Bit of a grab bag on some recent work on the government policy side. Timothy Taylor had a post a couple of weeks ago on active labor market policies - those are policies which directly encourage work rather than subsidize unemployment. There’s a useful table in the post of various policy interventions and the assessed effectiveness:
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Job placement services - positive results
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Training programs - positive in medium run
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Employer subsidies - mixed results
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Wage insurance - generally positive
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Public works - negative
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Self-employment - insufficient evidence
From the view of my own pet theory at the moment, the positive training results makes sense: the government intervention addresses the coordination failure around long-term investment in staff. The Aspen Institute’s (excellent) recent report is calling for some of the same - supporting community college and apprenticeships, for example.
One thing I don’t quite get though is why job placement services work as a public intervention. Matching is a definite problem, but it feels like a problem that the private sector would be quite incentived to fix. Hiring is expensive, and failing to hire even more so (longer period without person in role, more interviews etc.)
There clearly are some very successful businesses doing job listings, but presumably at a certain job/wage level they aren’t making their way through. This could be because there just isn’t the margin in matching minimum wage jobs, though I wonder if this is similar to a note that stood out to me in Evicted: though looking for an apartment was hard, the people followed in the book didn’t use the library with its free internet access to help them look, even if they were regularly using that access for other reasons.
I do also worry about the long-term effectiveness of improving matching for low-productivity work. The Aspen report has a good study looking at the relationship between wages and productivity (it is strong, which is reassuring!):
Given the strength of the link between pay and productivity, it is important for public policy to attempt to make workers, particularly low-wage workers, more productive. Policies to increase the skills of, and training available to, workers—for example, reforms to our K-12 education system and the expansion of apprenticeships and other forms of work- based learning—should be enacted. Earnings subsidies should be expanded to draw more people into the workforce. Policies to encourage business investment should also be considered. Labor market regulations that serve as barriers to workers and reduce the quality of matches between workers and jobs should be removed.
Speaking of the barrier to workers, also worth a look is Taylor’s recent article on capitalism with Scandinavian characteristics. Some of the interventions made have a pro-work effect, by effectively removing barriers to joining or continuing in the workforce:
But Kleven also points out that the higher Scandinavian taxes finance government policies that make it easier for many people to work — in particular “provision of child care, preschool, and elderly care.” He writes: “Even though these programs are typically universal (and therefore available to both working and nonworking families), they effectively subsidize labor supply by lowering the prices of goods that are complementary to working. … [T]he Scandinavian countries … spend more on such [labor] participation subsidies … than any other country. …”