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1. Managing an Aging Society: Learning the Right Lessons from Japan

Author:
Jacob Funk Kirkegaard
Publication Date:
04-2025
Content Type:
Working Paper
Institution:
Peterson Institute for International Economics (PIIE)
Abstract:
As the world and especially other Asian and European economies enter the accelerated process of aging that Japan experienced from the mid-1990s onwards, learning the right policy lessons from Japan’s response is crucial. This paper argues that, overall, Japan has done relatively well by implementing a response that—even if often belatedly so—has mitigated some of the worst economic effects of aging. Japan has successfully raised domestic labor utilization and immigration levels, integrated its economy more with the rest of the world, and implemented a fiscal policy based on debt expansion that has seen debt costs decline. Other advanced Asian economies and China now face aging processes materially faster than Japan’s and will age simultaneously rather than alone like Japan. In addition, many advanced economies will age during a period of much slower global economic growth and less rather than more global trade and investment opening than what Japan faced from the mid-1990s. These less benign international economic and political circumstances mean that many advanced economies will likely not age with the same relative political and economic stability seen in Japan in the last 30 years. In time, this paper argues, “Japanification” will no longer mean a slowly developing economic disaster but will come to mean competent management of a very difficult economic transition.
Topic:
Debt, Demographics, Labor Issues, Immigration, Fiscal Policy, Aging, and Productivity
Political Geography:
Japan and Asia

2. Climate action: Implications for factor market reallocation

Author:
Robert Z. Lawrence
Publication Date:
01-2024
Content Type:
Working Paper
Institution:
Peterson Institute for International Economics (PIIE)
Abstract:
This paper considers climate policies, not from the perspective of their environmental impacts, but rather their likely effects on labor and investments. While the aggregate impact of the green transition on jobs and investment may be modest, it will require significant reallocation of labor and capital within and across industries. Although the green transition brings new opportunities for employment and investment in renewable technologies, many workers and communities tied to the fossil fuel industry may not benefit from these advances due to skills mismatch and geographic constraints. Both the United States and the European Union acknowledge the importance of achieving “climate justice” and “leaving no one behind” in their decarbonization efforts. However, current policies and resources in the United States may fall short, with inadequate assistance reaching too many communities and a narrow focus on green jobs. In Europe, while the Just Transition Fund complements existing programs, effective implementation of place-based policies remains challenging due to the need for specific, localized responses.
Topic:
Climate Change, Environment, Labor Issues, European Union, and Energy
Political Geography:
North America and United States of America

3. Migration or stagnation: Aging and economic growth in Korea today, the world tomorrow

Author:
Michael A. Clemens
Publication Date:
07-2024
Content Type:
Working Paper
Institution:
Peterson Institute for International Economics (PIIE)
Abstract:
South Korea faces an unprecedented economic crisis driven by rapid population aging, as it approaches a future of negative economic growth. This paper examines the full range of possible policy responses with the potential to restore dynamism to the Korean economy. Contrary to many prior analyses, I find that enhanced labor migration to Korea is necessary, sufficient, and feasible. Migration is necessary because in the best forecasts we have, no other class of policy has the quantitative potential to meaningfully offset aging. Migration is sufficient because enhanced temporary labor migration by itself would offset most of Korea’s demographic drag on growth over the next 50 years. And migration is feasible because the levels of migration and timescale of the transition would resemble that already carried out by Malaysia and Australia. Many advanced economies will follow in Korea’s demographic footsteps in decades to come, and have much to learn from the decisions that the Korean government makes now.
Topic:
Demographics, Migration, Labor Issues, Economic Growth, and Aging
Political Geography:
Asia and South Korea

4. America's payoff from engaging in world markets since 1950 was almost $2.6 trillion in 2022

Author:
Gary Clyde Hufbauer and Megan Hogan
Publication Date:
12-2023
Content Type:
Policy Brief
Institution:
Peterson Institute for International Economics (PIIE)
Abstract:
International trade may not be as popular in the United States as it once was, but this updated PIIE study demonstrates that the payoff to the US economy from globalization has been significant. Gains from trade since 1950, facilitated by vastly improved transportation and communications, added up to $2.6 trillion in 2022, lifting US GDP by 10 percent. These gains averaged $7,800 per person and $19,500 per household in the United States in 2022. Despite these gains, trade barriers were erected under former president Donald Trump and continued under the Biden administration, spurred by concerns over trade-related job loss. These protectionist policies, coupled with the global financial crisis and the COVID pandemic, have slowed globalization. To be sure, trade has inflicted losses on certain US workers. Between 2001 and 2016, more than 300,000 workers annually lost or switched jobs because of imports. In comparison, more than 50 million workers change jobs each year. Americans enjoy large but less visible gains from trade through cheaper and more varied products and increased productivity at firms. Instead of restricting trade, US policymakers should adopt better safety nets for displaced workers and ensure that economic growth is more widely shared.
Topic:
Globalization, Markets, Labor Issues, Economic Growth, and Trade Policy
Political Geography:
North America and United States of America

