Coping with crises: Policies to protect employment and earnings (original) (raw)
The continuing failure of many countries to adequately mitigate the adverse labor market impacts of economic downturns is of concern, since labor market volatility can exacerbate poverty and stunt growth. This article aims to identify potentially effective policies responses to crises by navigating the potential tradeoffs between offsetting adverse shortterm impacts of economic downturns on the quantity and quality of jobs, and preserving incentives for economic recovery. The authors propose a taxonomy that categorizes interventions depending on whether they mitigate the negative short-term impact of crises or whether they stimulate recovery. The taxonomy helps policymakers to identify "winwin" policies that avoid potential tradeoffs between these objectives by simultaneously serving both. Common elements of effective interventions are feasibility, flexibility (for example the capacity for scaling up and down), and incentive compatibility-and there is no substitute for being prepared. Having sound safety nets in place before a crisis is superior to haphazardly implementing responses after a crisis hits. JEL codes: E24, I38, E61, D9, J02 Although economic crises are difficult to predict, their recurrence is a salient feature of emerging and developing economies. Nevertheless, many countries continue to lack an effective policy infrastructure that can mitigate the impacts of economic downturns on workers and their families while fostering recovery and long-run growth. This was painfully highlighted by the quest for quick responses to the global downturn of 2008-09 and by the ad hoc and reactive nature of many of the policies implemented. The weak ability of governments to systematically foresee, monitor, and contain the adverse labor market impacts of crises is of particular concern. The labor market is a prime channel through which shocks are transmitted to households, The World Bank Research Observer
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