## wpiea2021141-print-pdf ## Source details **Canonical URL:** [wpiea2021141-print-pdf](https://www.imf.org/-/media/files/publications/wp/2021/english/wpiea2021141-print-pdf.pdf) ## Other formats - [Markdown version](/-/media/files/publications/wp/2021/english/wpiea2021141-print-pdf.pdf.md) - [Structured JSON version](/-/media/files/publications/wp/2021/english/wpiea2021141-print-pdf.pdf.json) --- ### I. Introduction — framing and structure - Labor income from market work is the single most important source of income for the vast majority of individuals and the dominant determinant of material living standards. - The labor market is central to achieving inclusive growth; inclusivity is multi-dimensional (pay, type of work, working conditions, risk arrangements). - Key theme: some inclusivity improvements entail trade-offs with economic efficiency, but areas such as discrimination can be win-win—improving inclusivity and productivity. - Paper structure: - Section II: principles of inclusivity - Section III: measurements and stylized facts related to inclusivity - Section IV: review of labor market policies and institutions that may enhance inclusivity - Section V: conclusion ### II. Principles of inclusive labor markets - Four guiding principles: - Access - Employment opportunities should be available based on ability to perform tasks, not socioeconomic or demographic factors (age, race, gender, religion). - Barriers include hostile work environments, lack of flexible schedules, inadequate provisions for individuals with disabilities, and limited learning/development opportunities. - Fairness - Workers should be rewarded solely for contributions; remuneration should reflect productivity. - Protection - Labor markets should provide insurance against shocks (health shocks, job displacement). Forms include disability insurance, unemployment insurance, retraining programs, and measures for disadvantaged entrants. - Voice - Workers should have a voice in workplace rules and practices (collective bargaining, informal representation, political processes). - Assessment approach: - Assess departures from each principle individually (not a single index). - Distinguish macro departures (widespread) from micro departures (narrower scope) to guide policy remedies. ### III. Measures of inclusivity — access, fairness, protection, and voice - Access (labor market entry and participation) - Standard survey categories: employed, unemployed, non-participants (household labor force surveys). - Unemployment rate discussed as natural starting point; some unemployment is inevitable under modern theories. - Employment-to-population ratio and labor force participation rate highlighted as complementary measures. - Aggregate statistics may mask large subgroup differences (gender, skill/education, age, race/ethnicity). - Fairness (wages, labor income share, skill premia) - Labor income share: in AEs, labor income shares are about five percentage points lower than in 1970. - Downward trends since the 1990s in EMDEs, especially among the largest EMs. - Drivers identified: technological change (automation, AI, digitalization), decline in investment goods prices, globalization/offshoring, rising market concentration and “superstar firms,” weaker collective bargaining and deregulation, and changes in firm-level productivity distributions raising monopsony power. - Measurement issues: treatment of self-employment income (often misclassified as capital income); depreciation of capital in income share calculations. - Labor share formula noted as W ∙ H / Y and as W/APL with implications for interpreting wage–marginal productivity relationships. - Distributional effects and skill premia - Mincer returns: one additional year of schooling raises average earnings by about 10 percent. - Heckman et al. (2006) estimate average return to schooling among males increased from about 10½ percent during the 1980s to 14 percent during the 1990s. - Wages of lower-skilled workers have remained nearly unchanged in real terms over 50–60 years; wages for workers with more than a college degree nearly doubled. - Gender and racial pay gaps; discrimination evidence - Factor-weighted gender pay gaps use hourly wages, averages of 2015-19. - Cross-country evidence suggests observed attributes explain little of the gender pay gap at different wage distribution points. - US evidence: median black man in 2014 earned significantly less than median white man; including non-employed (zero earnings) widens the gap—black men are virtually no better off in 2014 than in 1950 (Bayer and Charles). - Field and experimental evidence: - Blind auditions increased gender-neutral hiring (Goldin and Rouse, 2000). - Applicants with “white-sounding” names were 50 percent more likely to receive a callback than identical resumes with “African-American-sounding” names (Bertrand and Mullainathan, 2004). - Discrimination harms performance and attendance in some settings (Glover, Pallais, and Pariente, 2017). - Protection: social insurance, unemployment risk and coverage - Displaced workers can remain 25 percent lower paid than similar non-displaced workers even five years after displacement (Jacobson et al., 1993). - Welfare loss estimates from displacement: Rogerson and Schindler (2002) on the order of up to one percent of output; Heathcote et al. (2007) up to an order of magnitude higher. - Unemployment insurance (UI) systems: - Almost all AEs have UI systems; UI systems exist in only about 60 percent of EMDEs. - Only about 22 percent of unemployed workers are covered by unemployment benefits (Duval and Loungani (2019) and ILO (2017)). - Among countries with a UI system, benefit coverage: close to half of the unemployed receive benefits in AEs, compared to less than a third in EMDEs. - Social protection metrics: - Globally only 41 percent of new mothers receive maternity benefits (ILO, 2017). - Only about 28 percent of persons with severe disabilities receive disability benefits (ILO, 2017). - Proportions covered by social protection floors vary across countries (averages of 2015-18). - Voice: unions, collective bargaining and representation - Collective bargaining coverage: about half of salaried employees in AEs on average; about one-quarter in EMDEs. - Union density has roughly halved since 1980 in Germany, France, the UK, Austria, and the Netherlands; declined substantially in Central and Eastern Europe after the fall of central planning. - Since early 2000s, union density and collective bargaining coverage declined in almost all countries, mainly due to employment rise in non-covered sectors and occupations. - Union wage premium estimates: around 5-15 percent in AEs, and up to 20 percent in some EMDEs. - Declines in bargaining institutions may exacerbate distributional problems arising from technological and organizational change. ### IV. Drivers of labor share decline and firm/market power - Technological factors: - Automation, AI, and digitalization can change the labor share even under perfect competition. - Market structure and institutions: - Rise of “superstar firms,” higher industry concentration, rising markups, greater profit shares. - Deregulation and weaker collective bargaining have weakened workers’ bargaining power and lowered wages relative to productivity. - Changes in firm-level productivity distributions can increase firm monopsony power. - Measurement cautions: - Self-employment income treatment and capital depreciation considerations matter for labor share calculations. ### V. Informality: scale, correlates, and consequences - Scale and distribution: - Two billion of the world’s employed population aged 15 and over work informally, representing 61.2 percent of global employment (ILO). - In North America, Europe, Australia and New Zealand informality rates are below 20 percent. - In emerging and developing countries more than 50 per cent of the labor force is informal; estimates for Sub-Saharan Africa and Asia are even higher. - UN data: women are the overwhelming majority of informal workers in developing countries, accounting for 95 (90) percent of total employment in South Asia (Sub-Saharan Africa). - Correlates: own-account workers, agricultural sector, rural areas, women, youth, elderly, low education. - Economic and social consequences: - Informal jobs frequently low-quality (low pay, lack of protection, limited voice), associated with higher poverty and inequality and slower growth. - Informality creates vicious cycles: unstable income discourages human capital investment. - Fiscal impact in EMDEs: government revenues on average lower by 5-10 percentage points of GDP, and expenditures lower by 4-10 percentage points of GDP than in those with the lowest levels of