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Slide 01
Labor Economics
- How labour markets work, why wages differ, what unions do, and how automation, globalisation, and policy shape the world of work.
- 32 slides • Scroll or use arrow keys
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Slide 02
Table of Contents
- What Is Labor Economics?
- Labour Supply: The Work-Leisure Trade-off
- Labour Demand and Marginal Productivity
- Wage Determination and Equilibrium
- Human Capital Theory
- Compensating Differentials
- Discrimination in Labour Markets
- The Gender Pay Gap
- Minimum Wage Debates
- Unions and Collective Bargaining
- Unemployment: Types and Causes
- Globalisation and Labour
- Automation and AI
- The Gig Economy
- The Future of Work
- Reading List
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Slide 03
What Is Labor Economics?
- Labor economics studies the markets in which workers and employers interact. It addresses some of the most consequential questions in economics.
- Core Questions
- Why do some workers earn 100x more than others?
- Does raising the minimum wage destroy jobs?
- Will robots take our jobs?
- Why are women paid less than men?
- Does immigration lower native wages?
- Why It Matters
- For most people, labour income is 70-80% of total income. The labour market determines living standards, inequality, social mobility, and life satisfaction more than any other market.
- The Labour Market Is Unusual
- Unlike commodity markets, labour markets involve human beings with preferences, dignity, and power asymmetries. This makes them fundamentally different from markets for wheat or steel.
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Slide 04
A Brief History of Work
- Pre-1800 -- 80-90% of humans worked in agriculture. Work was seasonal, unpaid (family/serf), and barely distinguished from "life"
- 1760-1840 -- Industrial Revolution creates the factory system. Workers sell time for wages. The "working class" emerges as a social category
- 1833-1901 -- Factory Acts (UK) limit child labour, set maximum hours. Germany creates first social insurance (1883)
- 1914-1945 -- Two World Wars transform labour: women enter factories; unions gain power; governments adopt full employment as policy goal
- 1945-1975 -- "Golden Age" of capitalism: strong unions, rising wages, low inequality, near-full employment in the West
- 1975-2000 -- Globalisation, deindustrialisation, union decline, rise of services. Manufacturing moves from rich to poor countries
- 2000-present -- Digital platforms, gig work, remote work, AI automation. The nature of employment itself is being redefined
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Slide 05
Labour Supply: The Work-Leisure Trade-off
- How many hours do people choose to work? The answer depends on two competing effects.
- Substitution Effect
- When wages rise, the opportunity cost of leisure increases. Each hour of Netflix "costs" more in foregone wages. This pushes people to work more.
- Income Effect
- When wages rise, people are richer and can afford more leisure. A surgeon earning $500/hour may choose to work 4 days a week. This pushes people to work less.
- The backward-bending labour supply curve: at low wages, substitution dominates; at high wages, income dominates
- Average annual working hours have fallen dramatically: ~3,000 hours in 1870 to ~1,400-1,800 today in OECD countries
- Keynes (1930) predicted 15-hour work weeks by 2030. He was right about productivity growth but wrong about how people would use it
- Labour force participation varies enormously: 83% for prime-age men in the US (down from 97% in 1950); 77% for women (up from 34%)
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Slide 06
Labour Demand: Marginal Productivity
- In the standard model, firms hire workers up to the point where the value of the last worker's output equals their wage.
- Marginal Revenue Product (MRP) = marginal product of labour x price of output
- A profit-maximising firm hires until MRP = wage
- Derived demand: demand for labour is derived from demand for the goods/services workers produce. No one hires baristas unless people want coffee
- Elasticity of labour demand: how responsive is employment to wage changes? Key determinants:
- Substitutability of capital for labour (easy in car assembly, hard in nursing)
- Elasticity of product demand (luxury goods vs. necessities)
- Labour's share of total costs (higher share = more elastic demand)
- Time horizon (more elastic in the long run)
- Hamermesh (1993) estimates: a 10% wage increase reduces employment by 3-5% in the long run
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Slide 07
Why Wages Differ: Human Capital Theory
- Gary Becker (Nobel 1992) and Jacob Mincer developed the dominant framework for understanding wage differences.
