Structural consequences of cyclical change for marginal group employment

In Sweden and many other countries, young people and immigrants are facing increasing difficulties in finding employment. We suggest that the decline in employment prospects for marginal groups to a significant extent can be explained by skill upgrading and over-education. In two recent papers focusing on youth and immigrants, respectively, we find support for these hypotheses. The present paper examines how the long-term evolution of youth male employment is linked to cyclical economic change, and in particular to recessions. We base our empirical analyses on data from 31 OECD countries, 1970 to 2018. A basic hypothesis we aim to test is whether the distribution of cyclical points around the line of long-run evolution of general employment has a vertically asymmetrical pattern with respect to marginal employment, such that the relative employment rate of marginal groups declines more in economic downturns (recessions) than it rises in economic upturns. If this asymmetry occurs systematically (repeatedly) over extended periods of time, cyclical change will have structural effects. We find support for this hypothesis based on our analysis of youth male employment. We suggest that two kinds of mechanism are at work in the interaction between cyclical and structural change. The first mechanism is operating from the structure to the cycle: low-skill jobs become increasingly unviable economically, but only slowly and gradually until a marked loss in general demand triggers significant employment decline tilted toward low-skill jobs. Restructuring of work organizations in the wake of the recession makes the return of low-skill jobs in the recovery less than complete. The second kind of mechanism operates in the other direction, i.e., from the cycle to the structure: the rate of educational expansion typically accelerates in recessions. This will in turn speed up the rate of over-education which tends to have a negative impact on marginal employment. We provide descriptive empirical evidence indicating that both these mechanisms are indeed active. In sum, recessions accelerate upward shifts in the skill structure that in turn depress the labor market prospects of male youth, with both links in the chain being of a lasting rather than temporary kind.

The Effect of Pension Subsidies on the Retirement Timing of Older Women

I estimate the effect of additional pension benefits on women’s retirement decisions by examining a German pension subsidy program. The subsidies have a kinked relationship with the recipients’ past pension contributions, creating a sharply different slope of benefits for similar women on either side of the kink point. I find that a 100 euro increase in the monthly benefit induces female recipients to claim their pensions six months earlier. Recipients also adjust their labor supply by using unemployment insurance as a stepping stone to retirement and by reducing time spent in marginal employment. A back-of-the-envelope calculation suggests that the ratio of behavioral to mechanical costs for this subsidy program is 0.25, which is smaller than that of many other income support programs.

The Rehn-Meidner model and its role in the Swedish economic policy

This paper aims to describe the Swedish Rehn-Meidner model, the cause of its creation, its features and the reasons for changes in the Swedish economic policy over several decades. The model was developed by two Swedish economists in 1951 and it impacted the economic policy over the following decades. It was intended to facilitate achieving the goals of full employment, price stability, economic growth and equality in a redistribution of income through the policies of solidarity wage, restrictive economy, active labour market and marginal employment. The model was designed as a solution to the "overheating" of the Swedish economy in the 1950s. The implementation of the model initially proved to be successful. However, in the 1970s the economic policy began to be more influenced by trade unions, acting mainly in their own interest. Due to the growing globalisation other external factors, such as oil crises and negative demand shocks, started to have an increasing impact on Sweden. It was when economic decisions started to shift away from the recommendations of the model, and the "golden age" of the 1950s and 1960s came to an end. The following analysis intends to explain what was the model characterisation, how it influenced Sweden's development, and why the country economic policy has changed over time. It also states that despite changes in the economy, certain elements of the model have remained valid until today.

The Effects of Germany’s Statutory Minimum Wage on Employment and Welfare Dependency

In January 2015, Germany introduced a federal, statutory minimum wage of 8.50 € per hour. This study evaluates the effects of this policy on regular and marginal employment and on welfare dependency. Based on the county-level administrative data, this study uses the difference-in-differences technique, exploiting regional variation in the bite of the minimum wage, i.e., the county-specific share of employees paid less than 8.50 € before the introduction of the minimum wage. The minimum wage had a considerable negative effect on marginal employment. There is also some indication that regular employment was slightly reduced. Concerning welfare dependency, the minimum wage reduced the number of working welfare recipients, with some indication that about one half of them left welfare receipt due to the minimum wage.

The interplay of welfare state policies with supply- and demand-side factors in the production of marginalised part-time employment among women in Germany

In the early 2000s, Germany's Red-Green government introduced a new type of marginal employment in the form of 'Minijob' legislation. In the context of the dualisation strategy of the German welfare state, Minijob legislation has supported firms in extending the secondary segment of marginal jobs. However, Minijobs are associated with particularly low social security and high poverty risks, and these positions are primarily staffed by women. Therefore, the extension of the Minijob system has contributed to the persistence of traditional structures of gender inequality. This empirical study examines how demand and supply side factors interact with welfare state institutions and politics in the production of marginal employment of women in part-time jobs. Using data from the German Socio-Economic Panel, we used logistic regression to analyse women's risk of working in Minijobs based on family, educational, biographical and workplace characteristics. The research results identify both supply side and demand side factors as being significant in shaping a situation whereby married women with small children and lower levels of education who work in small, non-public firms are particularly exposed to the risks of marginal employment in Minijobs.

Marginal Employment Growth Effects In The South African Economy

South Africa relative to its peers (upper middle income countries) suffers from high unemployment and sub-optimal economic growth. This study investigates the ‘marginal effects of employment’ with respect to real output and capital in South Africa, using annual data covering the period 1946-2015. It estimates the responsiveness of employment to real output growth and capital, employing the short and long-run dynamic interactions between these variables via the application of the VAR/VECM Johansen (1991) framework. The results show that there exists a statistically significant long-run co-integrating relationship between labour employment and real GDP growth. Marginal employment growth effect is positive; a one per cent increase in GDP tends to increase employment by about one third of one per cent. Employment adjusts consistent with expectations when it overshoots its structural relationship with other variables. However, real output tends to adjust contrary to expectations, implying significant diminishing returns to employment in the economy. Growth in capital impacts positively on output and employment. The study concluded that greater labour market flexibility and higher worker productivity is needed across all sectors of the economy.