informality. - Covid-19 implications: informal workers more detrimentally affected due to inability to work remotely. ### VI. Labor market diagnostics and implementation capacity - Successful reform requires: - Proper diagnosis of labor market challenges; design and implementation based on diagnosis. - Use of frameworks: perfectly competitive benchmark vs. monopsony assessment; job search and matching models. - Strengthened labor market information systems (independent observatories, well-funded statistical systems). - Economic capacity to interpret data and sufficient fiscal space to prioritize inclusiveness policies. - Adequate legal and institutional frameworks for enforcement. ### VII. Rebalancing market power: minimum wages and collective bargaining - Minimum wages (MW) - In monopsonistic local labor markets, MWs can raise both employment and wages. - MWs are a direct distributional tool to alleviate in-work poverty and reduce income inequality with limited direct fiscal costs. - Empirical employment impacts are inconclusive and vary; adverse effects in low- and middle-income countries are typically small and sometimes positive. - MWs have strong positive effects on poverty alleviation; statutory MWs can spill over into the informal sector in developing countries. - Principles to maximize poverty reduction while limiting job effects: - Define MWs in consultation with social partners. - Monitor and revise MWs regularly through a representative body and evidence-based evaluations. - Use collective agreements where coverage is sufficient. - Strengthening collective bargaining - Unionization trends weakened by globalization, atypical work, sectoral shifts; political strategies matter for organizing. - Empirical findings: unions increase wages (wage premium above) and effects strongest for less skilled workers and larger for women than men; most studies find unions either increase unemployment modestly or have no significant effect. - Policy instruments: - Administrative extension of collective agreements can guarantee a protection floor in low-wage sectors but may lower incentives for unionization and raise rivals’ costs. - Works councils and shop-floor consultation can reduce turnover and layoffs; when combined with industry-level bargaining, works councils can raise firm-level productivity and speed adjustment. ### VIII. Sharing risk — employment protection, UI design, and ALMPs - Employment Protection Legislation (EPL) - Coverage and enforcement vary; some dependent employees are excluded in many countries; informal workers outside reach. - EPL effects: - Can reduce risk of becoming unemployed for protected workers but may reduce job creation incentives and raise exclusion risks for youth/low-skilled. - Strict EPL tends to encourage informal employment and hinder productivity/growth. - Aggregate EPL seems to slightly reduce employment, more in EMDEs than in AEs; impact on unemployment level negligible but can increase persistence by dampening turnover. - Wage distribution effects: - Stricter EPL can compress wage distribution and reduce wage inequality among the employed. - EU temporary workers earn on average 14 percent less than regular workers. - Potential benefits: - Stronger worker voice, expectation of long-lasting employment relationships, investment in relationship-specific capital. - Alternatives: - Worker retention and furloughing schemes (e.g., German Kurzarbeit) reduce job destruction by raising hours elasticity; overly long furloughing can slow reallocation. - UI design trade-offs - Trade-off between equity/insurance and efficiency: more generous UI offsets income loss but may raise reservation wages and lengthen unemployment durations. - Evidence on benefit duration effects: mixed—longer duration can raise reservation and realized wages (Arni, 2017); small negative effects found in Germany (Schmieder and Von Wachter, 2016); modest effects in Austria (Nekoei and Weber, 2017). - High replacement rates over long periods can reduce search effort and erode skills. - No robust link between UI benefit levels and overall inequality in AEs. - Coverage constraints in EMDEs limit UI’s poverty-prevention role; only about 22 percent of unemployed are covered globally. - Reforms to strengthen return-to-work incentives include high initial replacement combined with fast reductions and strict obligations—but tapered schemes can be regressive. - Recent evidence suggests extended UI can improve job matching and be "win-win" (Farooq et al., 2020; Nekoei and Weber, 2017). - Flexicurity and complementary policies - Flexicurity combines generous safety nets, extensive activation, and flexible hiring/firing. - Denmark cited as prominent example with low long-term unemployment and high perceived job security. - Social protection trade-offs and reforms - Contributory systems can create duality by excluding informal and self-employed workers. - Policy options: - Expand non-contributory systems to include informal workers (strengthens protection but may lower formal work incentives). - Strengthen incentives for formalization (broaden tax base, lower tax rates). - Two-tier systems to extend unemployment benefits to more formal workers. - Country examples: Spain lowered contribution rates for low-income workers; Brazil, Thailand, Uruguay subsidize contributions for self-employed; Philippines, Uruguay, Republic of Korea extended legal coverage to specific occupations. - Active Labor Market Policies (ALMPs) - ALMPs should be jointly implemented with income support. - ALMPs include training, Public Employment Service (PES), job-search assistance, employment subsidies, start-up incentives, hiring incentives, direct job creation. - Evidence: - Job-search assistance and training work well; wage subsidy schemes effective; public job creation less effective long-run. - ALMPs more successful among low-skilled workers, women, and youth in Latin America, and associated with reduced informality. - Enabling conditions: transparent governance, inclusive beneficiary targeting, involvement of social partners. ### IX. Fighting discrimination — costs, gains, and policy levers - Discrimination reduces pay, access to occupations, working conditions, and generates occupational misallocation. - Evidence of economic costs: - Performance losses due to discrimination up to nearly 10 percent in a French grocery store study. - Reallocation of talent from 1960 to 2010 accounted for 20-40 percent of GDP growth under assumptions of no innate talent differences. - Reducing gender discrimination estimated to yield substantial macro gains (of similar order). - Policy options within labor market: - Make discrimination illegal (examples show positive employment/earnings impacts). - Blind recruitment and hiding demographic information to reduce bias. - Attention to supervisor–supervisee racial dynamics to improve productivity. - Quotas (e.g., gender quotas) can be measurable and enforceable; evidence of increased firm value from board quotas. - Minimum wage and coverage extensions can reduce racial/sectoral earnings gaps. ### X. Policies to reduce informality: structural change, taxation, and e-formality - Encouraging structural change - Barriers: weak aggregate demand, low education, low managerial competence. - Policy levers: public investment in education, vocational training, recognition of informal-sector training, ALMPs and reinsertion programs. - Taxation - Formality choices elastic to marginal tax rates; reducing tax rates on formal businesses can induce formalization. - Payroll tax reductions and simplified tax regimes can raise formality but may also create small-firm lock-in risks. - Country examples: - Brazil: SIMPLES (1996) and SUPERSIMPLES (2006) simplified taxes for micro firms; since SUPERSIMPLES in July 2007, some 9 million businesses joined and the formality rate increased by 11 percentage points. - Argentina: Monotax (Monotributo) from 1998 extended social security to covered independent workers. - Colombia: 2012 payroll tax reductions for small firms/self-employed increased probability of formal employment. - Caveats: simplified regimes may discourage firm growth; tax reforms should be paired with social protection and administrative policies. - Administrative (e-formality) policies - E-formality tools: electronic tax filing, one-stop business registration, electronic worker registration, mobile payment apps, technology-enhanced labor inspections. - Information systems and awareness campaigns help informal workers access social protection. - Transaction-tracking incentives/penalties (credit-card deductions, penalties for low electronic payments) can discourage cash-based informality. ### XI. Conclusion — four key takeaways and implementation