Combatting Unemployment

by Layard, Richard; Nickell, Stephen J.; Eichhorst, Werner; Zimmermann, Klaus F.

• ISBN13: 9780199609789
• ISBN10: 0199609780
• Format: Hardcover
• Copyright: 2011-07-07
• Publisher: Oxford University Press

Summary

Why is unemployment higher in some countries than others? Why does it fluctuate between decades? Why are some people at greater risk than others? Layard and Nickell have worked on these issues for thirty years. Their famous model, first published in 1986, is now used throughout the world. It asserts that unemployment must be high enough to reduce the real wages for which workers settle to the level justified by productivity. So what affects 'wage push'? The authors showed early on that the key factors affecting 'wage push' are how unemployed workers are treated and how wages are negotiated. If unemployed people get benefits without being required to accept jobs, vacancies go unfilled and mass unemployment results. The solution is welfare-to-work policies like those now introduced in most parts of the world. The authors have proposed these policies for the last twenty-five years in a series of key articles reproduced in this book. Their original analysis explains the subsequent movement of unemployment over the last two decades. They conclude the book with a new chapter on what should be done in the recession: no-one, they say, should be given unemployment benefit beyond a year, after which they should be offered work.

Table of Contents

Introduction by the Editors: A New Understanding of Labor Market Institutions Layard and Nickell on Labor Economics and Policy Making	p. 1
The Labor Market	p. 8
Aggregate Unemployment	p. 10
Some Basic Facts	p. 10
A Labor Market Model	p. 14
Unemployment and Wage Pressure	p. 21
Influences on Wage Pressure	p. 27
The Duration of Unemployment and the u/v Curve	p. 28
Employment Protection	p. 32
Mismatch	p. 33
Benefits	p. 36
Unions	p. 38
Incomes Policy	p. 42
Taxes and Import Prices	p. 43
Conclusion	p. 44
Relative Wage Rigidity and the Structure of Employment	p. 44
Industry	p. 44
Region	p. 45
Skill	p. 46
Age	p. 48
Sex	p. 49
Conclusion	p. 51
Why Does Unemployment Persist?	p. 52
Introduction and Summary	p. 52
How the NAIRU is Determined	p. 54
What Stops the Wage Dropping and What Causes Persistence?	p. 57
Insider Power	p. 57
Outsider Ineffectiveness	p. 60
Some Concepts	p. 63
Helpful Theories of Unemployment	p. 64
Efficiency Wages	p. 64
Union Bargaining	p. 66
Combatting Unemployment: Is Flexibility Enough?	p. 71
Country Differences	p. 74
Policies to the Unemployed	p. 78
Benefits	p. 78
Active Labor Market Policies (ALMP)	p. 79
Wage Bargaining	p. 83
Skills Imbalance	p. 85
Empirical Work	p. 88
Employment Protection	p. 88
Theoretical Background	p. 88
Evidence on Unemployment Dynamics	p. 90
Evidence on Equilibrium Unemployment	p. 94
Conclusions	p. 95
Taxes On Employment	p. 96
Work-Sharing And Early Retirement	p. 100
Theoretical Issues	p. 100
Empirical Analysis	p. 102
Conclusions	p. 103
Labor Market Institutions and Economic Performance	p. 104
Introduction	p. 105
Economic performance	p. 106
Labor Market Institutions	p. 113
Taxes on Labor	p. 113
Laws and Regulations on Employee Rights	p. 115
Trade Unions, Wage Bargaining, and Minimum Wages	p. 117
Benefit Systems and Active Labor Market Policies	p. 121
Skills and Education	p. 122
Barriers to Geographical Mobility	p. 124
Unemployment, Growth, and Labor Market Institutions	p. 126
The Determination of Equilibrium Unemployment	p. 126
Unemployment and Growth	p. 129
Labor Market Institutions and Growth	p. 131
Some Summary Regressions Explaining Growth and Labor Supply	p. 132
Labor Taxes	p. 136
Differential Taxes	p. 138
Total Tax Rates	p. 139
Marginal Tax Rates and Progressivity	p. 142
Summary	p. 142
Labor Standards and Employment Protection	p. 143
Labor Standards	p. 143
Employment Protection	p. 144
Summary	p. 147
Unions and Wage setting	p. 148
Unemployment	p. 149
Growth	p. 150
Summary	p. 151
Minimum Wages	p. 152
Unemployment	p. 152
Growth	p. 152
Social Security Systems and Active Labor Market Policies	p. 153
Unemployment	p. 153
Summary	p. 154
Skills and Education	p. 154
Summary	p. 163
Conclusions	p. 164
Unemployment: Macroeconomic Performance and the Labor Market	p. 166
The Determinants of Equilibrium Unemployment	p. 166
Evidence on the Factors Influencing Equilibrium Unemployment	p. 169
Our Original Policy Conclusions and How Things Have Changed	p. 172
Explaining Changes in Unemployment in OEGD Countries: Overview	p. 175
Specific Changes in Labor Market Institutions and their Impact on Unemployment	p. 183
The Unemployment Benefit System	p. 183
Systems of Wage Determination	p. 187
Employment Protection	p. 190
Labor Taxes	p. 190
Labor Market institutions and the Successes and Failures of the 1990s	p. 191
Summary and Conclusions	p. 194
Unemployment, Inactivity, and Happiness	p. 194
Last Words	p. 195
Policies For Full Employment	p. 197
The Lump-Of-Labor Fallacy	p. 199
Unemployment When Vacancies Abound	p. 202
How'Unerriployed People Are Treated	p. 203
Benefit Conditionality	p. 206
Active Labor Market Policy	p. 207
Additionality	p. 208
Older Workers	p. 210
Mothers	p. 211
Wage Flexibility And Regional Unemployment	p. 211
Employment Flexibility	p. 213
Conclusion: Flexibility Is Not Enough	p. 214
A Final Note: Unemployment and the Current Recession	p. 215
The Job Guarantee	p. 218
The Psychic Cost of Unemployment	p. 211
Notes	p. 221
References	p. 230
Index	p. 242
About the Authors and the Editors	p. 252
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