- Core Idea
- Workers invest in skills (education, training, experience) that increase their productivity and therefore their wages. Education is an investment with costs (tuition, foregone earnings) and returns (higher lifetime wages).
- Returns to Education
- The "Mincer equation" estimates ~8-13% higher earnings per additional year of schooling. College graduates earn ~66% more than high school graduates over a lifetime (US, 2023). The "college premium" has been rising since the 1980s.
- General vs. Specific Training
- General skills (literacy, numeracy) are portable; workers pay for them (via lower training wages). Firm-specific skills (proprietary software, company processes) benefit one employer; the firm pays.
- Signalling (Spence, 1973)
- Alternative theory: education doesn't increase productivity but signals pre-existing ability. The "sheepskin effect" (big wage jump at degree completion, not per year) supports this. Reality: likely both.
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Slide 08
Compensating Differentials
- Adam Smith (1776) observed that unpleasant or dangerous jobs must pay more to attract workers. This "compensating wage differential" remains a key concept.
- Job CharacteristicEffect on WagesExample
- Physical danger+7-14% premiumLogging, deep-sea fishing, mining
- Unpleasant conditions+3-8%Sewage workers, night shifts
- Job insecurity+4-10%Construction, seasonal work
- Long/inflexible hours+5-15%Investment banking, surgery
- Pleasant location-5-15%Coastal cities, college towns
- Meaningful work-5-10%Nonprofits, teaching, art
- The value of a statistical life (VSL): by measuring how much extra workers require for risky jobs, economists estimate the implicit value of life. US EPA uses ~$11 million (2024) for cost-benefit analysis of safety regulations.
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Slide 09
Labour Market Discrimination
- Discrimination -- paying less or hiring less for reasons unrelated to productivity -- persists despite decades of anti-discrimination law.
- Becker's Model (1957)
- Taste-based discrimination: some employers (or customers, or co-workers) have a "taste" for discrimination -- they're willing to pay a cost to avoid hiring certain groups. Competition should erode this (discriminating firms are less profitable).
- Statistical Discrimination
- Employers use group averages (real or perceived) as proxies when individual information is costly. A firm might assume young women are more likely to leave for childcare -- even if a specific applicant won't. Rational but unfair.
- Audit Studies
- Bertrand & Mullainathan (2004): resumes with "white-sounding" names (Emily, Greg) received 50% more callbacks than identical resumes with "Black-sounding" names (Lakisha, Jamal). Similar patterns found in Europe, Asia, and Latin America.
- Structural Barriers
- Beyond individual prejudice: occupational segregation, unequal school funding, network effects, and neighbourhood disadvantage create cumulative disadvantage that markets alone cannot fix.
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Slide 10
The Gender Pay Gap
- 84 centsUS women earn per dollar men earn (2023 median full-time)
- ~50%Of the raw gap explained by occupation and hours differences
- ~10-15%Unexplained residual gap (potential discrimination)
- Claudia Goldin (Nobel 2023) showed that the gap is largely a "motherhood penalty" -- women's earnings drop ~30% after the first child; men's don't change
- "Greedy jobs": Goldin found that occupations rewarding long, inflexible hours (law, finance, consulting) have the largest gender gaps. Pharmacy, with standardised hours, has nearly closed the gap
- Occupational sorting: women are disproportionately in lower-paying fields (education, care work), partly due to socialisation, partly due to employer expectations
- Nordic paradox: Scandinavian countries have high female participation but persistent occupational segregation -- generous parental leave may reinforce gendered division of childcare
- Policy levers: pay transparency laws, paternity leave mandates, flexible work policies, addressing bias in hiring and promotion
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Slide 11
The Minimum Wage Debate
- No topic in labour economics is more contested than the minimum wage.