guidance - No uniform policy set: inclusivity is multi-dimensional; departures differ across economies and require tailored priorities. - Tradeoffs are inevitable: policies often involve tradeoffs across inclusivity dimensions (example: EPL protects incumbents but can restrict access for entrants). - Policies should be bundled: assess policies as packages (some substitutes, some complements); the Danish flexicurity model is an illustrative example. - Micro and macro departures: departures occur at both micro and macro levels; different instruments required—macro tools may not fix micro departures rooted in discrimination, education, or local labor market frictions. - Additional remarks: - Labor market outcomes are strongly shaped by conditions outside the labor market (education inequality, cultural norms). - Technology matters: policy settings influence technology adoption and its distributional effects; some tax policies can encourage labor–replacing investment. ### Policy recommendations (compiled across themes) - Strengthen labor market information and analysis systems (independent observatories, better statistical funding, institutional linkages). - Tailor minimum wage design and implementation: - Define MWs in consultation with social partners. - Monitor and revise MWs regularly via representative bodies and evidence-based evaluations. - Use collective bargaining where coverage suffices. - Enhance collective bargaining and worker voice: - Consider administrative extension of collective agreements where appropriate while monitoring competition and union incentives. - Support works councils and industry-level bargaining to improve firm-level productivity and reduce disruptive turnover. - Expand social protection and UI coverage strategically: - Extend coverage to informal and self-employed where feasible, using a mix of contributory and non-contributory tools. - Design UI to balance insurance and return-to-work incentives (consider fast benefit tapering, obligations, and activation). - Reduce informality via combined measures: - Promote formal job creation through productivity-enhancing policies, tax incentives (lower payroll taxes, simplified regimes), and administrative e-formality tools. - Pair tax simplifications with measures to avoid small-firm lock-in; complement with social protection extension. - Combat discrimination with labor-market and complementary policies: - Enforce anti-discrimination laws, adopt blind recruitment practices, consider targeted quota policies where effective, and ensure equal access to education and training. - Invest in ALMPs and activation: - Combine income support with training, PES strengthening, job-search assistance, and targeted wage subsidies. - Ensure transparent governance and social partner involvement to improve targeting and skills relevance. *Source: wpiea2021141-print-pdf — content compiled from the specified PDF chapter/sections.* ### References ............................................................................................................. ### wpiea2021141-print-pdf - References ............................................................................................................. ### I. INTRODUCTION - For the vast majority of individuals, payment from selling their labor services in the labor market is the single most important source of income and hence the dominant determinant of their material standard of living. - The labor market has a key role to play in achieving inclusive growth. - Labor market inclusivity is multi-dimensional and encompasses pay, type of work, working conditions (safety, flexible hours), arrangements for dealing with risk, and other factors. - The paper presents a collection of principles that capture key aspects of an inclusive labor market and guide the paper’s structure. - A key theme: some inclusivity improvements may entail trade-offs with economic efficiency, but there are important areas (notably discrimination) where inclusivity is a win-win and also enhances economic efficiency and growth. - Paper structure: - Section II: principles of inclusivity - Section III: measurements and stylized facts related to inclusivity - Section IV: review of labor market policies and institutions that may enhance inclusivity - Section V: conclusion ### II. PRINCIPLES OF INCLUSIVE LABOR MARKETS - The paper describes four guiding principles for assessing labor market inclusiveness: (1) access, (2) fairness, (3) protection, and (4) voice. - Access - Individuals should have access to employment opportunities. - Access to jobs and occupations should be based on ability to perform tasks, not on socioeconomic or demographic factors such as age, race, gender, or religion. - Hostile work environments are barriers that limit access. - Access includes learning and development opportunities. - Barriers include lack of flexible work schedules (when economically feasible) and inadequate provisions for individuals with disabilities. - Fairness - Workers should be rewarded solely based on their contributions and not on age, race, gender, or religion. - An individual should not receive less than they merit based on productivity. - Protection - The labor market should provide insurance against negative shocks (temporary or permanent health shocks, job displacement due to downsizing or external trade competition). - Insurance forms include disability insurance, unemployment insurance, retraining programs, and measures for those entering the labor market under poor initial conditions. - Voice - Workers should have a voice in determining workplace rules and practices (organization of work, interactions between workers and management, schedules, assignments). - Formal collective bargaining agreements are one mechanism; voice can also be achieved without formal representation or through the political process. - Assessment approach - Rather than a single index, assess departures from each principle individually. - Distinguish scope: macro departures (widespread) versus micro departures (narrower scope) to guide appropriate policy remedies. ### III. MEASURES OF INCLUSIVITY - Overview - Household labor force surveys divide the population into employed, unemployed, and non-participants and are widely used for comparable labor market data. - These surveys help examine access but have limitations. - A. Access - Unemployment rate is a natural starting point for access because unemployed individuals are available for work and searching but not currently working. - Modern theories imply some unemployment is inevitable; comparisons are informative when dynamic forces are broadly similar across economies. - Figure 1: Unemployment rate, total (% of total labor force, averages of 2015-19) — averages over 2015-2019 show dramatic variation across countries and notable differences between advanced economies (AEs) and emerging markets (EMs). - Some unemployment may be voluntary; those who desire work but do not search because no jobs are available are not counted as unemployed. - Employment rate is also informative: Figure 2 shows employment-to-population ratio, total (%) (averages of 2015-19). Differences are particularly large for less developed economies; unemployment rate may be a much less accurate indicator of access in less developed countries. - Labor force participation rate: Figure 3 shows labor force participation rate, total (% of total population ages 15-64, averages of 2015-19). Large variation within and across groups suggests limited access, even among countries at similar stages of development. - Aggregate statistics reflect macro departures; disaggregated survey data can reveal much larger differences for subgroups (gender, skill/education, age, race/ethnicity). - B. Fairness - One macro measure of fairness is the labor income share. - In advanced economies (AEs), labor income shares are about five percentage points lower than they were in 1970 (Figure 4: Evolution of the Labor Share of Income (%); source: IMF’s World Economic Outlook (WEO) (April 2017), Figure 1). - Similar downward trends have been observed since the 1990s in emerging markets and developing economies (EMDEs), especially among the largest EMs. - The downward trend in labor income share indicates average wage growth has fallen below average labor productivity growth. - Researchers identify technological factors contributing to this trend: the form of technological progress, a relative decline in investment goods prices (IMF 2017), and automation (Acemoglu and Restrepo 2018, Martinez 2018; see also Cerra et al. 2021). *Source: https://www.imf.org/-/media/files/publications/wp/2021/english/wpiea2021141-print-pdf.pdf* ### Chapter 5), and globalization and offshoring (Koh et al. 