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Labour market adjustments and public policies: What roles for governments? Lars Osberg Dalhousie University Workshop on Adjustments in Markets for Skilled.

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Presentation on theme: "Labour market adjustments and public policies: What roles for governments? Lars Osberg Dalhousie University Workshop on Adjustments in Markets for Skilled."— Presentation transcript:

1 Labour market adjustments and public policies: What roles for governments? Lars Osberg Dalhousie University Workshop on Adjustments in Markets for Skilled Workers September 14-15, 2006, Ottawa, Ontario

2 What has not yet been emphasized? - 2 points Ceteris non paribus Public policy journal article Context is crucial short side rules + history matters

3 Multiple Margins of Labour market Adjustment/ Flexibility Organizational Change strategy, products, technology, markets ? Functional Change skills, job tasks, demarcations? Quantity of Labour Change Hours of work, Number employees ? Timing of Work On-Call, shift, 24/7, seasonal/cyclical recall ? Cost & Compensation Profit sharing, individualized incentives, wages ? Employee Status % Permanent, % part-time, % self-employed ? Geographic Centralized/dispersed, global/regional/local ?

4 Multiple Agents Multiple Objectives Adjustment decisions made by Firms Workers / households Unions Universities/Colleges/Training Institutes Who try to maximize $$$ income / profit Job satisfaction Status Utility Probability of re-election Government policy decisions affect all agents & all margins of adjustment

5 Adjustment / Change – continuous & everywhere ! Internal Adjustment within Firms + External Adjustment in Labour Markets Firms choose Packages of consistent HR policies & Business Strategies – a.k.a. corporate culture Infra-marginal continuing employees are the large majority of the Labour Force External: Job mobility, Labour Force Entry & Transitions Consistency between Internal/External strategies? E.g. Employer training & employment continuity Layoff/Recall adjustment inconsistent with OTJ retention & adjustment by skill upgrading Public Policy Issues: 1] Understanding Trade-offs & Inter-relationships of types of Internal & External Adjustment 2] Optimal Policy Packages – more than 1 model

6 Macro-Economic Context – aggregate unemployment & labour market adjustment Current context: Massive recent appreciation of Cdn $ / US $ Manufacturing job losses Regional imbalances driven by energy prices 6.5% unemployment rate nationally Prospect of US recession?? Issues: 1] Relationship between macro-economic context and labour market adjustment processes 2] Policy Implications Bank of Canada Hypothesis (?) Only Inflation Matters – 1% < CPI core < 3%

7 All margins work differently if People chase Jobs or Jobs chase People Demand for labour – derived from demand for goods & services Disequilibrium quite common High Unemployment & hysteresis Europe – interaction of demand shocks with institutions Canada – Negative 90s legacy for youth & immigrants 1990s – low inflation + strong growth in USA = benign environment for low inflation Canada So far, so good for Canada !! IMF + BoC + many others – worry about structural global imbalances & US recession + devaluation + oil Issue: Monetary policy response if US recession?


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