- The Textbook Prediction
- In a competitive market, a binding minimum wage (above equilibrium) should reduce employment
- Standard supply-and-demand logic: higher price = lower quantity demanded
- This was the consensus view through the 1980s
- The Card-Krueger Revolution (1994)
- David Card and Alan Krueger compared fast food employment in New Jersey (after a minimum wage increase) and Pennsylvania (no increase)
- Finding: no job losses -- employment actually rose slightly in NJ
- Sparked decades of debate and hundreds of follow-up studies
- Current Evidence
- Most studies find that moderate minimum wage increases (up to ~60% of median wage) have small or zero effects on employment
- Dube, Lester & Reich (2010): comparing adjacent counties across state borders, minimum wages raise earnings without significant job losses
- Cengiz et al. (2019): minimum wage increases shift workers up from below the minimum without destroying total employment
- Very large increases may have negative effects, especially in low-cost regions
- Card won the Nobel Prize in 2021, partly for this work
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Slide 12
Why Minimum Wages May Not Kill Jobs
- The empirical evidence requires an explanation. Several theories account for why minimum wages work differently than the simple competitive model predicts.
- Monopsony Power
- Joan Robinson (1933): when there are few employers (or high switching costs), firms have wage-setting power and pay below competitive levels. A minimum wage can increase both wages and employment. Alan Manning's "dynamic monopsony" argues this is widespread.
- Efficiency Wages
- Higher wages reduce turnover, increase effort, and attract better applicants. Firms may absorb minimum wage costs through lower turnover costs. Henry Ford's $5 day (1914) demonstrated this a century ago.
- Price Pass-Through
- Firms pass wage increases to consumers through small price increases (typically 0.4-0.7% price increase per 10% minimum wage increase). In low-wage sectors like fast food, this is feasible because demand is relatively inelastic.
- Reduced Profits
- Firms with market power earn rents. Minimum wages can compress these rents. Harasztosi & Lindner (2019) found Hungarian firms absorbed 75% of minimum wage increases from profits, not employment.
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Slide 13
Minimum Wages Around the World
- CountryMinimum Wage (USD/hr equiv., 2024)% of Median Wage
- Australia~$15.50~54%
- France~$13.80~61%
- Germany~$14.20~52%
- United Kingdom~$13.50~55%
- United States (federal)$7.25~28%
- South Korea~$7.20~62%
- Japan~$7.50~45%
- Brazil~$1.50~55%
- The US federal minimum wage ($7.25) hasn't been raised since 2009 -- the longest period without an increase since its creation in 1938. But 30 states and many cities have set higher minimums, with some (California, Washington) at $16+.
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Slide 14
Labour Unions: Rise and Decline
- 1799-1824 -- British Combination Acts outlaw unions; repealed 1824 after mass agitation
- 1886 -- American Federation of Labor (AFL) founded by Samuel Gompers; Haymarket affair in Chicago
- 1935 -- Wagner Act (US) guarantees right to organise and collectively bargain. Union membership surges
- 1945-1975 -- Peak union era: ~35% of US workers unionised (1954); higher in Europe. The "Treaty of Detroit" (1950) sets pattern of rising wages linked to productivity
- 1981 -- Reagan fires 11,345 striking air traffic controllers (PATCO). Signals a new era of anti-union policy
- 1980-2024 -- US private-sector unionisation falls from 24% to 6%. Public sector holds at ~33%
- 2021-present -- "Hot labour summer": Amazon, Starbucks, Apple Store, and UPS organising drives. Public approval of unions at 67% (highest since 1965)
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Slide 15
What Do Unions Do?
- Richard Freeman and James Medoff's classic 1984 book asked this question. The answer is complex.
- The "Monopoly Face"
- Unions raise wages above competitive levels (the "union wage premium" is ~10-15% in the US)
- This may reduce employment and create inefficiency
- Can protect unproductive workers from dismissal
- May resist technological change
- Strike activity disrupts production
- The "Voice Face"
- Unions give workers collective voice, reducing costly turnover
- Compress wage distribution -- raise wages at the bottom more than the top
- Negotiate better working conditions, safety, benefits
- Political advocacy for worker-friendly policies (minimum wage, OSHA, overtime rules)
- Counterbalance employer monopsony power
- The inequality connection: Economists estimate that the decline of US unions explains 15-33% of the rise in male wage inequality since 1980. Countries with strong unions (Nordics, Germany) have much lower inequality.