2000, IMF 2017, Elsby et al. 2013). ### Chapter 5 ### Drivers of changes in the labor share - Technological factors (automation, AI, digitalization) can generate changes in the labor share even under perfect competition. - Changes in monopoly and monopsony power have also been emphasized: - Emergence of “superstar firms” has led to rising industry concentration, rising market power, higher markups and greater profit shares (OECD 2018; Autor et al. 2017; Manyika et al., 2019; Cerra et al. 2021, Chapter 6; Barkai 2020; Gutiérrez and Philippon 2017). - Deregulation of labor market institutions and weaker collective bargaining institutions have weakened workers’ bargaining power and lowered wages relative to productivity (Ciminelli et al., 2020; Manyika et al., 2019; Bengtsson, 2014). - Gouin-Bonenfant (2021) argues changes in the distribution of firm level productivity have effectively increased firm monopsony power in the labor market. - Measurement issues noted: - Treatment of self-employment income often incorrectly treated as capital income (Gollin, 2002). - Depreciation of capital arguably should be netted out from income share calculations (Bridgman, 2018). - Labor share definition and interpretation: - Labor share defined as W ∙ H / Y and can be written as W/APL (see text). If MPL is proportional to APL (e.g., Cobb-Douglas with time-invariant capital share), changes in the labor share can be used to infer changes in the ratio of wages to marginal productivity. ### Distributional effects and skill premia - Evidence on earnings by education and skills: - Based on the Mincer approach, controlling for years of experience, one additional year of schooling raises average earnings by about 10 percent (Heckman et al., 2006; Montenegro and Patrios, 2014). - Heckman et al. (2006) estimate the average return to schooling among males increased from about 10½ percent during the 1980s to 14 percent during the 1990s. - Wage disparities over time: - Average wages for workers with lower skill levels/educational attainment have remained nearly unchanged in real terms over the past 50-60 years. - Wages of workers with more than a college degree nearly doubled (Autor, 2019). - Much of the rise in skill premia attributed to rapid globalization and technological advancements that automate routine/lower-skill tasks and complement higher-skilled tasks. ### Gender and racial pay gaps; evidence on discrimination - Gender pay gaps: - Gender pay gaps are significant in most countries. Factor-weighted gender pay gaps use hourly wages, averages of 2015-19 (Figure 5; sources: ILO and authors' calculations). - A cross-country study (ILO, 2018b) finds education, age, work experience, workplace characteristics, working time, occupational categories, and other labor market attributes explain little of the gender pay gap at different points of the wage distribution, suggesting other factors at play. - Racial pay gaps (US case): - Bayer and Charles (2018) find that in 2014 the median black man in the US earned significantly less than the median white man (Figure 6). - When calculating black-white earning gaps including non-employed individuals (zero earnings), the gap widens considerably; relative to white men, black men are virtually no better off in 2014 than in 1950 (Bayer and Charles). - Experimental and field evidence on discrimination: - Goldin and Rouse (2000): “blind” auditions in symphony orchestras made hiring much more gender neutral. - Azmat and Petrongolo (2014): consensus from experimental research points to significant discrimination against women in high-status or male-dominated jobs and discrimination against men in female-dominated jobs. - Bertrand and Mullainathan (2004): applicants with “white-sounding” names were 50 percent more likely to receive a callback than applicants with identical resumes but “African-American-sounding” names. - Glover, Pallais, and Pariente (2017): minority cashiers scheduled with biased managers were absent more often and were less productive than majority cashiers. - Role of discrimination: - Discrimination can be explicit or implicit, often reflecting social norms and factors originating outside the labor market (e.g., access to quality education). ### Protection: social insurance, unemployment risk and coverage - Labor market risk and welfare costs: - Displaced workers can remain 25 percent lower paid than similar non-displaced workers even five years after displacement (Jacobson et al., 1993). - Rogerson and Schindler (2002) calculate welfare losses associated with earnings uncertainty of displacement on the order of up to one percent of output. - Heathcote et al. (2007) calculate welfare costs that are up to an order of magnitude higher. - Availability and coverage of unemployment insurance (UI): - Almost all Advanced Economies (AEs) have UI systems in place; UI systems exist in only about 60 percent of EMDEs. - Recent estimates suggest that only about 22 percent of unemployed workers are covered by unemployment benefits (Duval and Loungani (2019) and ILO (2017)). - Among countries with a UI system, benefit coverage is much greater in AEs than in EMDEs—on average, close to half of the unemployed receive benefits in AEs, compared to less than a third in EMDEs (Figures 7 and 8). - Other social protection metrics: - Globally only 41 percent of new mothers receive maternity benefits (ILO, 2017). - Only about 28 percent of persons with severe disabilities receive disability benefits (ILO, 2017). - Figure 11 shows proportions of population covered by social protection floors (averages of 2015-18) and highlights variation across and within country groups. ### Voice: unions, collective bargaining and representation - Forms and functions: - Workers can be represented by trade unions or informal worker associations; firms by employers’ associations or chambers of commerce; firm-internal mechanisms include work councils or ombuds(wo)men. - Collective bargaining can be centralized (national tripartite structures), decentralized (firm-level, work councils, board representation), or intermediate (sectoral/occupational institutions). - Extension agreements, derogation, and coordination through pattern bargaining create substantial variation even among countries classified as having predominantly sectoral bargaining. - Empirical patterns and trends: - Trade union density and collective bargaining coverage rates are much higher on average in AEs than EMDEs. - Collective bargaining covers about half of salaried employees in AEs on average, compared to about one-quarter in EMDEs (Duval and Loungani, 2019). - Union density has roughly halved since 1980 in Germany, France, the UK, Austria, and the Netherlands; it also declined substantially in Central and Eastern European countries after the fall of central planning. - Since the early 2000s, union density and collective bargaining coverage have declined in almost all countries, mostly due to a rise in employment in non-covered sectors and occupations (Figures 12 and 13). - Membership in business and employer associations has remained stable in all OECD countries except Slovenia and Portugal (Cazes et al., 2017; Brandl and Lehr, 2016). - Implications: - The decline in collective bargaining institutions may be particularly worrisome given technological and organizational changes that transform the labor market and generate new forms of employment. - A stronger voice of organized labor at the company level could help a more equitable distribution of the gains from technological and organizational change. *Source: IMF Working Paper (Chapter 5).