James Heintz, PERI, University of Massachusetts
Expert Consultation on Women’s Economic
Empowerment
SOAS, University of London, Jan. 26-27, 2012
Rethinking the Role of Labour Markets
 Broadening the conceptual framework: how is labour
exchanged?
 Demand-side constraints and informality
 The inherent imperfection of labour markets
 Macroeconomics, growth, and labour
Common Approaches
 Labour economics: often based on wage employment.
Focus: determinants of earnings. Mincer-type wage
equations. Gender frequently enters as a dummy variable.
 Enterprise-based approaches: focuses on self-employment.
Estimate production functions: labor, capital (human &
fixed) as productive factors. Abstracts from other
constraints, including gender-based constraints.
 Limited productive capital in many such enterprises
(working capital may be more important). Particularly true
for women's enterprises/activities.
 Individuals exchange labour through a variety of markets.
A range of institutions/constraints affect this exchange.
How is labour exchanged? Broadening
the concept of labour markets.
 Consider women’s self-employment. With few capital
inputs, women are effectively selling their labour, but
the exchange is frequently mediated by other markets
(suppliers, consumer markets).
 Better understood by including these markets and
related institution into a consideration of ‘labour
markets’.
 These details are lost in a narrow labour-based or
enterprise-based approach.
 Unpaid care work – also critical.
Demand-side of the ‘labour market’
 Labour demand constraints affect labour market outcomes:
informality, either overly short or overly long hours of
work, open unemployment, etc.
 But the standard downward sloping labour demand curve
is overly narrow (wage employment, labour cost focus)
 Examples of sources of demand constraints:
 Lack of access to markets (including domestic markets)
 Insufficient investment/capital accumulation in formal sector
 Macroeconomic environment
 Self-employment and the importance of derived demand
Gender and labour demand
 Due to segregation of activities, unequal demand for
women's market labour relative to men's labour (e.g.
women crowded into activities in which demand may
be 'saturated').
 Affects returns to women’s market (remunerative)
labour.
Inherent imperfections
 Getting labour markets to approximate a perfectly
competitive ideal is not as good of a strategy as getting
labour markets to work better.
 Many sources: information asymmetries, social norms,
barriers to perfect mobility, transactions costs, market
power, contested exchanges, and gender dynamics.
 Goal: labor market institutions which enhance
individual choices, provide adequate income/living
standards, address unequal market power (social
protections), and develop human resources.
 Gender perspective critical.
Allocation of labour as a macro issue
 Labour is a critical factor of production & the
functioning of labour markets matters for
macroeconomic outcomes (Solow, Akerlof, Yellen,
Keynes)
 The allocation of labor in the economy affects overall
performance. Concentration in high risk, lowproductivity activities harms aggregate outcomes &
development dynamics.
 Gender segmentation has been shown to be highly
costly, not only to women, but to the economy as a
whole.
Labour as a produced factor of
production
 Growth models/policies often do not pay adequate
attention to how labour is produced. Fertility, unpaid care
work, non-market aspects of human capital.
 Some exceptions (e.g. Becker and Barro, 1989). However,
non-market factors essential to make growth work.
Altruism in the B&B model. Others have stressed nonmarket processes, gender roles, bargaining, a role for the
state, etc.
 Need to consider a broader allocation of labour. Market
and non-market activities essential for growth.
 Rethinking labour markets involves a rethinking of the
allocation of ALL labor and how the development of
human resources is coordinated.