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Slide 16
Models of Union Bargaining
- Nordic Model
- Centralised bargaining: industry-wide agreements between peak union and employer federations. 65-90% of workers covered (Sweden, Denmark, Finland). Produces wage compression, low inequality, high trust. Combined with flexible labour markets ("flexicurity").
- Continental European Model
- Sectoral bargaining: Germany's co-determination (Mitbestimmung) puts worker representatives on corporate boards. Works councils at firm level. Extension mechanisms apply agreements to non-union firms. Coverage: 50-80%.
- Anglo-Saxon Model
- Enterprise bargaining: unions negotiate firm by firm. The US Wagner Act framework. Adversarial relationship. Low density creates a "free rider" problem -- non-members benefit without paying dues. Coverage: 6-12%.
- Emerging Economy Model
- Huge informal sectors (50-90% of workers in India, Sub-Saharan Africa) beyond union reach. Formal sector unions may protect privileged insiders at the expense of excluded outsiders.
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Slide 17
Unemployment: Types and Measurement
- Frictional
- Workers between jobs, searching for better matches. Healthy and unavoidable. A college graduate taking 3 months to find the right first job. Reduced by better information (job boards, LinkedIn).
- Structural
- Mismatch between workers' skills/location and available jobs. Coal miners in Appalachia when coal declines. May persist for decades. Requires retraining, relocation assistance, or new industries.
- Cyclical
- Caused by recessions -- insufficient aggregate demand. The 2008-09 financial crisis pushed US unemployment to 10%. Addressed by monetary and fiscal policy (interest rate cuts, stimulus spending).
- Measurement Issues
- Official (U-3) unemployment counts only those actively seeking work. Discouraged workers and involuntary part-timers are excluded. The broader U-6 measure is typically 3-5 points higher. Labour force participation better captures "hidden" joblessness.
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Slide 18
The Natural Rate and the Phillips Curve
- Two of the most important (and debated) concepts in macroeconomic labour policy.
- NAIRU / Natural Rate
- Milton Friedman (1968): there's a "natural rate of unemployment" below which inflation accelerates
- Estimated at roughly 4-5% for the US, varying by country and era
- Pushing unemployment below NAIRU via demand stimulus creates inflation
- But the natural rate is unobservable -- estimated with large uncertainty
- 2018-2019: US unemployment hit 3.5% without inflation, suggesting NAIRU estimates were too high
- The Phillips Curve
- A.W. Phillips (1958): inverse relationship between unemployment and wage inflation in UK data (1861-1957)
- Became the foundation of demand management: trade off more inflation for less unemployment
- Broke down in the 1970s: "stagflation" -- high inflation AND high unemployment simultaneously
- Friedman/Phelps: the long-run Phillips curve is vertical at the natural rate
- The modern "flat Phillips curve" puzzle: unemployment swings have smaller inflation effects than before
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Slide 19
Globalisation and Labour Markets
- Trade theory (Stolper-Samuelson): trade benefits a country's abundant factor. In rich countries, this helps skilled workers and hurts unskilled. In poor countries, the reverse
- The "China Shock": Autor, Dorn & Hanson (2013) showed that Chinese import competition destroyed 2-2.4 million US manufacturing jobs (1999-2011). Affected communities saw persistent unemployment, lower wages, declining marriage rates, and rising opioid deaths
- Offshoring: not just manufacturing -- service jobs (call centres, programming, radiology) are increasingly mobile. Alan Blinder estimated 22-29% of US jobs are potentially offshorable
- Global value chains: production is fragmented across countries. An iPhone involves workers in 43 countries. This creates interdependence but also vulnerability (as COVID supply chain disruptions showed)
- Winners and losers: overall, trade increases national income -- but the gains are diffuse (slightly cheaper goods for everyone) while the losses are concentrated (devastated manufacturing towns). Compensation of losers is theoretically possible but rarely adequate
- "What an economist sees as the efficient reallocation of labour, a worker sees as the destruction of their community."
