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This paper assesses whether the scaling up of aid and the resulting increase in government spending that is needed to meet the Millennium Development Goals (MDGs) would be hampered by wage bill ceilings that are often part of government programs supported by the IMF's Poverty Reduction and Growth Facility (PRGF). Based on country case studies for 2003-05, the paper suggests that, in the past, wage bill ceilings have not restricted the use of available donor funds. Yet the paper offers a number of suggestions for further enhancing the flexibility of wage bill conditionality in PRGF-supported programs to respond to higher aid flows that may result in the future.

What effects do International Monetary Fund (IMF) loans have on borrowing countries? Even after decades of research, no consensus exists. We offer a straightforward explanation for the seemingly mixed effects of IMF loans. We argue that different loans have different effects because of the varied conditions attached to IMF financing. To demonstrate this point, we investigate IMF loans with and without conditions that require public sector reforms in exchange for financing. We find that the addition of a public sector reform condition to a country’s IMF program significantly reduces government spending on the public sector wage bill. This evidence suggest that conditions are a key mechanism linking IMF lending to policy outcomes. Although IMF loans with public sector conditions prompt cuts to the wage bill in the short-term, these cuts do not persist in the longer-term. Borrowers backslide on internationally mandated spending cuts in response to domestic political pressures.

This paper compiles and compares recent and past measures introduced to contain the public wage bill in a number of emerging and advanced economies to assess their effectiveness in bringing down expenditure in a sustained way. In the aftermath of the financial crisis, a number of countries have approved measures on the wage bill as part of fiscal consolidation efforts. These recent episodes are compared to past cases implemented in advanced economies over the period 1979–2009. Findings suggest that public wage bill consolidation episodes pre- and post-2009 are similar in many respects. Moreover, typically countries that were able to achieve more sustained reductions in the wage bill have implemented to larger extent structural measures, and/or these measures were accompanied with substantial social dialogue and consensus.

Offering evidence from both detailed individual country studies and homogenized statistics across the Latin American and Caribbean region, this book examines the impact of the minimum wage on wages, employment, poverty, income distribution and government budgets in the context of a large informal sector and predominantly unskilled workforces.

This article aims to investigate the causal relationship between economic growth, exports and public wage bill spending, using the Johansen cointegration, Granger causality test, variance decomposition (VDC) and impulse response function (IRF). The empirical investigation focuses on the case of a small open and export-oriented Slovenian economy, where public wage bill spending accounts for a sizable share of public expenditure. The results show a significant impact of public wage bill spending on exports. Reduction of public wage bill spending should be adapted to the circumstances in the economy to assure financial consolidation.

PurposeSmall businesses file taxes in accordance with the personal income tax code because they are considered flow-through entities. Thus, personal income tax reforms directly affect the incentives small business owners face regarding employment and operations. The paper aims to discuss these issues.Design/methodology/approachThe authors use the changes in personal income tax rates during the 1993 and 2001-2003 reforms and micro-level data to estimate the effect of statutory tax rate changes on small business employment decisions.FindingsThe authors add two contributions to the current literature: first, the author allow for intertemporal tax planning and second, the author allow the firm's decision to employ labor to be correlated with the firm's wage bill decision. Estimation of a Heckman selection model for wage bills shows that the probability that a business will employ labor is 1.18 percent higher when current tax rates increase by one percentage point and 0.70 percent lower when future rates are expected to increase by one percentage point. Among firms that already employ labor, the median wage bill elasticity with respect to current tax rates is -0.64. These estimates are larger than those reported in previous research because my model includes future taxes and allows for correlation between the firm's employment and wage bill decisions. Omitting the intertemporal tax responses biases the estimates of previous researchers upwards, whereas assuming the two firm decisions are independent biases estimates towards zero.Originality/valueThis paper has been cited in publications published inJournal of Entrepreneurship and Public Policy.

This article presents a comparative review of systems of collection of pension contributions in three Central European countries. We discuss some basic requirements for successful contribution collection and show how these three countries fare in that regard. The changing role of the social security institutions is described. The broad trend toward integrated collection systems, with an enhanced role of the tax authority is clearly discerned, although with some country-specific features. Contribution compliance is analysed for the largest group of insured persons - employees, using the indicator: covered wage bill (as percentage of GDP). The value of this indicator has mostly been decreasing in the 2000s. This is not a satisfactory development and could contribute to the deteriorating financial sustainability of public pension systems.

