Taming the Wave of Small and Medium Enterprise Insolvencies

by Federico J. Díez, Romain Duval, Chiara Maggi and Nicola Pierri The pandemic has hit small and medium enterprises particularly hard, partly because they are predominant in some contact-intensive sectors like hotels, restaurants, and entertainment. As a result, many advanced economies risk experiencing a wave of liquidations that could destroy millions of jobs, damage the […]

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Working Out the Differences: Labor Policies for a Fairer Recovery

By John Bluedorn The COVID-19 pandemic’s destruction of jobs was sure and swift. The lasting effects of the crisis on workers could be just as painful and unequal. Youth and lower-skilled workers took some of the hardest hits on average. Women, especially in emerging market and developing economies, also suffered. Many of these workers face […]

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The Great Divergence: A Fork in the Road for the Global Economy

By Kristalina Georgieva As G20 finance ministers and central bank governors meet virtually this week, the world continues to climb back from the worst recession in peacetime since the Great Depression. The IMF recently projected global GDP growth at 5.5 per cent this year and 4.2 per cent in 2022. But it is going to […]

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The Effect of the Minimum Wage on Employment and Unemployment

In a comment on my blog post about the proposed $15 federal minimum wage, frequent (and careful) commenter KevinDC quotes my statement:

Here’s what they found. The vast majority of studies, 79.3 percent, found that a higher minimum wage led to less employment.

He then comments:

I like the precise wording here by using the term “less employment.” One thing I’ve tried explaining to people is that is possible for increases in the minimum wage to decrease employment without increasing unemployment, because economists are bad at naming things in a way that make intuitive sense to people outside the field. (“Public goods? Obviously that means goods provided by the public sector, right?” “Market failure? That’s whenever I personally don’t like a market outcome, isn’t it?”) So, even in the case where  particular study doesn’t find increased unemployment after a minimum wage hike, that doesn’t actually mean that the increase in the minimum wage didn’t decrease employment.

Well said, Kevin.

I want to add that the CBO study I cited makes this distinction also. Here’s a key paragraph:

Taking those factors into account, CBO projects that, on net, the Raise the Wage Act of 2021 would reduce employment by increasing amounts over the 2021–2025 period. In 2025, when the minimum wage reached $15 per hour, employment would be reduced by 1.4 million workers (or 0.9 percent), according to CBO’s average estimate. In 2021, most workers who would not have a job because of the higher minimum wage would still be looking for work and hence be categorized as unemployed; by 2025, however, half of the 1.4 million people who would be jobless because of the bill would have dropped out of the labor force, CBO estimates. Young, less educated people would account for a disproportionate share of those reductions in employment.

 

 

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Structural Factors and Central Bank Credibility Limit Inflation Risks

By Gita Gopinath After ending last year with unexpectedly strong vaccine success and hope that the pandemic and economic distress it caused would recede, we woke up to the reality of new virus variants and the unpredictable, winding road that it can lead the world down. Something similar has happened with the discourse on inflation. […]

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Latin America and Caribbean’s Winding Road to Recovery

By Alejandro Werner, Anna Ivanova, and Takuji Komatsuzaki Latin America and Caribbean economies managed to bounce back from COVID-19’s initial economic devastation earlier in 2020. But the pandemic’s resurgence towards the end of the year threatens to thwart an uneven recovery and add to the steep social and human costs. After the sharp contraction in […]

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Great News on Employment and Unemployment

On the first Friday of October I laid out the somewhat good news on employment and unemployment for September. This Friday (today), the news is fantastic!

1. The number of people employed increased by 2.243 million. A typical increase in normal times is between 0.2 and 0.3 million, so this is 7 to 10 times as large.

2. The employment to population ratio increased from 56.6 percent to 57.4 percent, a large increase.

3. The number of people unemployed fell from 12.580 million to 11.061 million, a drop of 1.519 million.

4. The unemployment rate fell from 7.9 percent to 6.9 percent.

5. The unemployment rate for people in every single category: black, white, men, women, teenagers, Asian, and Hispanic or Latino, fell. For many of those groups it fell by more than 1 percentage point.

The above are all data from the Bureau of Labor Statistics household survey.

The data from the establishment survey are also good, especially in the details.

1. Private employment rose by 906,000.

2. Leisure and hospitality, one of the sectors hardest hit by both the pandemic and the lockdowns, rose by 208,000.

3. Government employment fell by 268,000.

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Employment Growth Continues to Decelerate: the ADP Report

ADP reports private nonfarm payroll employment today, +365K, below +650K consensus…: Figure 1: Private nonfarm payroll employment fm BLS September release (black), Bloomberg consensus for October as of 11/4 (teal square), ADP October release (red). Source: BLS, ADP via FRED, Bloomberg, and author’s calculations. While it’s well known that ADP private NFP does not well […]

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How COVID-19 Will Increase Inequality in Emerging Markets and Developing Economies

By Gabriela Cugat and Futoshi Narita Emerging markets and developing economies grew consistently in the two decades before the COVID-19 pandemic hit, allowing for much-needed gains in poverty reduction and life expectancy. The crisis now puts much of that progress at risk while further widening the gap between rich and poor. Despite the pre-pandemic gains in […]

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