Adjustment and the labor market
How has the labor market responded to changes in macroeconomic conditions and related government policies? And to what extent has government intervention affected the microeconomic functioning of the labor market. Geographical immobility of workers does not seem to hinder adjustment. Labor is increasingly deployed in nontradables and import competing sectors, however, and problems of mobility between tradables and nontradables are reported. In addition, shortages of skilled manpower are reported. There is little evidence of wage resistence where wage indexation is not institutionalized. Traditional methods of wage support have become less important in the past two decades. Where effective minimum wage policies exist, they have the expected distortionary effects. Wage differences between the public and private sectors, particularly in sub-Saharan Africa, have continued to widen, and the efficiency of the public sector has declined as a result. Job security regulations may be an obstacle to structural adjustment programs insofar as they hinder the release of labor from contracting sectors.
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