- -- Dani Rodrik
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Slide 20
Immigration and Labour Markets
- Immigration's labour market effects are among the most studied -- and most politically charged -- topics in economics.
- The Evidence
- The Mariel Boatlift (Card, 1990): 125,000 Cuban refugees increased Miami's labour force by 7% overnight. Card found no significant effect on native wages or employment -- foundational study
- Borjas rebuttal: George Borjas re-analysed the data focusing on less-skilled natives and found wage declines of 10-20% for high school dropouts
- Meta-analyses: most studies find small effects -- a 10% increase in immigrant share reduces native wages by 0-3%
- Why Effects Are Small
- Immigrants and natives are often complements, not substitutes (immigrant labourers + native managers)
- Immigration expands product demand, creating new jobs
- Natives move to different occupations or locations
- High-skilled immigration (H-1B, etc.) clearly boosts innovation and tax revenue
- The distribution matters: high-skilled immigration benefits almost everyone; low-skilled immigration may modestly reduce wages for the least-skilled natives while benefiting employers and consumers.
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Slide 21
Automation and Technological Unemployment
- Fear of machines replacing workers dates back centuries. Is this time different?
- 1811-1816 -- Luddites smash textile machinery in northern England. Their fear wasn't irrational -- handloom weavers' wages fell 60%
- 1930 -- Keynes coins "technological unemployment" but predicts it's a "temporary phase of maladjustment"
- 1960s -- JFK commissions study on automation. Panic recedes as employment grows
- 2013 -- Frey & Osborne (Oxford): 47% of US jobs "at high risk" of automation within 10-20 years. Sparks global anxiety
- 2017 -- McKinsey: ~50% of work activities (not jobs) are automatable with current technology, but adoption is gradual
- 2023-present -- Large language models (GPT-4, Claude) automate cognitive tasks: writing, coding, analysis, customer service. White-collar jobs newly at risk
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Slide 22
AI and the Future of Jobs
- Tasks, Not Jobs
- Autor (2015): technology automates tasks, not entire jobs. Most jobs are bundles of tasks, some automatable, some not. ATMs automated cash dispensing but bank teller employment rose as branches became cheaper to operate.
- Skill-Biased Technical Change
- Since the 1980s, technology has complemented high-skilled workers (raising their productivity and wages) while substituting for routine middle-skilled jobs. The result: job polarisation -- growth at the top and bottom, hollowing out of the middle.
- The AI Difference
- Previous automation affected routine, predictable tasks. AI (especially generative AI) affects cognitive, non-routine tasks: writing, analysis, programming, design. This potentially threatens precisely the knowledge workers who benefited from earlier automation.
- Historical Pattern
- Every major technology (steam, electricity, computers) initially destroyed jobs, then created more than it destroyed -- but with painful transition periods lasting decades. The question is whether AI follows this pattern or breaks it.
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Slide 23
The Gig Economy
- Digital platforms (Uber, DoorDash, Fiverr, Upwork) have created a new category of work that sits uneasily between employment and self-employment.
- ~16%Of US adults have earned from gig platforms (Pew, 2021)
- ~1-2%Of total employment from platform gig work
- 73MFreelancers in the US (includes all independent work)
- Worker classification: the central legal battle. Are Uber drivers employees (entitled to minimum wage, benefits, protections) or independent contractors (flexible but unprotected)?
- California AB5 (2019): reclassified many gig workers as employees. Prop 22 (2020): Uber/Lyft spent $200 million to carve out an exemption. Similar battles worldwide
- The flexibility paradox: workers value flexibility but it often comes with income volatility, no benefits, algorithmic management, and little bargaining power
- Global dimension: platforms connect workers in developing countries to clients in rich ones. Upwork and Fiverr have created global competition for freelance work
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Slide 24
The Remote Work Revolution
- COVID-19 forced the world's largest remote work experiment. The effects are lasting.
- The Numbers
- Pre-COVID: ~5% of US work days were remote. Peak COVID: ~60%. Post-COVID: ~28% (2024). Hybrid (2-3 days remote) is the dominant new model for knowledge workers.