5. The Rapid Response Labor Mechanism of the US-Mexico-Canada Agreement

Author:
Chad P. Bown and Kathleen Claussen
Publication Date:
10-2023
Content Type:
Working Paper
Institution:
Peterson Institute for International Economics (PIIE)
Abstract:
The US-Mexico-Canada Agreement (USMCA) introduced a new compliance institution for labor rights in trade agreements: the facility-specific Rapid Response Labor Mechanism (RRM). The RRM was developed to tackle one particular thorn in the side of North American integration—labor rights for Mexican workers—which had had detrimental, long-term political-economic consequences for the two countries’ trade relationship. This paper reviews the unique political-economic moment in the United States and Mexico that prompted the creation of this tool. It describes how the RRM works and the considerable financial and human resources the two governments have brought to bear to operationalize it. The paper then reports a number of stylized facts on how governments used the RRM during its first three years, largely in the auto sector. It proposes paths of potentially fruitful political-economic research to understand the full implications of the RRM and concludes with preliminary lessons as well as a discussion of the potential for policymakers to transpose facility-specific mechanisms for labor or other issues, such as the environment, into future economic agreements.
Topic:
Treaties and Agreements, Labor Issues, Free Trade, and Disputes
Political Geography:
Canada, North America, Mexico, and United States of America

6. The role of childcare challenges in the US jobs market recovery during the COVID-19 pandemic

Author:
Jason Furman, Melissa Kearney, and Wilson Powell III
Publication Date:
06-2021
Content Type:
Working Paper
Institution:
Peterson Institute for International Economics (PIIE)
Abstract:
This working paper examines how much of the overall decline in employment between the beginning of 2020 and 2021 can be explained by excess job loss among parents of young children, and mothers specifically. Using data from the Current Population Survey (CPS), the authors confirm that, in general, mothers with young children have experienced a larger decline in employment, as compared (unconditionally) with other adults, including fathers. This excess job loss is driven by mothers without a four-year college degree. The main point of the paper is to build off this observation and examine how much of the aggregate employment deficit in early 2021 can be explained by parent-specific issues, such as childcare struggles. To examine this question, the authors construct counterfactual employment rates and labor force participation rates that assign to mothers of young children the percent change in employment and labor force participation rates experienced by comparable women without young children. The paper considers multiple definition, sample, and counterfactual specification alternatives. The analysis yields robust evidence that differential job loss among mothers of young children accounts for a negligible share of the ongoing aggregate employment deficit. The result is even stronger (and flips signs) if all parents are considered, since fathers with young children experienced less job loss than other men. The practical implication of these findings is that nearly all of the aggregate ongoing employment deficit is explained by factors that affect workers more broadly, as opposed to challenges specific to working parents.
Topic:
Labor Issues, Children, Pandemic, COVID-19, and Childcare
Political Geography:
North America and United States of America

7. Do US firms have an incentive to comply with the FLSA and the NLRA?

Author:
Anna Stansbury
Publication Date:
06-2021
Content Type:
Working Paper
Institution:
Peterson Institute for International Economics (PIIE)
Abstract:
To what extent do US firms have an incentive to comply with the Fair Labor Standards Act (FLSA) and the National Labor Relations Act (NLRA)? Stansbury examines this question through a simple comparison of the expected costs of noncompliance (in terms of legal sanctions) to the profits firms can earn through noncompliance. In the case of the FLSA minimum wage and overtime provisions, typical willful violators are required to pay back wages owed and in some cases additional penalties, if detected by the Department of Labor (DOL). Based on available data on the penalties levied, a typical firm would need to expect a chance of at least 78-88 percent that its violation would be detected in order to have an incentive to comply with the FLSA. In practice, the probability of detection many firms can expect to face is likely much lower than this. In the case of the NLRA, a firm that fires a worker illegally is required to reinstate the worker with back pay if the violation is detected. Based on empirical estimates of the effect of unionization on firm profits, a typical firm may have an incentive to fire a worker illegally for union activities if this illegal firing would reduce the likelihood of unionization at the firm by as little as 0.15-2 percent. These analyses illustrate that neither the FLSA nor the NLRA penalty and enforcement regimes create sufficient incentive to comply for many firms. In this context, the substantial evidence of minimum wage and overtime violations, and of illegal employer behavior toward unions, is not surprising.
Topic:
Labor Issues, Regulation, and Economy
Political Geography:
North America and United States of America

