Generating Jobs: How to Increase Demand for Less-Skilled Workers
Edited by Richard B. Freeman and Peter Gottschalk
The gap
between low-paid and high-paid U.S. workers grew during the 1980s to
levels of inequality not seen since the Great Depression. This collection
of seven studies examines a set of relatively neglected policy options
on ways to improve the market for less-skilled workers - micro demand-side
policies - contrasting them to education and training policies that
affect the labor supply.
The most familiar demand-side policies were the Roosevelt administration's
Public Works Administration (PWA) and Works Program Administration (WPA);
the Johnson administration initiated affirmative action programs and
the Nixon administration developed the Comprehensive Employment and
Training Act (CETA). The book looks at four kinds of smaller (micro)
demand-side policies:
- Tax credits, subsidies or concessions to employers to lower the costs of employing some groups of workers, either particular people or in a particular area;
- Direct or indirectly targeted government hiring;
- Pay mode changes such as profit-sharing or higher minimum wages and benefits; and
- Regulatory changes such as work-hour limits, anti-discrimination rules, and limits on part-time or full-time employment.
The authors
conclude from the studies that subsidy policies should target disadvantaged
people, not disadvantaged areas, and should cover as broad a group as
possible. Public employment policies are more successful at increasing
the number of job-holders than at increasing their wages; profit-sharing
is unlikely to raise either. Mandated wage increases and benefits, found
in virtually all countries, have only modest effect because they can
induce employers to lower other compensations or hire fewer workers.
Regulatory changes have saved some jobs and crated others, but they
are not panaceas for unemployment or for disadvantaged workers.
In sum, no micro demand-side program is a magic solution to the problem,
but some programs do make a difference and should be studied further
and explored for possible improvement and expansion.
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Richard B. Freeman is Ascherman Professor of Economics at Harvard University,
Co-Director of the Labor and Worklife Program at the Harvard law School,
and Director of the Labor Studies Program at the National Bureau of
Economic Research. He is also Co-Director of the Centre for Economic
Performance at the London School of Economics and Visiting Professor
at the London School of Economics.
Peter
Gottschalk (gottscha@bc.edu)
is professor of economics at Boston College and a Senior Research Affiliate
at the National Poverty Center of the University of Michigan. A specialist
in labor economics, poverty and discrimination, he is also research
affiliate at the Institute for Research on Poverty at the University
of Wisconsin, Madison.