- Productivity
- Bloom et al. (2023): hybrid work has ~neutral to slightly positive effects on productivity. Fully remote has more mixed results. Key finding: workers value remote work at ~8% of salary equivalent.
- Geographic Arbitrage
- Remote work enables workers in low-cost areas to earn high-cost-area wages. This has reshaped housing markets (Boise, Austin boom), but also led some firms to adjust pay based on location.
- Inequality
- Remote work is available primarily to college-educated, white-collar workers (~37% of US jobs). Service, manufacturing, and construction workers cannot work remotely -- deepening the divide between "laptop class" and everyone else.
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Slide 25
Active Labour Market Policies
- Governments use various tools to improve labour market outcomes beyond simple unemployment insurance.
- PolicyWhat It DoesEvidence
- Job training programsRetrain displaced workers for new occupationsMixed; short programs often ineffective. Longer, intensive programs (e.g., Year Up, Per Scholas) show positive returns
- Wage subsidiesGovernment pays part of wages to encourage hiringEffective short-term, especially for disadvantaged youth. Germany's Kurzarbeit (short-time work) preserved millions of jobs during COVID
- Public employment servicesJob matching, counselling, placementCost-effective. Digital platforms now complement public services
- Earned Income Tax Credit (EITC)Subsidises low-wage work through the tax systemStrong evidence of increasing employment and reducing poverty. The US EITC lifts ~6 million people above the poverty line annually
- Apprenticeship systemsCombines on-the-job training with classroom educationGermany's dual system: 50% of youth enter apprenticeships. Low youth unemployment (5.8% vs. 12% EU average)
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Slide 26
Universal Basic Income (UBI)
- As automation anxiety grows, UBI -- an unconditional cash payment to all citizens -- has moved from fringe idea to serious policy discussion.
- Arguments For
- Safety net for technological displacement
- Eliminates poverty traps and welfare bureaucracy
- Enables risk-taking (entrepreneurship, education, caregiving)
- Supported by both left (redistribution) and some right (Milton Friedman's negative income tax)
- Finland experiment (2017-2018): modest wellbeing improvements, no reduction in employment
- Arguments Against
- Enormous cost: a $12,000/year US UBI = $3.9 trillion (entire federal budget)
- May reduce work incentive (though most experiments find small effects)
- Universality means most money goes to people who don't need it
- Political economy: may undermine support for targeted programs
- Stockton, CA pilot (2019-2021): $500/month increased full-time employment from 28% to 40%
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Slide 27
Monopsony: The Employer Power Revolution
- A paradigm shift in labour economics: recognition that employers often have significant wage-setting power.
- Definition: monopsony is to labour markets what monopoly is to product markets -- a single buyer (or few buyers) of labour with power to set wages below competitive levels
- Alan Manning (Monopsony in Motion, 2003): even with many employers, search frictions, mobility costs, and differentiated jobs give firms monopsony-like power
- Evidence: Azar, Marinescu & Steinbaum (2022) found that US labour markets are highly concentrated -- the average market has an HHI suggesting moderate-to-high monopsony
- No-poach and non-compete agreements: ~18% of US workers are bound by non-competes, suppressing wage competition. FTC attempted to ban most non-competes in 2024
- Wage theft: estimated at $15-50 billion annually in the US -- exceeding all robberies, burglaries, and motor vehicle thefts combined
- Policy implication: if employers have monopsony power, minimum wages, unions, and antitrust enforcement in labour markets are all more justified than the competitive model suggests
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Slide 28
Behavioural Labour Economics
- Insights from psychology reshape our understanding of how workers and firms actually behave.
- Reference-Dependent Preferences
- Workers evaluate wages relative to reference points (past wages, peers' wages, expectations). Bewley (1999) found that firms resist nominal wage cuts because they devastate morale -- explaining "downward nominal wage rigidity."
- Fairness and Reciprocity
- Akerlof & Yellen (1990): workers reciprocate fair treatment with effort ("gift exchange"). Firms that pay above-market wages get above-market productivity. Explains why firms don't cut wages even in recessions.