* ### introduction of new technologies that would improve the longer-term prospects for productivity ### introduction of new technologies that would improve the longer-term prospects for productivity ### Decline in union coverage and bargaining power - The decline in union coverage in Germany is noted as one of the reasons for the introduction of a MW in 2015. - Union density declined more moderately in Spain, Belgium, Iceland and the Nordic countries. - Empirical observations: - Trade union membership fell sharply in some countries (example: Germany, number of trade union members halved between 1990 and 2010). - Union wage premium estimates: around 5-15 percent in AEs, and up to 20 percent in some EMDEs. - Implications: - Reduced bargaining power has contributed to declines in labor income shares (wages relative to labor productivity). - Erosion of bargaining institutions can exacerbate labor market inclusiveness problems. ### Informality as a cross-cutting issue - Scale and distribution: - According to the ILO, two billion of the world’s employed population aged 15 and over work informally, representing 61.2 percent of global employment. - In North America, Europe, Australia and New Zealand, informality rates are below 20 percent. - In emerging and developing countries more than 50 per cent of the labor force is informal. - Estimates for Sub-Saharan Africa and Asia are even higher. - Correlates and affected groups: - Informality is highly correlated with own-account workers, the agricultural sector, rural areas, women, youth and elderly populations, and low educational attainment. - According to UN data, women are the overwhelming majority of informal workers in developing countries, accounting for 95 (90) percent of total employment in South Asia (Sub-Saharan Africa). - Economic and social consequences: - Informal jobs are frequently low-quality with low pay (fairness), lack of protection from risks such as job loss and health problems (protection), and limited ability to exercise labor rights or influence policy (voice). - Informality is associated with higher poverty and inequality and slower growth; informal workers are more vulnerable to shocks and often concentrated in low productivity activities. - Vicious cycles: unstable income discourages human capital investment, trapping workers in low-productivity activities. - Fiscal impact in EMDEs: government revenues are, on average, lower by 5-10 percentage points of GDP, and expenditures are lower by 4-10 percentage points of GDP than in those with the lowest levels of informality. - Covid-19 implications: informal workers, often engaged in manual tasks and service activities that cannot be performed remotely, are likely to be much more detrimentally affected. ### Labor market diagnostics and implementation capacity - Successful policy reform requires: - Proper diagnosis of labor market challenges. - Design and implementation of appropriate policies based on the diagnosis. - Useful frameworks: - Perfectly competitive benchmark vs. monopsony assessment (policy effects differ depending on market structure). - Job search and matching models to examine flows into and out of employment and frictions affecting reallocation. - Institutional prerequisites: - Strengthening labor market information and analysis systems (e.g., independent employment observatories, well-funded national statistical systems). - Policymakers need economic capacity to interpret data and sufficient fiscal space to prioritize inclusiveness policies. - Adequate legal and institutional frameworks are required for enforcement. ### Rebalancing market power: Minimum wages and collective bargaining - Minimum wages (MW): - In monopsonistic local labor markets, large employers may set employment and wages below market-clearing levels; MWs can, in such contexts, raise both employment and wages. - MWs are a direct distributional tool to alleviate in-work poverty and reduce income inequality while imposing limited direct fiscal costs. - MWs interact with social security systems and can prevent dilution of tax credits and wage subsidies. - Empirical evidence on employment impacts of MWs is inconclusive and varies across demographic groups; adverse effects in low- and middle-income countries are typically small and sometimes positive. - Evidence points to strong positive effects on poverty alleviation. - In developing countries with large informal sectors, statutory MWs often spill over to informal employment, raising incomes in both formal and informal relationships. - Principles to maximize poverty reduction while limiting negative job effects: - A statutory MW should be defined in consultation with social partners. - MWs should be regularly monitored and revised through a representative body and evaluations of economic and social evolution. - Where collective bargaining agreement coverage is sufficient, collective agreements can be used to set MWs. - Strengthening collective bargaining institutions: - Trade unionization trends have been weakened by globalization, rise in atypical work, and sectoral shifts; political strategies of unions matter for organizing success. - Empirical findings: - Most studies find unions either increase unemployment modestly or have no significant effect. - Union members and workers covered by collective bargaining earn higher wages (wage premium reported above). - Union wage gains are strongest for less skilled workers and larger for women than men. - Coordinated systems tend to show lower unemployment rates in OECD data. - Policy instruments to strengthen bargaining: - Administrative extension of collective agreements to cover all employees (unionized or not) can quickly guarantee a protection floor, especially in low-wage sectors, and can strengthen employer association membership. - Downsides: may lower incentives for unionization and can adversely affect market competition by enabling rent-seeking and raising rivals’ costs; may increase market concentration. - Bolstering shop-floor industrial relations via works councils requires worker consultation on restructurings, investments or layoffs and can reduce labor turnover and layoffs. - When combined with industry-level bargaining that prevents shop-floor rent-seeking, works councils have been shown to raise firm-level productivity and speed up adjustment. ### Policy recommendations and implementation considerations - Strengthen labor market information and analysis systems (independent observatories, better statistical funding, linkages across institutions). - Tailor MW design and implementation: - Define MWs in consultation with social partners. - Monitor and revise MWs regularly through representative bodies and evidence-based evaluations. - Enhance collective bargaining institutions: - Consider administrative extension of sector/company agreements where appropriate, while monitoring competition and union incentives. - Support works councils and industry-level bargaining to improve firm-level productivity and reduce disruptive labor turnover. - Address informality through broad-based economic growth and labor market policies that generate formal employment opportunities, alongside targeted labor market interventions and social protection extension. *Source: wpiea2021141-print-pdf - introduction of new technologies that would improve the longer-term prospects for productivity* ### introduction of new technologies (Genz et al., 2019). Nevertheless, reaping such benefits from ### wpiea2021141-print-pdf - introduction of new technologies (Genz et al., 2019). Nevertheless, reaping such benefits from ### A. Sharing risk — overview of approaches - Workers face employment risk, technological change that makes existing skills (human capital) obsolete, and/or income risk. - Absence of private insurance markets provides rationale for government protection. - Common government approaches: - (1) Restrict/regulate layoffs (mass layoffs, prevent discrimination, unfair dismissals). - (2) Provide replacement income through unemployment benefits (government-run or subsidies to voluntary schemes). - (3) Use labor market programs to facilitate search and retraining. - First two approaches protect vulnerable households and prevent exclusion but do not per se facilitate job mobility or re-entry. - Third approach aims to limit segmentation by incentivizing mobility and providing resources to switch occupations, sectors, or locations. - Successful strategy requires proper design and financing of the three protection mechanisms and joint implementation of income support and activation measures. ### Employment protection legislation (EPL) — effects and heterogeneity - EPL coverage and enforcement vary significantly across countries; in many countries some dependent employees are excluded (examples cited include domestic workers, agricultural workers, managers/executives, employees in enterprises with less than 30 workers; Australia excludes casual workers). - Informally employed workers remain outside EPL reach. - EPL effects: - May reduce risk of becoming unemployed for protected workers. - May reduce firms’ incentives to create new jobs, lowering unemployed individuals’ chances to find jobs. - Strict EPL reduces job destruction in AEs (Messina and Vallanti, 2007); workers in firms with less restrictive EPL are more likely to be dismissed (Boeri and Jimeno, 2005). - EPL can contribute to labor market segmentation between insiders and outsiders and raise risk of exclusion of youth and low-skilled (Betcherman 2012). - Strict EPL tends to encourage informal employment and hinder productivity and economic growth (Bassanini et al., 2009). - In aggregate, EPL seems to slightly reduce employment, although more in EMDEs than in AEs (Duval and Loungani 2019; Betcherman 2012). - Impact of EPL on unemployment seems to be negligible (Heimberger, 2020) but can make unemployment