Understanding how to create more and better jobs

Professor Pedro Martins Inaugural Lecture

Queen Mary University of London

October 21st, 2015

Mentors and co-authors

• Prof Ian Walker, Lancaster U • Prof Pedro Portugal, Bank of PT • Prof Jonathan Thomas, Edinburgh U • Prof Alvaro S. Pereira, OECD • Prof Gary Solon, Arizona U • Prof Andrew Oswald, Warwick U • Prof Pedro T. Pereira, Madeira U • Prof Brigitte Granville, QMUL • Prof Robin Naylor, Warwick U • Prof Lazlo Andor, Brussels U

• Prof Jonathan Haskel, Imperial Coll • Prof Huw Dixon, Cardiff U • Dr Alex Hijzen, IMF • Dr Francisco Lima, Lisbon U • Dr Yong Yang, Sussex U • Dr Luiz Esteves, CADE, Brazil • Dr Richard Upward, Nottingham U • Prof Andy Snell, Edinburgh U • Sofia P. Costa, QMUL • Dr Jim Jin, St Andrews U

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Outline 1. Labour economics and labour policy

2. Globalisation

3. Institutions

4. Public programmes

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Labour economics & policy – recent drivers 1/2

• Wider theory base • Neoclassical: competitive markets (productivity, prices)

• Human capital (Becker 1992)

• Search (frictions, flows) (DMP 2010)

• Behavioural

• Institutional

• Greater focus on evidence • Emergence of evidence-based policy

• Increasing demand for ‘policy-actionable’ evidence • Eurozone debate on structural reforms vs monetary policy vs debt relief

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Source: Laing et al, 2011

Labour economics & policy – recent drivers 2/2

• Counterfactual empirical methods • Social experiments (Deaton 2015)

• Regression and matching (Heckman 2000)

• Regression discontinuity

• Difference-in-differences

• Instrumental variables

• Big(ger) data • Matched employer-employee longitudinal data

• Social security and other administrative data sets

• Public records of firms

• Internet

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International aspects

• Globalisation: FDI, GVCs, international trade, migration • “Second unbundling” (ideas and production)

• Multinationals as sweatshops or promoters of more and better jobs? • Job polarisation in G7 countries?

• Work co-authored with A. Hijzen, R. Upward, Th. Schank and Y. Yang, part of which in collaboration with the OECD, Paris • Orbis firm-level data (1996-2007): 2,179 (parent) multinationals; 5,230 affiliates

• Focus on the cases of UK, Ger, PT, BR and Indonesia

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International aspects

• International “rent sharing” • Profits of multinationals are shared with workers in affiliates

• Effects stronger when greater differences in characteristics (complementarities) but weaker when more affiliates (substitution)

• Acquisitions/divestments (UK, DE, PT, BR, IND) • Positive wage effects of foreign ownership (especially for developing countries)

• Higher wage increases following from mobility to foreign firms

• Greater job security following foreign takeovers

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Change in unemployment rate between 2014 and 2009

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Labour-market institutional aspects

• Employment protection law

• Collective bargaining, unions and employer associations

• Minimum wages (incl tax credits and DNWR)

• Unemployment benefits (and income support)

• (Public) employment services

• Active labour market policies (incl training)

• Flexicurity approach (protecting people, not jobs) vs segmentation

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Activation services

• Support to the unemployed: job search, training, ALMPs

• Aggregate demand vs structural reforms

• Public vs private provision

• Potential substitution effects of activation (in periods of high unempl)

• Evaluation of programme in PT targeted at unemployed for 6 months or more, involving over 200,000 people in its first year

• Merged data from PES and Social security

• CGR WP with S. P. Costa, cited in new EC initiative (& new collaboration with gov’t of MZ, ILO and IGC)

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Management training

• Market failures in training provision, uncertain returns: lower productivity

• €65b to be spent by the EU on education, training and employment measures (2013-2020)

• Counterfactual evaluation of €100m programme in PT (‘FIG’, 2008) • Funding to provide skills to workers (incl managers)

• Allocation depending on scores in different criteria, training and firm characteristics, and available resources

• Merge of administrative and matched panel data

• Work in progress, in collaboration with the European Commission

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Change in firm performance (sales per worker), between 2012 and 2008

Final thoughts: Understanding how to…

• Work in progress, many different approaches

• Important contributions and developments • Different theoretical concepts

• More sophisticated empirical methods

• Richer data

• Significant potential from greater interaction between economics, management, other fields of study (politics, law, etc) and other stakeholders (public bodies, int’l organisations, etc)…

• … to promote further improvements in labour market evidence, policy and outcomes

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