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Fewer Jobs or Smaller Paychecks? Labor Market Impacts of the Recent Crisis in Middle-Income Countries

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  • Gaurav Khanna
  • David Newhouse
  • Pierella Paci

Abstract

This note presents early evidence on the labor market impacts of the recent economic crisis in 41 middle-income countries.A broader geographic coverage is prevented by the lack of high-frequency labor market data in other middle-income countries and in the low-income countries. Whereas the economic downturn has threatened recent progress in enhancing employment opportunities, the impact has fallen disproportionately on the quality of employment rather than on the number of jobs. Slower growth in earnings accounts for nearly three quarters of the total adjustment for the average country. The bulk of the earnings adjustment was driven by a reduction in working hours, as well as a shift away from the better-paid industrial sector. Evidence of the adjustment’s nature and magnitude suggests a policy package that combines (1) income maintenance programs—that is, cash transfers to low-paid poor workers; (2) interventions that facilitate flexible-hours arrangements; and (3) innovative policies that provide workers access to income maintenance mechanisms to compensate for temporary reductions in standard working hours—for example, by granting partial compensation from the unemployment benefit system or by providing paid training opportunities.

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Bibliographic Info

Paper provided by The World Bank in its series World Bank Other Operational Studies with number 10197.

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Date of creation: Apr 2010
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Handle: RePEc:wbk:wboper:10197

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Keywords: Fiscal and Monetary Policy Social Protections and Labor - Labor Markets Social Protections and Labor - Labor Policies Finance and Financial Sector Development - Debt Markets Poverty Reduction - Achieving Shared Growth Macroeconomics and Economic Growth;

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References

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  1. Fretwell, David H. & Benus, Jacob & O'Leary, Christopher J., 1999. "Evaluating the impact of active labor programs : results of cross country studies in Europe and Central Asia," Social Protection Discussion Papers 20131, The World Bank.
  2. Chris Manning, 2000. "Labour Market Adjustment to Indonesia's Economic Crisis: Context, Trends and Implications," Bulletin of Indonesian Economic Studies, Taylor & Francis Journals, vol. 36(1), pages 105-136.
  3. Cho, Yoon Y. & Newhouse, David, 2011. "How Did the Great Recession Affect Different Types of Workers? Evidence from 17 Middle-Income Countries," IZA Discussion Papers 5681, Institute for the Study of Labor (IZA).
  4. Carmen M. Reinhart & Kenneth S. Rogoff, 2009. "The Aftermath of Financial Crises," American Economic Review, American Economic Association, vol. 99(2), pages 466-72, May.
  5. Gutierrez, Catalina & Orecchia, Carlo & Paci, Pierella & Serneels, Pieter, 2007. "Does employment generation really matter for poverty reduction ?," Policy Research Working Paper Series 4432, The World Bank.
  6. Mead, Donald C. & Liedholm, Carl, 1998. "The dynamics of micro and small enterprises in developing countries," World Development, Elsevier, vol. 26(1), pages 61-74, January.
  7. Dionisius Narjoko & Hal Hill, 2006. "Winners and Losers during a Deep Economic Crisis: Firm-level Evidence from Indonesian Manufacturing," Departmental Working Papers 2006-13, The Australian National University, Arndt-Corden Department of Economics.
  8. Fabrizio Bresciani & Gershon Feder & Daniel O. Gilligan & Hanan G. Jacoby & Tongroj Onchan & Jaime Quizon, 2002. "Weathering the Storm: The Impact of the East Asian Crisis on Farm Households in Indonesia and Thailand," World Bank Research Observer, World Bank Group, vol. 17(1), pages 1-20.
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Cited by:
  1. Cho, Yoonyoung & Newhouse, David, 2011. "How did the great recession affect different types of workers ? evidence from 17 middle-income countries," Policy Research Working Paper Series 5636, The World Bank.
  2. Ali Benabdennour & Malek El Weriemmi & El Moustapha Ould Sidi Mohamed, 2012. "Financial Crisis and Governance in Developing Countries: Socio-economic Issues and Perspectives," Review of Economics & Finance, Better Advances Press, Canada, vol. 2, pages 71-84, November.
  3. Jean-Pierre Cling & Mireille Razafindrakoto & François Roubaud, 2012. "Secteur informel, crise et politiques publiques au Vietnam," Working Papers DT/2012/11, DIAL (Développement, Institutions et Mondialisation).
  4. Bidani, Benu & Fatou Diagne, Mame & Zaidi, Salman, 2012. "Subjective perceptions of the impact of the global economic crisis in Europe and Central Asia : the household perspective," Policy Research Working Paper Series 5995, The World Bank.
  5. Kucera, David & Roncolato, Leanne & von Uexkull, Erik, 2010. "Trade contraction in the global crisis : employment and inequality effects in India and South Africa," ILO Working Papers 459401, International Labour Organization.

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