Slow Growth Of Employment Research Articles

China versus Mexico in the Global EPZ Industry: Maquiladoras, FDI Quality, and Plant Mortality

Studies find that the rapid increase in Chinese exports to the United States (US) contributed to the net loss of over 800 maquilas and close to 300,000 maquila jobs from October 2000 to December 2003 and slow employment growth from 2004 to 2006. In this study, we examine the characteristics of surviving and non-surviving plants to determine if maquila losses are concentrated in low-, medium-, or high-quality segments. Based on a unique firm-level data set made up of 101 plants in five major industrial centers, we find that larger maquilas and plants producing auto parts enjoyed lower mortality rates. Controlling for these two factors, we find no statistically significant relationship between the use of technology-intensive production systems, just-in-time inventory practices, total quality management, attractive human resource management practices, and maquila survival. Contrary to much of the literature that appeared from 2000 to 2005 and statements made by Mexican policy makers, our results suggest that China’s export surge has contributed to relatively high rates of maquila mortality in low-, medium-, and high-quality maquila segments. We conclude with policy recommendations.

How Disasters Affect Local Labor Markets: The Effects of Hurricanes in Florida

This study improves upon the Difference in Difference approach by examining exogenous shocks using a Generalized Difference in Difference (GDD) technique that identifies economic effects of hurricanes. Based on the Quarterly Census of Employment and Wages data, worker earnings in Florida counties hit by a hurricane increase up to 4 percent, whereas earnings in neighboring counties decrease. Over time, workers experience faster earnings and slower employment growth than workers in unaffected counties. Hurricanes have a greater impact in coastal and Panhandle counties, and powerful hurricanes have greater economic effects than weaker ones. Further, the GDD technique is applicable to analyze a wider range of exogenous shocks than hurricanes.

The Manpower Law of 2003 and its implementing regulations: Genesis, key articles and potential impact

This paper reviews Indonesia's Manpower Law 13/2003 and related regulations, against a backdrop of slow employment growth, business concerns about the legislation and government attempts to change it in 2006. The paper focuses on severance rates and dismissals, short-term contracts and out-sourcing, and minimum wages, also briefly discussing other articles, and comparing the law with those in neighbouring countries. It suggests that certain articles have contributed to significantly higher wage costs and reduced flexibility in the management of labour in Indonesia's formal sector, even though compliance is by no means universal within the private sector. Key provisions, especially large increases in severance rates, and needs criteria imposed for the purpose of setting minimum wages, are also out of step with labour market policies in other developing countries. Circumstantial evidence suggests that these measures have adversely affected the investment climate and damaged prospects for a recovery in employment. The authors are particularly grateful to two anonymous referees for very helpful comments on this paper, and to Kelly Bird, who has been engaged with both authors in research on labour laws in Indonesia for several years. The normal disclaimers apply.

Wage Determination in South Africa: What Do We Know?

