Jobs. Jobs. Jobs. Getting the Labor Markets Working Again

IMF Blog, November 8, 2012

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Published: November 8, 2012
Theme: “Labor Markets through the Lens of the Great Recession”
Motivation: Sharp and persistent rise in unemployment in advanced economies since the 2008-09 financial crisis has major human and economic costs, including loss of morale and loss of skills, and may undermine the fabric of society.
Goal: Shed light on labor market issues central to the current economic and social landscape and to contribute to new policy thinking at the IMF and elsewhere.

Event: IMF's 13th Jacques Polak Annual Research Conference
Core components:
- Mundell-Fleming lecture (keynote) by Peter Diamond, Nobel Prize winner in Economics and Professor of Economics at MIT.
- 12 papers on key dimensions of labor markets and income distribution, and on the role of trade and financial globalization in labor market outcomes.
- Opening remarks by George Akerlof, Nobel Prize winner in Economics and Senior Advisor in the IMF Research Department.
- Concluding Economic Forum on “Policies and Jobs” with a panel including Ricardo Hausmann, Adriana Kugler, Lawrence Katz, and Martin Rama (head of the World Bank 2013 WDI report on jobs).

Focus: The controversial issue of cyclical vs. structural unemployment.
Analytical tools examined:
- Beveridge curve: relation between unemployment and vacancies.
- Matching function: relates hires, unemployment, and vacancies.
Objectives:
- Assess usefulness and limits of these tools.
- Provide indications for how research should be extended in the future.

Has the relationship between employment and output growth (the so-called “Okun law”) changed in recent years? To what extent is such a relationship stable over time and significantly homogeneous across countries?
What is the role of skills mismatch in unemployment? Is the Beveridge curve shifting significantly over time and, if so, how do social policy (namely, unemployment insurance) and skill mismatch account for such shifts?
What is the relationship between growth and income and wealth inequality? Do rising top income shares exacerbate economic fragility? And if so, how far should and could fiscal policy go in trying to mitigate it?
Do contractionary monetary policies systematically increase inequality in labor earnings and consumption?
How far does imperfect financial intermediation help explain fluctuations in employment and asymmetries in job creation between small and large businesses?
How large has been the impact of trade integration with large emerging markets (China, India, and others) on employment and income distribution in advanced countries?
What are the stylized facts about fast employment recovery “miracles”? Do recoveries tend to benefit more those who lost their jobs in the first place through “employment recalls” at the expense of new entrants in the labor force? How crucial have been labor market reforms and regulation in fostering employment recoveries?

Mundell-Fleming lecture: Peter Diamond (Nobel Prize winner; MIT).
Opening remarks: George Akerlof (Nobel Prize winner; Senior Advisor, IMF Research Department).
Economic Forum panel on “Policies and Jobs”: Ricardo Hausmann (Harvard University and former finance minister of Venezuela), Adriana Kugler (chief economist of the U.S. Department of Labor), Lawrence Katz (Harvard University), Martin Rama (head of the World Bank 2013 WDI report on jobs).

Intended outcome: Inform policy choices in advanced and emerging countries and influence research and policy thinking at the IMF and elsewhere.
Access note: Research papers are posted online and the Economic Forum is broadcast via the IMF website.

Source: Jobs. Jobs. Jobs. Getting the Labor Markets Working Again — Olivier Blanchard, November 8, 2012