Institute for Research on Labor and Employment

Data on 18 rich democracies 1968-87 show that job creation is mainly a product of demographic changes (age structure, net migration rates) and changes in social structure (the rate of family breakup as it relates to poverty and the history of female labor-force participation) -- clues to an increased supply of young and/or cheap labor. Job creation is unrelated to unemployment rates or other measures of economic performance and their causes; it comes at the cost of lower earnings growth and slower long-run productivity gains. If job creation is little affected by demand policies, the appropriate response is less boasting about employment gains and more attention to a strategy to reshape the supply and quality of labor -- e.g., active labor-market and education policies, a family policy, policies to reduce industrial conflict.