Showing posts with label Inclusive Growth. Show all posts
Wednesday, August 3, 2016
A new IMF report discusses whether increases in the minimum wage in Japan will succeed in raising wage growth. It concludes: “In order to revamp growth and permanently exit deflation, Japan needs vigorous wage growth. The government has recognized this and announced substantial increases in the minimum wage and we empirically estimate its impact on average wages. Our econometric results suggest that the 3 percent hourly minimum wage increase could cause monthly wages to increase by about 1.5 percent on a year-on-year basis. The minimum wage policy should be complemented by other income policies—e.g. a “soft target” for wage growth and increases in public wages to create cost-push pressures in line with the inflation target.”
A new IMF report discusses whether increases in the minimum wage in Japan will succeed in raising wage growth. It concludes: “In order to revamp growth and permanently exit deflation, Japan needs vigorous wage growth. The government has recognized this and announced substantial increases in the minimum wage and we empirically estimate its impact on average wages. Our econometric results suggest that the 3 percent hourly minimum wage increase could cause monthly wages to increase by about 1.5 percent on a year-on-year basis.
Posted by at 10:45 AM
Labels: Inclusive Growth
Tuesday, August 2, 2016
The United States has always been regarded as a highly mobile society. Previous work has left the impression that when adverse economic shocks hit their cities or regions, Americans are quickly able to move and find jobs elsewhere within the country. In a new paper, Mai Dao, Davide Furceri and I provide new evidence that questions this view. Our evidence shows that the ability to migrate is not as immediate as previously supposed; in the first year or two after an adverse shock to a state, the bulk of the burden is borne by an increase in the state unemployment and a decline in its labor force participation rate. We also find that while net mobility across states picks up during national recessions, this increase is driven more by a stronger population inflow into states that are doing better rather than stronger population outflow from states that are doing worse; the outflow occurs only toward the end of the recession. Overall, therefore, our results offer a less sanguine view of the ability of U.S. workers to shield themselves from the consequences of adverse shocks than is available in the literature. Here is a link to the paper and to an online appendix which is a wonk’s delight.
The United States has always been regarded as a highly mobile society. Previous work has left the impression that when adverse economic shocks hit their cities or regions, Americans are quickly able to move and find jobs elsewhere within the country. In a new paper, Mai Dao, Davide Furceri and I provide new evidence that questions this view. Our evidence shows that the ability to migrate is not as immediate as previously supposed; in the first year or two after an adverse shock to a state,
Posted by at 4:40 PM
Labels: Inclusive Growth
In a revised version of our 2013 paper, Larry Ball, Daniel Leigh and I still conclude: “It is rare to call a macroeconomic relationship a “law.” Yet we believe that Okun’s Law has earned its name. It is not as universal as the law of gravity (which has the same parameters in all advanced economies), but it is strong and stable by the standards of macroeconomics. Reports of deviations from the Law are often exaggerated. Okun’s Law is certainly more reliable than a typical macro relationship like the Phillips curve, which is constantly under repair as new anomalies arise in the data.” The paper provides estimates of Okun’s Law for 20 advanced economies, including the United States.
In a revised version of our 2013 paper, Larry Ball, Daniel Leigh and I still conclude: “It is rare to call a macroeconomic relationship a “law.” Yet we believe that Okun’s Law has earned its name. It is not as universal as the law of gravity (which has the same parameters in all advanced economies), but it is strong and stable by the standards of macroeconomics. Reports of deviations from the Law are often exaggerated.
Posted by at 4:13 PM
Labels: Inclusive Growth
Monday, July 25, 2016
Here are links to my talk and PPT at a ETUI conference. And here’s a two-minute video summary of what I said.
Here are links to my talk and PPT at a ETUI conference. And here’s a two-minute video summary of what I said.
Posted by at 2:22 PM
Labels: Inclusive Growth
Tuesday, July 12, 2016
Structural unemployment in France has long been elevated, and appears to have edged up further since the crisis. This reflects both demand and supply factors, including: high labor taxes, wage stickiness, a growing skill gap, hysteresis effects from the crisis years, a lengthy period of elevated economic uncertainty, inactivity traps created by the unemployment and welfare benefit systems, and demographic factors that have pushed up the labor force. The cyclical recovery is projected to bring down the unemployment rate only slowly, and the NAIRU is estimated to remain above 8 percent over the medium term. We investigate the structural causes of unemployment and potential remedies.
Reducing labor tax wedges can increase both output and employment. In France, CICE, PRS and other recent reforms have reduced the labor tax wedge for the low-paid workers. The wedge remains elevated for middle and upper incomes, but further reductions would require difficult policy trade-offs given the high level of public spending.
Strictness of employment protection in France is above the EU average. Labor arbitration procedures are cumbersome and allow making an appeal for a very long time after dismissal, which adds to uncertainty for companies. Reforms easing dismissal regulations could have a sizable positive impact on output and employment when economic conditions are strong. Early studies suggest that the proposed “El Khomri” law, by reducing judicial uncertainty around dismissals, could have a moderate impact on overall unemployment, while stimulating hiring on open-ended (CDI) contracts as opposed to temporary recruitment (on CDD).
Efficiency of collective bargaining depends on flexibility at the firm level, the reach of sector-level agreements, and the effectiveness of coordination among agents. IMF research suggests that France can be classified among countries with “low trust” and “some coordination”, which entails poor unemployment outcome. In France, trade unions play a leading role in collective negotiations even though membership is low. The El Khomri law would extend the scope for firm-level collective agreements.
While the replacement rate of unemployment benefits in France is broadly in line with other countries, eligibility criteria are relatively lax, with rapid qualification and accumulation of benefit rights, and weak job search requirements. Moreover, specificities of the benefit formula create incentives for alternating between ultra-short contracts and unemployment periods.
The ratio of minimum to median wage in France is among the highest in the OECD, which may adversely affect job market chances for the young, the low-skilled, and the long-term unemployed. Its automatic annual adjustment can contribute to wage stickiness.
A detailed analysis by my IMF colleague Nicoletta Batini.
Structural unemployment in France has long been elevated, and appears to have edged up further since the crisis. This reflects both demand and supply factors, including: high labor taxes, wage stickiness, a growing skill gap, hysteresis effects from the crisis years, a lengthy period of elevated economic uncertainty, inactivity traps created by the unemployment and welfare benefit systems, and demographic factors that have pushed up the labor force.
Posted by at 12:28 PM
Labels: Inclusive Growth
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