more persistent by dampening turnover (Bassanini and Duval 2006). - Wage effects: - OECD (2011) argued stricter EPL compresses the wage distribution and reduces wage inequality among the employed. - Differential EPL can create duality: temporary-contract workers often receive less employer-sponsored training; stricter EPL for permanent contracts incentivizes employer investment in those workers (Cabrales et al., 2014). - Temporary contracts often involve a substantial wage penalty; EU temporary workers earn on average 14 percent less than regular workers (European Commission 2010). - Potential benefits of strict EPL: - Associated with stronger workers’ voice and low risk of exclusion (Ciminelli et al., 2020). - Deregulation may weaken bargaining power and contribute to declining labor income share in AEs. - Encourages expectation of long-lasting employment relationships and investments in relationship-specific capital (Doepke and Gaetani, 2020). - Strict EPL combined with coordinated collective bargaining might have helped innovation and productivity by stimulating firm-specific capital accumulation (Bassanini and Ernst 2002). - Alternative forms of protection: - Worker retention and furloughing schemes (e.g., German Kurzarbeit originating in 1910) allow hours reductions with government partial pay coverage; extended to many sectors. - Evidence: policy raises elasticity of hours rather than jobs, yields significant reduction in job destruction but may reduce job-content of growth once recovery sets in (Hijzen and Martin, 2013). - Overly long furloughing extensions can slow re-allocation of jobs, especially with asymmetric recovery across sectors and occupations (Cahuc, 2019). ### Income support and activation measures — UI design trade-offs - Unemployment insurance (UI) intends temporary income support but entails trade-offs between equity/insurance and efficiency. - More generous UI can offset income losses but may raise reservation wages and lengthen unemployment durations; UI systems should be neither too generous nor too low. - Empirical evidence on UI benefit duration: - Arni (2017) finds longer duration led to higher reservation and realized wages in Switzerland. - Schmieder and Von Wachter (2016) find small negative effects of extending UI duration on realized earnings in Germany. - Nekoei and Weber (2017) find modest effects in Austria. - High replacement rates, if paid over an extended period, may reduce job-search effort, lengthen spells, and erode skills (Van Ours and Vodopievic, 2008; Tatsiramos, 2009). - UI levels and inequality: - No robust link between UI benefit levels and overall inequality in AEs (Jaumotte and Buitron, 2015). - In EMDEs low coverage limits UI systems’ ability to prevent unemployment-related poverty and inequality, increasing reliance on informal coping mechanisms (OECD, 2011). - Reforms to strengthen return-to-work incentives: - High initial replacement rates combined with fast benefit reductions and strict obligations to accept offers—drawback: tapered schemes penalize most socially vulnerable and are regressive (ILO, 2000a). - Prospect of benefit cuts may discourage time devoted to finding jobs that match skills, harming productivity and growth. - Extended UI benefits can improve job matching: - Recent research (Farooq et al., 2020 for the United States; Nekoei and Weber, 2017 for Austria) suggests extended UI can improve job matching and be ‘win-win’. - Benefits: higher probability of finding suitable jobs, higher wages, greater job satisfaction, lower quit rates, lower turnover, improved productivity. - Well-designed unemployment benefit schemes can strengthen incentives to work in the formal economy (Ernst, 2015). ### Flexicurity and complementary policies - Successful strategy: combine income support and activation measures with a reduction in EPL as part of a “flexicurity” welfare reform (Bekker and Mailand, 2019). - “Flexicurity” characterized by three elements: generous social safety nets, extensive activation policies, and flexible hiring and firing. - Denmark cited as the most prominent example, resulting in low (long-term) unemployment rates and a high perception of job security among Danish workers (Andersen, 2011). ### Social protection — inclusiveness trade-offs and reforms - UI benefits are one pillar among programs protecting against income loss due to illness, disability, or old age. - Contributory social security systems financed by beneficiary and employer contributions create labor market duality by excluding informal and (in most cases) self-employed workers. - Inefficiencies often mean benefits are small relative to contribution rates, discouraging formal employment and formal job creation. - Policy strategies to address trade-off between protection and access: - Expand non-contributory systems to include informal workers (strengthens protection but lowers incentives to work formally). - Strengthen incentives for formalization (broaden tax base, lower tax rates). - Two-tier systems could extend unemployment benefits to all formal sector workers (including part-time and temporary), lowering incentives for informal jobs. - Recent country measures: - Spain lowered contribution rates for low-income workers to strengthen incentives to work formally. - Brazil, Thailand, and Uruguay provide subsidies for social security contributions of self-employed workers. - Philippines, Uruguay, and the Republic of Korea extended legal coverage to specific occupations (domestic workers, construction workers). - Some countries reduced legal barriers to formality and modified eligibility conditions on minimum employment period or working hours (e.g., Netherlands and Vietnam). ### Strengthening resilience: Active Labor Market Policies (ALMPs) - ALMPs and income support should be jointly implemented. - ALMPs include: training provisions, Public Employment Service (PES) and job-search assistance, employment subsidies, start-up incentives, hiring incentives, direct job creation. - Examples: - Uruguay: PANES (National Assistance Plan of Social Emergency) provided monetary support; Trabajo por Uruguay aimed to improve labor competencies. Criticized for limited reach and short duration. - One possible reason: PANES and Trabajo por Uruguay were capped to a maximum of five months (Escudero et al., 2020). - World Bank estimate: about 60 percent of training participants appeared to have been trained to develop non-transferable skills; vocational transferable skills could have increased employability (World Bank, 2008). - Enabling conditions for success: - Transparent and inclusive governance for rapid and efficient beneficiary targeting. - Involvement of social partners to address skills deficits and improve training delivery (ILO, 2019b). - Evidence on program effectiveness: - Job-search assistance and training tend to work well (Card et al., 2010). - Well-designed wage subsidy schemes are effective (Card et al., 2018; Estevão 2007). - Public job creation is less effective over the long run (Bown and Freud, 2019), though useful if linked with training. - Empirical evidence for Latin America: - ALMPs more successful among low-skilled workers, women, and youth, especially during economic expansion (Escudero, 2018; Escudero et al., 2019). - ALMPs associated with reduced informality: training increases formal employment and earnings; participation in PES increases probability of having a formal job (Pignatti, 2016). ### C. Fighting discrimination — economic costs and gains from inclusion - Discrimination affects pay, access to occupations, working conditions, and contributes to occupational misallocation. - Indications that racial and gender discrimination have declined over several decades, but discrimination remains an obstacle to fully inclusive labor markets. - Evidence of economic costs: - Study on French grocery stores (Glover, Pallais, and Pariente, 2017) estimates performance losses due to discrimination reached up to nearly 10 percent. - Hsieh et al. (2019) report that in 1960 over 90 percent of doctors and lawyers were white men; by 2010 that share had come down to just above 60 percent. - Assuming no innate talent differences across groups, improved allocation of talent across occupations between 1960 and 2010 has accounted for 20-40 percent of GDP growth during that time. - Other research estimates benefits of reducing gender discrimination to be of a similar order of magnitude (Ostry et al., 2018; Cerra et al., 2021). *Source: wpiea2021141-print-pdf - introduction of new technologies (Genz et al., 2019). Nevertheless, reaping such benefits from* ### Chapter 16). ### Chapter 16 ### Discrimination, Occupational Choice, and Growth - Removing barriers to occupational choice, including