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Over the past twenty years or so, unemployment has been increasing in most OECD economies. In the same period, there has been a considerable increase in the wedge between the real cost to the employer of hiring a worker and the net real wage received by the worker. The present study examines whether changes in the wedge (including various tax rates) may have generated long-lasting effects on real labour costs. Behaviour which generates this kind of outcome is called "real wage resistance". If there is real wage resistance, a rise in the wedge leads to higher unemployment. If this outcome persists in the long run, the primary problem related to the functioning of the wage setting mechanism is not necessarily the speed of adjustment but rather the equilibrium in which adjustment terminates. The countries examined are the United States, Japan, Germany, France, the United Kingdom, Italy, Canada, Australia, Sweden and Finland. The study covers the private business sector and the ...

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This working paper considers how hours of work and labour force participation are likely to respond to tax reforms. As regards hours of work, the analysis looks at married women and lone parents. Married women constitute a group which responds to incentives, as shown by experimental and sample survey studies. Lone parents, an important fraction of the working age population in some countries, often are subject to special tax and income support provisions and have limited sources of alternative income. A second part of the analysis concerns inflows to and outflows from employment, labour force participation and duration of unemployment as they affect men and women in different age groups and with differing family responsibilities. The analysis is based mainly on the well-documented tax reforms in the United Kingdom. The first part of the paper develops the appropriate methodology for analysing labour supply responses to tax changes and the second part attempts to clarify the magnitude ...

Employment

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Enterprise management involves finding solutions for many problems in which information is incomplete and for which co-operative relationships with employees are needed if the firm’s objectives are to be realised. To this end, management may develop practices one of whose side-effects is to aggravate unemployment. This paper focuses on four broad themes: the first concerns the management contribution to some of the labour market rigidities highlighted in recent reviews of the literature on unemployment; the second concerns how management practices may affect access to jobs for certain categories of workers, and hence their ability to leave unemployment; the third concerns the potential impact of some of the new management practices currently transforming firms in some major sectors of employment. Since many of these practices are to be found in varying degrees in all countries, the fourth section takes a comparative look at the experience of some different countries to ask whether ...

Employment

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Policy to reduce poverty has often foundered on the issue of work incentives. The issue is a manifestation of the traditional conflict between equity and efficiency; the redistribution of income from higher to lower income people typically leads to reduced incentives for both groups to supply labor to the market, or to exercise initiative. This conflict is also known as the "poverty trap"--with income transfer (welfare) programs in place, those with low earned income have a reduced incentive to seek and accept employment, and as a result appear trapped in poverty. This paper discusses the primary policy strategies for reducing poverty while maintaining work incentives that have been analyzed in the literature. These strategies have been presented in a context in which a structure of income support policies and labor market constraints already exists. Existing policies typically have two characteristics: they are categorical and piecemeal in their coverage, and they contain serious ...

Employment

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This working paper addresses the question whether imperfect competition in product markets contributes substantially to the level and persistence of unemployment in modern industrial economies. In section I, the paper documents the available empirical research of the origin and extent of product market power held by firms due to market imperfections. The implications for employment are then explored through transmission of such power into the labour market through wages (section 2) and output reduction from pricing above marginal cost or wage levels below marginal revenue product (section 3). The role for such product market power in the macroeconomic analysis of unemployment is also explored in section 3, but little evidence of the importance on the macro level is available. The paper thus assesses the extent of product market imperfections and their importance in wage setting. It concludes that product market imperfections are widespread and although large deviations of price ...

Employment