- Present Bias
- Workers underinvest in training and retirement savings because they overvalue the present. Auto-enrollment in 401(k) plans increased participation from 49% to 86% (Madrian & Shea, 2001) -- a nudge that changes outcomes without mandates.
- Job Search
- Unemployed workers don't search as intensively or systematically as models predict. They rely on networks over job boards, experience psychological costs of rejection, and may accept the first adequate offer rather than the best.
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Slide 29
The Changing Social Contract
- The post-WWII employment relationship -- lifetime employment, employer-provided benefits, defined-benefit pensions -- has been dismantled over 40 years.
- Median job tenure in the US: 4.1 years (2022). Only 10% of workers stay 20+ years with one employer. Japan's "lifetime employment" system is eroding
- Retirement: shift from defined-benefit pensions (employer bears risk) to 401(k)/defined-contribution plans (worker bears risk). Only 15% of private-sector workers have a pension (vs. 38% in 1980)
- Healthcare: employer-provided health insurance ties workers to jobs ("job lock"). An estimated 1.5 million workers would change jobs if health insurance were portable (US)
- Non-standard work: temp agencies, contract workers, freelancers, and gig workers now represent ~10-15% of the workforce. They typically have lower pay, fewer benefits, and less job security
- The "fissured workplace": David Weil documents how firms outsource functions (janitorial, food service, security, IT) to subcontractors, evading labour law obligations
- "The modern corporation has become a nexus of contracts rather than a community of workers."
- -- David Weil, The Fissured Workplace (2014)
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Slide 30
The Future of Work: Key Trends
- AI Augmentation
- Most likely scenario: AI augments rather than replaces most workers -- but changes the task composition of jobs dramatically. The premium shifts to uniquely human skills: creativity, empathy, judgment, physical dexterity.
- Demographic Shift
- Ageing populations in rich countries (and increasingly China) create labour shortages. By 2050, there will be 1.6 billion people over 65. This shifts bargaining power toward workers -- but also strains pension systems.
- Green Transition
- The shift to clean energy will create millions of jobs (solar, wind, EVs, retrofitting) while destroying others (coal, oil). The ILO estimates a net gain of 18 million jobs by 2030 from the energy transition.
- Portable Benefits
- If employment relationships are fragmented, benefits must be attached to workers rather than jobs. Proposals for portable benefits accounts, universal healthcare, and lifelong learning accounts aim to adapt the safety net.
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Slide 31
Nobel Laureates in Labor Economics
- LaureateYearContribution
- Gary Becker1992Human capital theory; economics of discrimination
- James Heckman2000Selection bias correction; early childhood investment
- Dale Mortensen, Christopher Pissarides2010Search and matching theory of unemployment
- David Card2021Natural experiments in labour (minimum wage, immigration)
- Joshua Angrist, Guido Imbens2021Causal inference methods used throughout labour economics
- Claudia Goldin2023Women's labour force participation and the gender earnings gap
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Slide 32
Reading List
- Textbooks & Surveys
- George Borjas -- Labor Economics (8th ed., 2020): standard graduate textbook
- Richard Freeman & James Medoff -- What Do Unions Do? (1984): seminal analysis, still relevant
- Alan Manning -- Monopsony in Motion (2003): reshaped understanding of employer power
- Inequality & Policy
- Claudia Goldin -- Career and Family (2021): why gender equity stalled and how to fix it
- David Autor -- "Work of the Past, Work of the Future" (2019 AEA lecture): job polarisation
- David Weil -- The Fissured Workplace (2014): outsourcing and the erosion of employment standards
- Automation & Future
- Carl Frey -- The Technology Trap (2019): historical perspective on automation anxiety
- Daniel Susskind -- A World Without Work (2020): what happens if machines can do it all?
- Annie Lowrey -- Give People Money (2018): the case for universal basic income
- Globalisation & Immigration
- Branko Milanovic -- Global Inequality (2016): who wins and loses from globalisation
- David Card -- "Immigration and Inequality" (2009 AEA lecture): comprehensive evidence review
- Dani Rodrik -- Straight Talk on Trade (2017): globalisation's limits and possibilities
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