Wage determination in South Africa:what do we know? Miriam Altman Introduction Wages play an important role in the broader economy from both efficiency and equity perspectives. This article considers the state of knowledge on wage determination in South Africa. It asks the following questions: • Is wage setting appropriate for South Africa's development needs? Are wages determined in alignment with employment and growth needs to achieve full employment? Do they underpin incomes (for labour replacement)? Are they responsive to industrial competitiveness requirements? • Are wages set within a competitive framework? What constrains competition in the labour market? How important are racial and gender discrimination? What impact do high skill wage increases have on economic growth? What impact would competition have? • What are the roles of institutions such as unions and bargaining councils, and of minimum wages, on efficiency and equity? Figure 1 outlines factors that can impact on wage determination. This starts from 'supply-side factors' such as access to education, networks, transport or workers' general health. The demand for labour, and therefore wage levels, can be affected by industrial structure, general growth conditions and the behaviour of firms in their human resources practices. These supply and demand conditions are mediated by market institutions providing bargaining, regulation, networks, and information. Some flexibility to market conditions is often sought. However, flexibility is a term that is often misused. Most commonly, it refers to contract flexibility, or the ability to hire and fire. This should enable firms to adjust to changing market conditions. But flexibility or rigidity could also refer to [End Page 58] entrenched non-competing labour market segments. Patterns of wage determination may be segmented by occupation, industry, geographical area, gender or race. These can be important sources of inflexibility and have serious cost and efficiency implications. This article is structured as follows: the first section reviews general wage trends, and the distribution of wages. The second section considers explanations for wage trends attributed to economic structure. The third section reviews the impacts of unions and minimum wages on overall wages and equity. The final section looks at the evidence of racial and gender discrimination. Click for larger view View full resolution Figure 1. Factors impacting on wage determination. Overview of wage trends General wage trends Wage trends differed dramatically over the 1970s, 1980s and 1990s, as would be expected over a period of structural change, greatly varying rates of economic growth and political change. The distribution of value added between wages and employment growth will greatly impact on efficiency and equity outcomes. In the 1970s, there was rapid annual growth in real wages in mining (10.8 per cent), manufacturing (2.5 per cent) and agriculture (2.6 per cent). This exceptional growth in wages trailed behind that in real value added in agriculture and manufacturing. In services, real wages were relatively stagnant (0.2 per cent per annum), despite rapid growth in value added by about 3 per cent per annum (Mazumdar and van Seventer 2002). Mazumdar and van Seventer (2002:17) find that the 'tradeable sector divided the increase in output [End Page 59] almost equally between real wage growth and employment increase'. Mining in particular benefited from output price increases, enabling higher wages in a context of stagnant output and slow employment growth. In contrast, expansions of output in the services sector contributed mainly to employment growth and not to wage increases. The experience was very different in the 1980s. Real wage growth in the 1980s was generally very low, and mostly trailed growth in value added. According to Mazumdar and van Seventer (2002), the 1990s were marked by a re-emergence of wage growth, generally outstripping that in value added. The divergence was much more marked for mining and light industry than it was for services sectors. This was the case in both traded and non-traded sectors, although it is still more marked for the former. This means the fruits of any output growth would have favoured wages over employment. The context is one of fairly slow growth in value added over the 1990s, so rapid employment creation would not be expected. Real wage growth would need explanation in this context. Mazumdar and van...

Where Did the Productivity Growth Go? Inflation Dynamics and the Distribution of Income

Where Did the Productivity Growth Go?Inflation Dynamics and the Distribution of Income Ian Dew-Becker and Robert J. Gordon It's no secret that the gap between the rich and the poor has been growing, but the extent to which the richest are leaving everybody else behind is not widely known. . . . It's like chasing a speedboat with a rowboat. —Bob Herbert, The New York Times1 There is no question that a huge gap has opened up between productivity and living standards. . . . Not since World War II have productivity and income diverged so sharply. —Louis Uchitelle, The New York Times2 The first half of this decade has witnessed a sharp contrast between strong output and productivity growth, on the one hand, and slow employment and median income growth, on the other. The strong growth in output combined with weak growth in hours worked has resulted in an explosion [End Page 67] in labor productivity growth, implying an underlying trend that is rising faster than in any previous subperiod of the postwar era. Yet who received the benefits? Median household income actually fell by 3.8 percent from 1999 to 2004 and grew from 1995 to 2004 at a rate of only 0.9 percent a year, a much slower rate than that of nonfarm private business (NFPB) output per hour over the same period, at 2.9 percent.3 Similarly, the median real wage for all workers grew over 1995-2003 at an average rate of 1.4 percent a year, less than half the rate of productivity growth.4 The failure of the productivity growth revival to boost the real incomes and wages of the median family and the median worker calls into question the standard economic paradigm that productivity growth translates automatically into rising living standards, as in this quote from Paul Krugman: Productivity isn't everything, but in the long run it is almost everything. A country's ability to improve its standard of living over time depends almost entirely on its ability to raise its output per worker . . . the essential arithmetic says that long-term growth in living standards . . . depends almost entirely on productivity growth.5 This paper should be read in the spirit of a detective novel, whose title might be "The Case of the Missing Productivity Payoff." Our detective story is divided into two parts, macro and micro. The macro part begins with the standard identity stating that productivity growth equals real wage growth if labor's income share is constant. We examine the aggregate data that compare productivity growth with growth in alternative real wage measures, and we then ask how the post-1995 acceleration in productivity growth enters into the econometrics of price and wage dynamics. In past incarnations of dynamic Phillips curves, productivity growth has been a sideshow to the main story, if mentioned at all. The paper provides a new look at price and wage dynamics in order to assess the causes of low inflation in the decade after 1995. In light of the strong demand of the late [End Page 68] 1990s, why was inflation so low? What role did the revival of trend productivity growth play, in contrast to other beneficial supply shocks? Did the productivity growth slowdown of 1965-79 play a parallel role in creating high inflation in the 1970s? Can dynamic wage and price equations reproduce the behavior of the changes in labor's income share observed in the data? The investigation begins with the Gordon inflation model that explains price changes by inertia, demand shocks, and supply shocks but does not include wages. A unique contribution of this paper is then to bring wages back into the study of inflation dynamics and to develop a model that includes both price and wage equations and allows each to feed back to the other. This model can capture the effect of changes in trend productivity growth on inflation, nominal wage changes, and changes in labor's income share. In dynamic simulations of the wage-price model, we find that changes in the productivity growth trend had major effects in boosting inflation during 1965-79 and in slowing it down between 1995 and 2005...