8. The evolving gender gap in labor force participation during COVID-19

Author:
Simeon Djankov, Pinelopi Koujianou Goldberg, Lisa Hyland, and Eva (Yiwen) Zhang
Publication Date:
04-2021
Content Type:
Policy Brief
Institution:
Peterson Institute for International Economics (PIIE)
Abstract:
Despite many significant gains by women in the paid workforce in recent decades, the percentage of women participating in the labor force has remained lower than the percentage of male participants. Now, in response to the COVID-19 pandemic and the global economic downturn it precipitated, the gap in labor force participation between men and women in some economies has actually widened, with potentially damaging repercussions for women’s career prospects and pay. The pandemic has disproportionately affected sectors employing more women, such as retail stores, restaurants, and the hotel and hospitality business. An increase in family caregiving responsibilities because of school and childcare closures has also fallen on working mothers' shoulders. Both factors have pulled women out of the labor force. The authors track trends in male and female labor force participation in 43 countries and find substantial differences across countries in the way women’s participation has been affected relative to that of men. In some countries, such as Colombia, Chile, and Cyprus, the gender gap in labor force participation widened the most during the pandemic. The gender gap also widened in the United States, driving 2.5 million women from their jobs in what Vice President Kamala Harris called a “national emergency” for women. In other economies, such as Luxembourg and Lithuania, the gender gap in labor force participation, unexpectedly, shrank during the early period of the pandemic. On average, female employees have fared better in countries where women are less concentrated in the services sector, less likely to be employed as temporary workers, and where laws supported greater equality at the onset of the crisis. Greater government expenditure on childcare in the pre-COVID-19 era, however, does not appear to have insulated female workers from the damaging repercussions of the pandemic.
Topic:
Economics, Gender Issues, Labor Issues, Women, Services, COVID-19, and Empowerment
Political Geography:
Colombia, Chile, Cyprus, Global Focus, and United States of America

9. Startups in the United States during the pandemic reflect some dynamism amid job losses

Author:
Simeon Djankov and Eva (Yiwen) Zhang
Publication Date:
05-2021
Content Type:
Policy Brief
Institution:
Peterson Institute for International Economics (PIIE)
Abstract:
New business applications have surged in the United States since the start of the COVID-19 pandemic. The growth is driven largely by startups in online retail, transportation, and personal services. Many of these new entrepreneurs are self-employed and were likely laid off and forced into entrepreneurship by necessity. No official data are available yet on the number of businesses destroyed in 2020, because business data for firms that close without entering bankruptcy are lagging. But the authors calculate that firm births may have surpassed firm deaths during the pandemic. While this boom in business entry is a tribute to the adaptability and potential innovative spirit in US capitalism, one should not be overly optimistic about jobs created in this wave of startups. As many of these new startups are by people forced to strike out on their own, the number of jobs created per new firm is even smaller than it was during previous US recessions. And like online businesses started around the last recession (e.g., Uber, Airbnb, and Venmo), some of these new firms may turn out to be major contenders in their sectors, displacing workers employed by their traditional rivals.
Topic:
Science and Technology, Labor Issues, Financial Crisis, and COVID-19
Political Geography:
North America and United States of America

10. Gendered laws and women in the workforce

Author:
Marie Hyland, Simeon Djankov, and Pinelopi Koujianou Goldberg
Publication Date:
05-2020
Content Type:
Working Paper
Institution:
Peterson Institute for International Economics (PIIE)
Abstract:
This paper provides the first global look at how gender discrimination by the law affects women’s economic opportunity and charts the evolution of legal inequalities over five decades. Using the World Bank’s newly constructed Women, Business and the Law database, it documents large and persistent gender inequalities, especially with regard to pay and treatment of parenthood. The paper finds positive correlations between more equal laws pertaining to women in the workforce and more equal labor market outcomes, such as higher female labor force participation and a smaller wage gap between men and women.
Topic:
Gender Issues, Labor Issues, Women, Inequality, and Economic Inequality
Political Geography:
Global Focus