Labor productivity is generally seen as bringing
wealth and prosperity; but how does it vary over the business cycle?
Aggregate labor productivity is a central
indicator of an economy’s economic development and a wellspring of living
standards. Somewhat controversially, many macroeconomists see productivity
as a primary driver of fluctuations in economic activity along the business
cycle. In some countries, the cyclical behavior of labor productivity seems
to have changed. In the past 20–30 years, the US has become markedly less
procyclical, while the rest of the OECD has not changed or productivity has
become even more procyclical. Finding a cogent and coherent explanation of
these developments is challenging.
A range of other policies and changes are needed
for childcare expansion to increase mothers’ labor supply
In 2002, the EU set targets for expanding
childcare coverage, but most of the post-socialist countries are behind
schedule. While childcare expansion places a heavy financial burden on
governments, low participation in the labor force by mothers, especially
those with children under the age of three, implies a high potential impact.
However, the effectiveness of childcare expansion may be limited by some
common characteristics of these countries: family policies that do not
support women’s labor market re-entry, few flexible work opportunities, and
cultural norms about family and gender roles shaped by the institutional and
economic legacy of socialism.
Corruption is a driving force of emigration,
especially for high-skilled workers, but also for other workers
Knowing whether corruption leads to higher
emigration rates—and among which groups—is important because most labor
emigration is from developing to developed countries. If corruption leads
highly-skilled and highly-educated workers to leave developing countries, it
can result in a shortage of skilled labor and slower economic growth. In
turn, this leads to higher unemployment, lowering the returns to human
capital and encouraging further emigration. Corruption also shifts public
spending from health and education to sectors with less transparency in
spending, disadvantaging lower-skilled workers and encouraging them to
Government policies can stimulate female labor
force participation if coherent and well thought-out
Increasing women’s labor force participation is
important to sustainable economic development, especially in economies with
highly educated women and an aging population. Women’s participation varies
across transition countries, driven by such economic and social factors as
traditional views of gender roles and limited government support for
caregivers. Still, in all countries there is clear scope for policies aimed
at increasing women’s participation. In particular, in countries where
women’s educational attainment is already high, policies to support a better
work−life balance and female entrepreneurship look particularly
Improving outcomes for women takes more than
raising labor force participation—good jobs are important too
The relationship between female labor force
participation and economic development is far more complex than often
portrayed in both the academic literature and policy debates. Due to various
economic and social factors, such as the pattern of growth, education
attainment, and social norms, trends in female labor force participation do
not conform consistently with the notion of a U-shaped relationship with
GDP. Beyond participation rates, policymakers need to focus on improving
women’s access to quality employment.
In transition economies, better property rights
protection and rule of law enforcement can boost job creation and growth
In the transition from central planning to a
market economy in the 1990s, governments focused on privatizing or closing
state enterprises, reforming labor markets, compensating laid-off workers,
and fostering job creation through new private firms. After privatization,
the focus shifted to creating a level playing field in the product market by
protecting property rights, enforcing the rule of law, and implementing
transparent start-up regulations. A fair, competitive environment with
transparent rules supports long-term economic growth and employment creation
through the reallocation of jobs in favor of new private firms.
One-company towns concentrate employment but
their ability to adapt to adverse events is often very limited
One-company towns are a relatively rare
phenomenon. Mostly created in locations that are difficult to access, due to
their association with industries such as mining, they have been a marked
feature of the former planned economies. One-company towns typically have
high concentrations of employment that normally provide much of the funding
for local services. This combination has proven problematic when faced with
shocks that force restructuring or even closure. Specific policies for the
redeployment of labor and funding of services need to be in place instead of
subsidies simply aimed at averting job losses.
Outmigration has contributed to increasing wages
and decreasing unemployment in the new EU member states but may also cause
The recent EU enlargements into Central and
Eastern Europe and increased labor mobility within the Union provide a
unique opportunity to evaluate the labor market effects of emigration.
Outmigration has contributed to higher wages for stayers, as well as to
lower unemployment in the source country. However, emigration has also
exacerbated skills shortages in some sectors, as well as mismatches between
skills and jobs.
Speaking English has its benefits in transition
countries but can it supersede Russian?
In many transition countries, the collapse of
communism ushered in language reforms to adapt to the newfound independence
from the Soviet Union and openness to the rest of the world. Such reforms
may have implications for individuals’ economic opportunities, since foreign
language proficiency may enhance or signal productivity in the labor market.
Recent empirical evidence documents positive labor market returns to English
language skills in transition countries. However, Russian language
proficiency also remains economically valuable, and nationalist language
policies may lead to future loss of economic opportunities.