Why has employment not grown more quickly in Vietnam?

A paradox of Vietnam’s economic performance in the 1990s has been that despite rapid economic growth, extensive economic reforms, increased openness and significant reductions in poverty, the rate of employment growth has been disappointing. Conventional explanations of the slow growth of employment emphasize the incomplete nature of the economic reform process emphasizing three key areas – trade policy, the role of state-owned enterprises and labour market policies – which have led to resources being misallocated to the detriment of labour-intensive export sectors and the private sector. The paper shows that the slow growth of industrial employment in Vietnam has not been a result of an excessive concentration of resources on capital-intensive industries or state-owned enterprises. It is primarily the changes which have occurred within industries, resulting in increases in labour productivity from the very low levels at the beginning of the 1990s, that have prevented industry from absorbing more workers.

Conditioning Expectations: The Protection of the Employment Bond in German and American Law

According to many observers, one of the critical factors accounting for the unprecedented economic growth that the United States enjoyed during the past decade is a regulatory regime that places few restrictions on an employer's ability to shed unwanted employees. Similarly, the slower economic growth that Germany and Europe experienced during this period often is attributed to elaborate employment protection schemes that restrict the ability of employers to discharge undesired workers. These protections are blamed for making countries like Germany less attractive places for foreign investment. This piece examines in comparative perspective the restrictions the American and German regulatory schemes place on an employer's ability to dissolve the employment bond. Although the two systems proceed from opposite suppositions (i.e., employment-at-will vs. discharge only for just cause), we find there is far less divergence between the two regimes than typically is assumed. Though distinctive, each system provides a set of protections against unfair dismissal which differ only in their focal points and areas of emphasis. Among other things, we find that in contrast to the United States, the German scheme permits an employer to calculate with comparative reliability the cost associated with any termination. Even though legal insurance and other institutional features makes bringing an unfair dismissal action very inexpensive in Germany, highly-compensated employees seek legal protection against terminations with significantly greater frequency than do lower-level employees. Less qualified workers also have distinctly worse prospects of success in both legal systems. In the United States, the validity of terminations typically is challenged through an employment discrimination action. Although discriminatory discharges also are prohibited by German law, the Unfair Dismissal Act has made discrimination actions substantially irrelevant in practice. We also note that the spectacular growth in job creation the United States enjoyed during the 1990s came at a time when we had more peace-time employment regulation than any period in our history. We find some evidence for the hypothesis that unfair dismissal protections do not slow employment growth, but may instead stimulate productivity.

Unemployment in Latin America and the Caribbean in the mid-90's

The paper presents a comparative analysis of unemployment incidence and duration in a cross section of countries in Latin America and the Caribbean. The analysis of time-series averages of unemployment rates shows that unemployment is heterogeneous across countries, and comparable to the level of developed countries with relatively flexible labor markets. Unemployment has moderately increased, and this is likely to be associated with changes in the relative prices of capital and labor that has resulted in slower employment growth. This has been partly compensated by slower labor supply growth. Labor markets in the region are quite fluid in terms of employment creation and destruction, as the high inflow and low long term unemployment rates show. Inflow rates are very similar across deciles (except for the lowest), but short-term unemployment is more prevalent in the lower ones. This suggests that the fundamental problem that high unemployment groups face do not result from more frequent job destruction (high inflow), but rather from experiencing difficulties finding a new job (low outflow).

