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Business Finance

What we’re reading about the social externalities from jobs

The effects of poor employment outcomes are not limited to those experiencing them directly. There is growing evidence of substantial benefits to broader society from the creation of better jobs.

However, studies on social externalities from jobs, such as social cohesion, crime and violence, terrorism, subjective well-being, and parenting, tend to be disparate and loosely connected. Nonetheless, findings are largely consistent on jobs being at the core of these issues. Apart from the economic benefits from job creation for the individuals hired, social externalities are starting to be considered as critical to the development process. The 2013 World Development Report on jobs shined a spotlight on this narrative, and more recent papers on ‘good job externalities’ have followed suit.

Challenges remain in quantifying the value of these externalities and accounting for them in development policy choices, but progress has been made. A more complete understanding of how to value externalities will help optimize program design. With the forthcoming Jobs Flagship Report, we look forward to pushing the envelope on the applications of this jobs externalities framing. Stay tuned!

Essential readings

  • One study found that per capita income growth rises by almost 1% for a one standard deviation (SD) increase in trust. (Zak and Knack, The Economic Journal, December 2001)  
  • Meanwhile, a more recent study finds a one SD increase in the regional unemployment rate is associated with a rise of over 5% SD in trust. (Azzollini, Social Science Research, January 2022)
  • Behavioral responses inform a discrete choice experiment to quantify the value of the social externalities. (Ricaldi and Mousley, World Bank, January 2019)
  • To utilize such insights in policy and leverage private investment, one can include the value assigned to the externalities in economic analysis of development projects. (Robalino et al., World Bank, June 2020)         
  • Recent application of this concept in project ex post analysis suggests that many private agricultural aggregators likely have enough private incentive to cover a large portion of the cost of supporting poor farmers to join organized value chains. (Baxter et al., World Bank, 2022)
  • This policy paper proposes reshaping industrial policy to give local agencies the federal funds they need to provide firms with training, tax incentives, and technological or infrastructure assistance to enhance labor productivity, with firms expected to help their municipalities meet goals such as creating good jobs. (Rodrik, The Hamilton Project, September 2022)
  • In Europe, unemployment scars are associated with lower social trust, and unemployment-trust associations are stronger where average unemployment is lower. (Azzollini, Social Science Research, September 2022)
  • Formal employment is associated with a range of social outcomes and behaviors linked to higher levels of social cohesion, e.g. social interactions and political activism among those in regular employment can either improve aggregate institutions or deepen social divides. (Wietzke, The World Bank Research Observer, February 2015)
  • In Jordanian communities hosting Syrian refugees, donor-sponsored Cash-for-Work programs can improve social cohesion by fostering a sense of belonging and horizontal trust. (Zintl & Loewe, The European Journal of Development Research, May 2022)
  • This brief provides a list of readings that are essential for understanding and discussing the relationship between unemployment and conflict. (Cramer, GSDRC brief, March 2015)
  • Poor labor market opportunities increase terrorist organization membership – a 1% reduction in unemployment is associated with a 16% reduction in the number of Daesh recruits – but also limits recruitment when travel creates higher migration costs. (Brockmeyer et al., The Review of Economics and Statistics, January 2022)
  • This working paper reviews the recent research on unemployment and subjective well-being. (Suppa, GLO Working Paper, January 2021)
  • Parental unemployment just before making an education decision reduces the child’s chances of obtaining a university degree by over 5%. (Schmidpeter, Upjohn Institute Working Paper, August 2020)
  • This working paper focuses on a meta-intervention regime for creating good jobs across sectors. (Rodrik & Sabel, Harvard Kennedy School Working Paper, January 2020)
  • This working paper presents a measure of jobs-linked externalities in fragility, conflict, and violence (FCV) contexts with a significant mismatch between private and social profitability (Ricaldi & Mousley, World Bank, 2019).
  • A 1% reduction in a US state’s unemployment rate is associated with reductions in burglary, larceny, and auto theft of 2%, 1.5%, and 1%, respectively (Raphael and Winter-Ebmer, The Journal of Law & Economics, April 2001).

Broader jobs agenda

  • Performance pay is associated with more work hours in the UK, primarily due to worker sorting rather than behavioral change. (Green and Heywood, IZA Discussion Papers, August 2022)
  • An increase in minimum wage intensity is correlated with higher female employment in Greece, as female labor markets are typically less competitive. (Roupakias, MPRA Working Paper, August 2022)
  • Shortened school years have a negative labor market impact for nearly one’s entire occupational career. Earnings losses are primarily driven by men. (Cygan-Rehm, CESifo Working Paper, August 2022)
  • Coaching programs result in significant academic gains for students, particularly for men and students majoring in science, technology, engineering, and math (STEM). (Canaan et al., Upjohn Institute Working Paper, August 2022)
  • Teleworking allows skilled workers of more productive cities to reside in less productive cities with cheaper housing, with implications for housing prices and unskilled workers in both cities. (Gokan et al., CESifo Working Paper, September 2022)

Source : World Bank



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