection should be considered as part of a comprehensive package that also includes an adequate safety net for the unemployed and effective re-employment services.     

Does Homeownership Lead to Longer Unemployment Spells? The Role of Mortgage Payments

This paper examines the impact of housing tenure choice on unemployment duration in Belgium using EU-SILC micro data. We contribute to the literature in distinguishing homeowners with mortgage payments and outright homeowners. Accounting for tenure endogeneity and unobserved heterogeneity, we find that homeowners with a mortgage exit unemployment first, while outright owners stay unemployed the longest. Tenants take an intermediate position. Our results emphasize the key role of housing costs in the link between housing tenure and labour market outcomes. Considered together with the results of recent macroeconomic research on housing and employment in Belgium, this paper provides indirect evidence for significant negative effects of homeownership on the labour market and the economy beyond the owners themselves.     

Employers' Responses to Demographic Changes in Rural Labour Markets: The Case of Dumfries and Galloway

Employers in many rural areas are facing the problem of a declining workforce due to demographic changes in the population. These demographic changes are a result of a combination of population ageing, the in-migration of mainly retired people, out-migration and low fertility rates. This paper examines how employers are adjusting to demographic changes in Dumfries and Galloway, a rural local authority in south west Scotland. The area has one of the highest proportions of older people in the UK, and as such provides a useful insight into employers' responses to population ageing. Fifty locally based employers were questioned concerning the labour market impact of population ageing and their responses to this situation. The paper argues that in order to ensure the medium-term economic viability of the local economy, employers will need a set of strategies both to attract workers to the area and to increase the participation and retention of older workers resident in the area.     

What Happened to European Unemployment?

Summary  Many academic papers were still being written on mass unemployment in Europe. While, unemployment in the EU15 was falling dramatically. Not only academics, but also European workers at large did not seem to appreciate these labour market developments. I offer two explanations for this puzzling deterioration of workers perceptions of the labour market in spite of disappearing unemployment: (i) labour market risk increased, and (ii) employment growth occurred at the cost of stagnating labour productivity. This means that the new labour market offers a worse risk-return combination. Strategies to address these issues are discussed in the final section of the paper. This paper provides an extended version of the first Willem F. Duisenberg Lecture, held at the University of Amsterdam on February 28, 2008. I am particularly grateful to NIAS for this opportunity and to Petry Kievit for having greatly improved my English.     

Labour Market Adjustments to Financing Conditions under Sectoral Rigidities in the Euro Area

This paper analyses empirically the response of labour market indicators to changing financing conditions in a panel of 15 euro area countries from 1999Q1 to 2015Q4. Using a local projections approach, we estimate impulse responses of three margins of sectoral labour market adjustment – employment, hours worked and real wages. Consistent with recent results in the literature, we find contractionary financing shocks to depress all three indicators of the labour market. Furthermore, responses are asymmetric depending on the sign of the shock, different in magnitude depending on the sectoral composition, and sensitive to labour market institutions such as employment protection legislation and union density. Finally, labour market institutions seem to mainly affect the relative strength of the adjustment margins and not so much the overall response of the wage bill.     

The Spanish socialists in power: thirteen years of economic policy

This article analyses the economic policy in Spain during thegovernments of the Spanish Socialist Party, the PSOE (1982-96).It considers the different areas of economic policy such asmonetary, exchange-rate, and industrial policy, with specialemphasis on labour policy and welfare state issues. Taking intoaccount the difficult economic situation in 1982, there weresome important advances in social policy and progressive taxationduring the 1980s. However, the main economic objective of the1982 electoral programme, to reduce unemployment, failed: whenthe PSOE came to power, the unemployment rate was 16 per cent,and when it left government the rate was over 22 per cent. Moreover,in the opinion of the authors, the most negative element wasthe push to change the labour market, promoting the causalizationof labour relations, eroding the trade unions and strengtheningthe power of employers.     