This report analyzes the paths by which developing country labor markets adjust to permanent trade-related shocks. Trade shocks can bring about reallocation of labor between industries, but the presence of labor mobility costs implies economy-wide losses because they extend the period of economic adjustment. This report focuses primarily on the adjustment costs faced by workers after a trade shock, because of magnitude and welfare implications and policy relevance. From a policy viewpoint, understanding the relative magnitudes of labor mobility and adjustment costs can help policymakers design trade policies that are consistent with employment objectives, can be complemented by labor policies, or support programs to facilitate labor transitions, or both. To complement and validate the analysis based on structural choice models, the study designed a distinct empirical approach using reduced-form econometric estimation strategies. This approach examines the impact of structural reforms and worker displacement on labor market outcomes. This makes it possible to estimate the time required to adjust to a trade-related shock, but does not assume the rigid underlying relationship inherent in structural models. This report is organized as follows: chapter one gives introduction. Chapter two presents evidence from the literature on the relative magnitude of labor adjustment costs borne by workers and by firms. Chapter three presents a new database of country-level labor mobility cost estimates for both developing and developed economies. Chapter four showcases country case studies in which labor mobility costs vary by industry, firm size, and worker type (for example, informal versus. formal). Chapter five analyzes the impact of structural reforms on aggregate labor market outcomes across countries and the effect of worker displacement due to plant closings on the employment outcomes of individual workers in Mexico. Chapter six concludes with a summary of the main findings about the labor adjustment costs associated with trade-related shocks and a discussion of policy responses internationally.

This book investigates trends in skills demand and supply over the past two decades for insights into ways to build (and use) the critical skills needed to sustain competitiveness of the Philippine economy. Part one of the book investigates trends in demand for skills in the country overall and by sectors, explores its possible determinants, and attempts to identify emerging skills gaps. Part two turns to the analysis of the supply of skills in the country with a focus on the ability of education and training to provide highly skilled labor, keeping workers' skills updated, and providing skills development opportunities for the unskilled. It explores employers' perceptions on the quality of institutions and provides detailed analysis of the main characteristics, outcomes, and challenges in four key (or growing) subsectors of the provision of skills in the country: higher education, postsecondary technical-vocational education, non-formal secondary education, and postemployment training. It concludes with a summary of policy recommendations.

This study documents the effects of the 2008–09 global financial crisis on poverty in Latin America and the Caribbean (LAC). In doing so, it describes and decomposes the effects of the crisis on poverty using data from comparable household budget surveys for Argentina, Brazil, Chile, Colombia, Costa Rica, Dominican Republic, Ecuador, El Salvador, Mexico, Paraguay, Peru, and Uruguay, and labor force surveys for Argentina, Brazil, Chile, Colombia, Ecuador, Mexico, Peru, and Uruguay. The study also provides macro-micro modeling of crisis and no-crisis scenarios for Mexico and Brazil, as well as the big picture and program-specific details of the social protection policy responses for these countries and more. Among the findings are the following. First, the effects of the global financial crisis on those living in poverty were not trivial: more than 3 million people fell into or remained mired in poverty in 2009 as a result of the crisis. Of these, 2.5 million were Mexican. Second, the changes in poverty were driven by changes in labor incomes caused by a variable combination of changes in employment rates and real wages. Third, the macro-micro modeling revealed different adjustment mechanisms but similar final incidence results for Brazil and Mexico. The results were regressive overall, with the middle of the income distribution hit even a bit more than the poor. According to the descriptive results from the larger set of countries, changes in inequality accounted for a tenth to a third of changes in poverty. Fourth, countries were quite active in their social protection policy responses, largely taking advantage of programs built in precrisis years. Social transfers partially offset the lower labor earnings of the poor, although income protection for the unemployed was weak. Finally, overall the policy messages are that good policy helps attenuate the links between a global crisis and poverty in the LAC countries, and many of the important things need to be done ex ante such as dealing with the macro fundamentals and building social protection programs.