Labour Market Regulation, Flexibility and Employment

ABSTRACT: Chronic unemployment and slow employment growth in some countries have led to calls for more labor‐market “flexibility”. This paper defines the flexibility issue in terms of legally‐mandated “severance”, a generalized employment cost linked to seniority. A mandated severance benefit can stand for a variety of programs including employer‐provided employment guarantees, payments which must be made to laid‐off workers, and compensation for wrongful discharge. Such a mandated cost can be seen as a payroll tax on the employer, raising the issue of tax incidence.Employers often take the view that labor costs are given and that mandated costs are simply add‐ons to pre‐existing cost levels. However, the literature on tax incidence suggests that a significant portion of “employer‐paid” payroll taxes are shifted to labor in the form of lower wages. Such shifting should reduce the dis‐employment effects attributed to severance.A model is provided of a firm upon which a severance mandate is imposed. Even at the micro level, the firm can shift some of the cost of severance to employees by lowering wages — although at the expense of higher turnover costs associated with increased quit rates. At the macro level, to the extent that firms reduce employment, there could be still further downward wage adjustments which would shift the severance burden to labor and mitigate the dis‐employment effect.Ultimately, if the natural rate of unemployment is raised by severance mandates, the age‐old question is raised of why wages do not fall in the face of labor surpluses. The true inflexibility to be explained, therefore, is in wage determination.

The Canadian Labor Market: Developments, Prospects, and Policy

This paper examines recent developments in the Canadian labor market. Using disaggregated labor market data, various hypotheses concerning the slow employment growth and rise in unemployment since 1990 are evaluated. The analysis indicates that a large part of the recent rise in the unemployment rate may reflect an increase in the structural rather than the cyclical component of unemployment. Various sources of labor market rigidities that may have contributed to the increase in structural unemployment are examined. In particular, the role of the unemployment insurance system in contributing to labor market rigidity and measures for reforming this system, including the recent proposals of the government, are discussed. Finally, this paper examines active labor market policies that could help to alleviate structural unemployment.

The Canadian Labor Market: Developments, Prospects, and Policy

This paper examines recent developments in the Canadian labor market. Using disaggregated labor market data, various hypotheses concerning the slow employment growth and rise in unemployment since 1990 are evaluated. The analysis indicates that a large part of the recent rise in the unemployment rate may reflect an increase in the structural rather than the cyclical component of unemployment. Various sources of labor market rigidities that may have contributed to the increase in structural unemployment are examined. In particular, the role of the unemployment insurance system in contributing to labor market rigidity and measures for reforming this system, including the recent proposals of the government, are discussed. Finally, this paper examines active labor market policies that could help to alleviate structural unemployment.

Unions and Employment Growth

Employment grows about 4 percentage points per year more slowly in union than in nonunion plants. This first examination of union employment effects at the plant level suggests that unionized plants face substantial competitive pressure. As much as 61 percent of the decline in the present unionized may be accounted for by slower employment growth in union plants

Tourism and Leisure Jobs: A Statistical Review

Job creation in tourism and leisure activities has received considerable attention since the publication of the government's Action for Jobs in Tourism. Yet there remains considerable controversy over the scale of job creation and the nature of the jobs supported. This article attempts to cast some light on these issues by drawing on recent research at the Institute of Manpower Studies, on available statistical data, information from in-company case studies and parallel research. The article concludes that recent job growth has largely focused on the hotel and catering sector and has largely but not exclusively stressed part-time work. Future prospects for slow employment growth in this sector look good.

La croissance confisquée

La croissance confisquée

Recession's Harm to Chemical Employment Detailed by New Data

The recession is long past and chemical production is once again on the rise, with an accompanying increase in hiring of chemical workers. But how bad the recession actually was for employment in the chemical industry has only recently come to light through justpublished data from the Department of Labor. For instance, in spite of the recession's ending in late 1982 for the general economy and in the second quarter of 1983 for the chemical industry, employment in the chemical industry in 1983 continued lower than it was during the year before. And, although chemical employment began to turn up at about the same time as the chemical economy, the lagging nature of employment—plus the efficiencies put in place by chemical companies during the recession—tended to slow employment growth all during 1983. Thus, last year, employees for chemicals and allied products totaled about 1.05 million, down 3% from 1982. This follows an equal reduction in ...