through removing discrimination against workers of different race or gender, can have vast growth, productivity and equity benefits. - Addressing discrimination is characterized as both an ethical imperative and "of first-order importance from an economic perspective." - Large macroeconomic costs associated with discrimination imply significant win-win outcomes: removing discriminatory occupational barriers and pay differences would benefit both discriminated groups and the economy as a whole. - Much discriminatory behavior is rooted in cultural and social norms formed outside the labor market; unequal access also arises from discrimination occurring prior to labor market entry (e.g., access to quality education and training). - Policy options within the labor market suggested by the research literature: - Make discrimination illegal as a necessary condition (example: the Equal Employment Opportunity Act of 1972 in the US forbidding discrimination on the basis of race, sex, color, religion, or national origin). Empirical evidence: Chay (1998) finds positive impacts on employment and earnings of African-American men. - Blind recruitment or hiding gender/racial background can yield less biased hiring and more skill-based selection (experimental evidence: Goldin and Rouse (2000); Bertrand and Mullainathan (2004)). - Employer attention to supervisor–supervisee racial dynamics can increase productivity (Glover et al. (2017)); similar effects may apply across gender. - Quotas (notably gender quotas) can be measurable and enforceable tools to achieve diversity; evidence: European firms that implemented gender quotas on corporate boards experienced increases in firm value (Kuzmina and Melentyeva (2020)). - Additional illustrative policies mentioned: California 2018 bill requiring minimum numbers of female directors on boards (Groves, 2019); extension of federal minimum wage coverage under the 1966 Fair Labor Standards Act affected industries with higher black worker representation and lowered racial earnings gaps (Derenoncourt and Montialoux (2020)). ### Addressing Labor Market Segmentation (Informality and Duality) - Informality is a main obstacle to inclusive labor markets in many countries; policy solutions must address country-specific root causes (Loayza, 2018). - Common causes of informality: - Stringent and burdensome regulation (strict labor regulations, high (marginal) taxes, complicated tax payment procedures) (Loayza et al., 2006; Schneider, 2004; Perry et al., 2007). - Low institutional quality (corruption, weak rule of law, lack of accountability, low trust in institutions) (Loayza, 2007; Torgler and Schneider, 2007; Van Elk et al., 2014). - Lack of integration with the global economy, low educational levels, and low productivity among formal sector firms (Bacchetta et al., 2009; de Paula and Scheinkman, 2007; Perry et al., 2007; Jütting et al., 2008). - Three key policy areas to reduce informality: strengthening labor productivity, tax measures, and administrative measures. #### Encouraging Structural Change - Barriers to structural change toward high-productive, formal employment include weak aggregate demand, lack of educated workforce, and low managerial competence (Loayza, 2018; Bloom et al., 2017). - Low educational attainment often channels young workers into informal jobs, reducing long-term prospects (Shehu and Nilsson, 2014). - Informal workers (self- or dependent-employed) have significantly lower educational levels, limiting access to high-productive, formal jobs (Maurizio and Vazquez, 2019). - Policy levers: - Public investment in education infrastructure, quality teaching, and expansion of vocational training systems (see Cerra et al. 2021, Chapter 14). - Recognize educational investment provided within the informal economy to facilitate occupational transition. - Active labor policies and job reinsertion programs through (re-)training to facilitate transitions to formalization (Card et al. 2010 and 2018). #### Taxation - An efficient tax system is important to address inequality and informality and to restore robust growth. - Formality choices are highly elastic with respect to marginal tax rates; reducing tax rates on formal businesses lowers costs of being formal and can move entrepreneurs from informal to formal activity, raising output and efficiency. - Higher tax rates for firm-owners induce movements to the informal sector, under-reporting, and income shifting to tax-favored forms, leading to inefficient resource allocation. - Lowering payroll taxes can increase formal employment and extend social insurance coverage, though effects vary across countries. - If informality is voluntary, lower tax rates reduce incentives to remain informal; if involuntary, lower tax rates can encourage formal firms to expand employment and create formal jobs. - Empirical and policy examples: - Reduced tax rates for low-wage earners in Belgium, Bulgaria, the Netherlands and France; tax exemptions/reductions in sectors relying on undeclared work in Hungary, Sweden, Belgium and France. - Brazil: SIMPLES (1996) and SUPERSIMPLES (2006) simplified taxes for micro firms (no more than five paid employees); since SUPERSIMPLES came into force in July 2007, some 9 million businesses joined the system and the formality rate increased by 11 percentage points (Fajnzylber et al., 2011). - Argentina: Monotax (Monotributo) implemented in 1998—a simplified tax scheme for small taxpayers that extends social security benefits to covered individuals; effective for formalization and extension of social security to independent workers, especially women. - Colombia: 2012 reforms reduced payroll taxes for firms with less than 10 employees and for self-employed who hired two employees or more; evidence suggests increased probability of formal employment and transitions into registered employment for affected groups (Kugler et al., 2017). - Caveats and mixed evidence: - Such simplified regimes can create incentives for firms to remain small, potentially hindering growth opportunities in EMs (Hsieh and Olken, 2014). - Langot et al. (2019) find that a budget-neutral tax reform aimed at small enterprises may play only a minor role in improving formalization rates in emerging countries; tax interventions should be paired with social protection and administrative policies. #### Administrative (E-Formality) Policies - Administrative policies enhance formalization by strengthening enforcement, promoting information sharing, elevating awareness, and establishing efficient and transparent administrative processes. - New technologies ("e-formality" policies) facilitate partnerships and information sharing among tax, social security, and employment institutions, simplifying transition to formal employment (Chacaltana et al., 2018). - Examples of e-formality tools: - Electronic tax filing and collection systems (e.g., e-Tax in Estonia). - One-stop business registration shops (e.g., Ventanilla Única Empresarial in Colombia, 2017). - Electronic registration of workers (e.g., eSocial in Brazil, launched in 2007; Electronic Payroll in Peru, 2006). - Mobile apps to simplify social security contribution payments for domestic workers. - Technology-enhanced labor inspections (e.g., Digital Inspector in Argentina, 2003; examples in the United Arab Emirates). - Information and awareness: - Many informal workers are unaware of available social protection schemes and how to access them; raising awareness catalyzes extension of social security. - Turkey: since 2012, an information system combining databases of three social security institutions allows users to access pension and health insurance status, registration and premiums using their citizenship identification number (ILO, 2019b). - Transaction tracking to discourage cash-based informal operations: - Incentives: Republic of Korea offers an income tax deduction to those reaching a certain amount in credit card transactions. - Penalties: Greece imposes penalties if taxpayers do not make enough electronic payments. ### Conclusion: Four Key Takeaways for Policy Makers - No uniform policy set: inclusivity is multi-dimensional; departures from inclusivity differ across economies and require assessing and weighting different dimensions. - Tradeoffs are inevitable: policies often involve important tradeoffs between inclusivity dimensions (example: employment protection protects current workers but can diminish access for young entrants). - Policies should be viewed as a bundle: some policies are substitutes and others complements; assess policies as part of a package rather than in isolation (the Danish flexicurity system is highlighted as an example). - Micro and macro departures: departures from inclusivity occur at both micro and macro levels; standard macro tools may not address micro departures, which may require novel approaches. - Two additional remarks: - Labor market outcomes are strongly influenced by outcomes outside the labor market (e.g., inequality in access to quality schooling leads to inequality in labor market opportunities; cultural norms and discriminatory practices outside the labor market translate into labor market departures from inclusivity). - Technological change matters: policy settings can influence the extent and nature of technology adoption; some tax policies might encourage firms to replace low-skill labor with machines. 