The origin and insignificance of labour market imperfections in the Netherlands: Another note on the specification of the UV curve 1955–1980

Summary This paper reestimates the UV curve for the Netherlands 1955-1980 and challenges the conclusions based on previous specifications of the curve. The specification finally chosen solves not only the technical problems of autocorrelation and the like, but also yields insight into the origins of the upward shift of the UV curve. The majority of the factors responsible for the rise in unemployment due to labour market imperfections bears a clearly cyclical character. The qualification of this type of unemployment as structural seems therefore incorrect and misleads policy intentions towards inefficient micro-economic labour market policy.I acknowledge the stimulating comments in the critical remarks of S. Kuipers, Th. van de Klundert and J. Muysken and the statistical assistance of Karl Driessen. The very start of this project was made possible with the financial assistance of the National Program for Labour Market Research (NPAO-ZWO No. 45–39).     

EEN Actief Arbeidsniarktbeleid

Summary The period following the second world war was characterised in The Netherlands by full employment. As a result, the policy with regard to the labour market underwent some remarkable changes. Before the war, the principal aim of that policy had been the prevention of unemployment. Now far more stress is being laid on the creation of a state of equilibrium between the various parts of the market. At the same time, because people became more aware of the fact that economic policy in general should be directed towards attaining a high rate of economic growth, another new element was introduced into labour market policy. It was felt to an increasingly strong extent that such policy should also be made to serve the purpose of attaining an optimal use of the available and potential labour force.The author is of opinion that labour market policy should be a matter of co-operation between government and socialeconomic organisations, and the entrepreneurs. It should start at the level of general and professional education, and take into account that the present phase of economic development shows important shifts. Agricultural employment in The Netherlands is narrowing down from 8% of the total working population at present, to probably 6% in 1970. Employment in manufacturing is levelling off at a percentage of around 42. This means that employment in the tertiary sector is surpassing 50%. An active labour market policy should be part of a program of general economic planning at middle-long term, and include a policy, directed towards establishing a higher rate of mobility of labour. Co-ordination of an active labour market policy with other sectors of socio-economic policy could be reached by the creation of governmental or semi-governmental bodies, designed to give special attention to the optimal use of the labour force as a factor of production, with due regard to the human element.Referaat gehouden voor de jaarlijkse bijeenkomst van de Vereniging van Afgestudeerden der N.E.H. te Rotterdam, op 17 Mei 1967.     

Wage Divergence and Asymmetries in Unemployment in a Model with Biased Technical Change

In an attempt to explain the different wage and unemployment responses in mainland Europe and the US to a fall in demand for low-skilled labour, we present a model with two levels of skills and two classes of goods. We analyse the response to skill-biased technical change in two distinct labour market regimes. A trade-off between wage divergence and unemployment of skilled and unskilled workers occurs. Skill-biased technical change turns out to have a different impact in both regimes, due to a different working of the chimney effect.     

Unemployment and Catching Up: Europe Vis-à-vis the USA

This paper develops a two-region two-sector endogenous growth model with a dual labour market based on efficiency wages. Growth is driven by research done in the (high-tech) tradeables sector. The follower region tends to catch up in terms of labour productivity with the leader region. Differences in unemployment compensation systems can lead to relative convergence, i.e., a steady state with the backward region lagging behind the leader region. The reason for this is that high social welfare compensations generate high unemployment and reduce the amount of labour employed for R&D purposes.     

Phillips ‘loops’ in South Africa∗

Professor Phillips published his famous Phillips curve article in 1958. In his research, however, he observed that wages were rising more rapidly during the upswing of the business cycle, when unemployment was falling, than during the downturn, when unemployment was rising. When data on the respective variables was plotted, a distinct ‘loop’ was found. In the analysis of South African labour statistics, it was found that such a ‘loop’ existed in the White labour market. However, in the case of the Black labour market, only a weak image of a ‘loop’ was found. The real economic forces producing such a ‘loop’ were almost completely absent. This has implications not only for labour management and economic policy in general, but also for development strategies, because it implies that if Black labour had been left to market forces only, they would have been worse off than they are now.