Inflation and the Philadelphia Economy

In recent years, inflation has been added to the list of factors contributing to the economic malaise of the private and public sectors of old urban areas such as Philadelphia. This article describes some preliminary empirical explorations of the question, using data from Wharton Econometric Forecasting Associate's (WEFA's) Philadelphia Model data bank. An examination of the private sector data suggests that the relatively slow growth of employment in the Philadelphia Standard Metropolitan Statistical Area has contributed to keeping the overall inflation rate—and housing inflation— relatively low. Exploration of links between economic growth and inflation of energy and wage rates suggests that the net effect of relative high energy cost is only marginal. Relatively low inflation rates in the area have apparently helped to bring about an equilibrating adjustment in relative wage rates— an optimistic note in Philadelphia's near-term future. Inflation has created considerable difficulties in the public sector, however. Of the two major local tax sources — property and wages—wage taxes were better able to cope with inflation than property taxes. Rapidly rising prices exacerbate sluggish property tax revenues. Wage tax revenues have contributed to resolving the budget deficit by offsetting the unresponsiveness of the property tax. Inflation makes reform of the property tax imperative.

The Evidence on Appropriate Factor Proportions for Manufacturing in Less Developed Countries: A Survey

The question of appropriate factor proportions for less developed countries (LDCs) has emerged as an important area for research and for policy in the 1970s. High and rising rates of urban unemployment, the slow growth of employment in manufacturing, and high and rising capital-labor ratios are occurring simultaneously in many LDCs. It is frequently argued that the first two phenomena are caused by the last; that there are no efficient alternatives to the modern capital-intensive technology of the rich industrial nations; and that drastic, nonmarket solutions offer the only hope for the LDCs' employment and unemployment problems. Though many economists believe that efficient alternatives do exist, there are still some skeptics within the profession (or at least some who believe that the alternatives are quite limited) and many noneconomist policymakers who believe that fixed proportions (i.e., current Western technology) describe the only efficient technology available for LDCs. Over the past 15 years there has been a significant accumulation of evidence bearing on this question, but there has been no systematic gathering and analysis of this evidence.' That will be the major task of this paper.

La politique de l'emploi en Pologne au cours des années 1960-1970

Poland's Employment Policy in the Period 1960-1972. Polish employment policies in the postward period are characterized by two distinct phases. In the first phase from 1945 until early 1960's there occurred a very rapid expansion of employment while the labor force grew rather slowly. From 1963 onwards, the labour force grew rapidly, while the rate of employment increase began to decline. As a result, substantial unemployment appeared both in the industry and in agriculture. Vocational education and technical training of the labour force proceeded at a rapid pace throughout the first period. Remarkable achievements were accomplished in training of technicians and engineers. However, the expansion of higher education came to a stop in the mid 1960's and the utilization and deployment of the highly skilled labour force was frequently faulty and wasteful. Slow growth of employment was due to a drop in the rate of an overall industrial expansion, to unbalanced allocation of resources, to investment in capital goods industries, rather than in consumer goods industries and services. Poor economic performance was also caused by excessive centralization, incompetent management and reliance on administrative methods, instead of on the free play of the market forces, and the mechanism of market prices, wages and other incomes. Poor system of work incentives hindered the rise of productivity ; low labour productivity resulted in low wages, insufficient personal incomes and low living standards. This in turn generated wide spread discontent of the population which led to an open workers' rebellion in 1970, and subsequently forced the party leaders to change their economic policies. The new economic policies adopted by the VI Party Congress in June 1972 reestablished the balance in favour of consumer goods production, raised money and real wages, provided stronger incentives for productivity increases and endeavoured to create more jobs for the rapidly growing labor force in the 1970's. '

Urban Unemployment in East Africa*

E now know how to avoid mass unemployment in the industrial countries. What had not occurred to us was that we would soon be facing a new kind of unemployment in the nonindustrial world. For twenty years the problem there had appeared to be how to accelerate the rate of growth of incomes, and in this a fair measure of success has been achieved. In many underdeveloped countries gross national product has been rising by 5 per cent. per year or more, and it was tacitly assumed that corresponding increases in employment would go hand in hand. But they have not, and since the numbers seeking jobs has greatly increased this has begun to pose a major problem to which the solution is not immediately obvious, and which is unlikely to be soluble by the kind of measures which have proved successful in industrial countries. This article will examine trends in employment in Kenya and Uganda, but what has happened there is probably not very different from what has happened in many other low income countries so that the significance of the ensuing discussion may not be confined to East Africa alone. I begin with a brief account of the nature of urban employment and unemployment and go on to ask whether one should regard the very slow growth of total employment as inevitable. Finally, I shall pose the question whether if the number of urban employment opportunities rose, unemployment in the towns could be expected to decline.