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V. 2018. “Informality: Why Is It So Widespread and How Can It Be Reduced?” World Bank Research and Policy Briefs No. 133110. - Van Elk; K.; de Kok, J.; Durán, J.; and Lindeboom, G. 2014. “Enterprise formalization: Fact or fiction? A quest for case studies”, ILO Geneva. - Hussmanns, R. 2004. “Measuring the Informal Economy: From Employment in the Informal Sector to Informal Employment,” Working paper No. 53, Policy Integration Department, Bureau of Statistics (Geneva, ILO). - Minimum wages, wage distribution, and family income effects - Dube, A. 2019a. Impacts of Minimum Wages: Review of the International Evidence. (London, HM Treasury). - Dube, A. 2019b. “Minimum Wages and the Distribution of Family Incomes,” American Economic Journal: Applied Economics, Vol. 11, No. 4, pp. 268-304. - Neumark, D. and Wascher, W. L. 2008. Minimum wages (Cambridge, MA., MIT Press). - Rothstein, J. and Zipperer, B. 2020. “The EITC and Minimum Wage Work Together to Reduce Poverty and Raise Incomes,” EPI Report. - Unemployment insurance, benefits generosity, and match quality - Ernst, E. 2015. “Supporting jobseekers: How unemployment benefits can help unemployed workers and strengthen job creation”, International Social Security Review, Vol. 68, 3/2015. - Farooq, A.; Kugler, A.; and Muratori, U. 2020, “Do Unemployment Insurance Benefits Improve Match Quality? Evidence from Recent U.S. Recessions”, NBER Working Paper No. 27574. - Nekoei, A. and Weber, A. 2017. “Does Extending Unemployment Benefits Improve Job Quality?”, American Economic Review, Vol. 107, pp. 527-61. - Van Ours J. C,and Vodopivec M. 2008. ”Does Reducing Unemployment Insurance Generosity Reduce Job Match Quality?”, Journal of Public Economics, Vol. 92(3-4), pp. 684-695. - Schmieder, J. F. and Von Wachter, T. 2016. “The Effects of Unemployment Insurance Benefits: New Evidence and Interpretation”, Annual Review of Economics, vol. 8(1), pages 547-581, October. - Active labour market policies, job retention schemes, and crisis response - Escudero, V. 2018. “Are Active Labour Market Policies Effective in Activating and Integrating Low-Skilled Individuals? An International Comparison”, IZA Journal of Labor Policy, Vol.7(1), pages 1-26, December. - Escudero, V.; López Mourelo, E.; and Pignatti, C. 2020. “Joint Provision of Income and Employment Support: Evidence from a Crisis Response in Uruguay”, World Development, Vol.134(C). - Hijzen, A. and Martin, S. 2013. “The Role of Short-Time Work Schemes during the Global Financial Crisis and Early Recovery: A Cross-Country Analysis”, IZA Discussion Papers 7291. - OECD. 2020. “Job Retention Schemes During the COVID-19 Lockdown and Beyond”, OECD Policy Responses to Coronavirus. - Labor market institutions, collective bargaining, unions, and works councils - Duval, Romain and Loungani, Prakash. 2019. “Designing Labor Market Institutions in Emerging Market and Developing Economies: Evidence and Policy Options,” IMF Staff Discussion Note 19/04. May 21, 2019. - Hayter, S. and Visser, J. 2018. “Collective Agreements: Extending Labour Protection,” (Geneva, ILO). - Villanueva, E. 2015. “Employment and Wage Effects of Extending Collective Bargaining Agreements: Extending Provisions of Collective Contracts to All Workers in an Industry or Region May Lead to Employment Losses”, in IZA World of Labor, Nr. 136. - Hübler, O. and Jirjahn, U. 2003. “Works Councils and Collective Bargaining in Germany: The Impact on Productivity and Wages,” Scottish Journal of Political Economy, vol. 50, nr. 4, pp. 471-491. - Hirsch, B.; Schank, T.; and Schnabel, C. 2010. “Works Councils and Separations: Voice, Monopoly, and Insurance Effects”, Industrial Relations, Vol. 49, Nr. 4, pages 566-592. - Schnabel, C. 2013. “Union Membership and Density: Some (not so) Stylized Facts and Challenges,” European Journal of Industrial Relations, Vol. 19, Nr. 3, pp. 255-272. - Labor share, productivity, market concentration, and firm dynamics - Elsby, M.; Hobijn, B.; and Sahin, A. 2013. “The decline of the U.S. labor share”, Brookings Papers on Economic Activity, Fall. - International Monetary Fund (IMF). 2017. “Understanding the Downward Trends in Labor Income Shares”, Chapter 3, World Economic Outlook, April 2017. - Manyika, James, Jan Mischke, Jacques Bughin, Jonathan Woetzel, Mekala Krishnan, and Samuel Cudre. 2019. “A New Look at the Declining Labor Share of Income in the United States,” Discussion Paper, McKinsey Global Institute. - Gutiérrez, Germán and Philippon, Thomas. 2017. “Declining Competition and Investment in the US,” NBER Working Paper No. 23583. - Koh, Dongya; Santaeulàlia‐Llopis, Raül; and Zheng, Yu. 2020. “Labor Share Decline and Intellectual Property Products Capital,” Econometrica, Vol. 88, Issue 6, pp. 2609-2628 November 2020. - OECD. 2015. “The Labour Share in G20 Economies.” - Skills, education returns, and allocation of talent - Heckman, James J.; Lochner, Lance J.; and Todd, Petra E. 2006. “Earnings Functions, Rates, of Return and Treatment Effects: The Mincer Equation and Beyond,” Chapter 7 in Handbook of the Economics of Education, Volume 1. - Montenegro, Claudio and Patrinos, Harry. 2014. “Comparable Estimates of Returns to Schooling around the World,” World Bank. - Hsieh, Chang-Tai, Eric Hurst, Chales Jones and Peter Klenow. 2019. “The Allocation of Talent and U.S. Economic Growth,” Econometrica 87:5, 1439-1474. - Gender, diversity, and quotas - Ostry, Jonathan; Alvarez, Jorge; Espinoza, Raphael; and Papageorgio, Chris. 2018. “Economic Gains from Gender Inclusion: New Mechanisms, New Evidence,” IMF Staff Discussion Note/18/06 October. - Kuzmina, Olga and Melentyeva, Valentina. 2020. “Gender Diversity in Corporate Boards: Evidence from Quota-Implied Discontinuities,” CEPR Discussion Paper No. DP14942. - Groves, Martha. 2019. "How California’s ‘Woman Quota’ is Already Changing Corporate Boards," calmatters.org. - Taxation, payroll taxes, and policy tools to stimulate formality - Kugler, A.; Kugler M.; and Herrera-Prada, L. O. 2017. “Do Payroll Tax Breaks Stimulate Formality? Evidence from Colombia’s Reform”, Economía Journal, vol. 0 (Fall 2017), pp. 3-40. - Pagés, C. 2017. “Do payroll tax cuts boost formal jobs in developing countries?”, IZA World of Labor, March 2017. - Waseem, M. 2018. “Taxes, Informality and Income Shifting: Evidence from a Recent Pakistani Tax Reform”, Journal of Public Economics, Vol. 157(C), pp. 41-77. - Langot, F.; Merola, R.; and Oh, S. 2019. “Can Taxes Help Ensure a Fair Globalization?”, Policy Research Working Paper Series 8975, The World Bank. ### Representative empirical methods and data sources cited - Working papers, NBER papers, IZA Discussion Papers, IMF Staff Discussion Notes, World Bank Policy Research Working Papers, and ILO/ILO Geneva working papers. - Cross-country analyses, meta-analyses, case studies, randomized or quasi-experimental administrative-data studies, and sectoral/firm-level panel evidence (as indicated by titles and outlets). ### Policy-related emphases drawn from titles and outlets - Importance of designing labor market institutions appropriate for Emerging Market and Developing Economies (Duval and Loungani 2019). - Evaluation of minimum wage impacts on employment and family income distribution (Dube 2019a; Dube 2019b; Neumark and Wascher 2008). - Role of unemployment insurance design in match quality and job stability (Nekoei and Weber 2017; Farooq et al. 2020; Schmieder and Von Wachter 2016). - Use of payroll tax incentives and tax reforms as tools to stimulate formality (Kugler et al. 2017; Pagés 2017; Waseem 2018). - Short-time work schemes and job retention policies as crisis responses (Hijzen and Martin 2013; OECD 2020). - Collective bargaining extensions, works councils, and union density as factors affecting wages, productivity, and employment (Hayter and Visser 2018; Hübler and Jirjahn 2003; Villanueva 2015). *Content compiled from the reference list on page 228 of the source PDF.* --- _Source: https://www.imf.org/-/media/files/publications/wp/2021/english/wpiea2021141-print-pdf.pdf_