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

  • Gaurav Khanna
  • David Newhouse
  • Pierella Paci

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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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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  1. Cho, Yoonyoung & Newhouse, David, 2013. "How Did the Great Recession Affect Different Types of Workers? Evidence from 17 Middle-Income Countries," World Development, Elsevier, vol. 41(C), pages 31-50.
  2. 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.
  3. 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.
  4. 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.
  5. Dionisius Narjoko & Hal Hill, 2007. "Winners and Losers during a Deep Economic Crisis: Firm-level Evidence from Indonesian Manufacturing ," Asian Economic Journal, East Asian Economic Association, vol. 21(4), pages 343-368, December.
  6. Reinhart, Carmen M. & Rogoff, Kenneth, 2009. "The Aftermath of Financial Crises," CEPR Discussion Papers 7209, C.E.P.R. Discussion Papers.
  7. Hal HILL & Takashi SHIRAISHI, 2007. "Indonesia After the Asian Crisis," Asian Economic Policy Review, Japan Center for Economic Research, vol. 2(1), pages 123-141.
  8. 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.
  9. 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.
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