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by Valentino Piana (2001)



1. Significance
2. Composition
3. Determinants
4. Impact on other variables
5. Long-term trends
6. Business cycle behaviour
7. Data
8. Formal models


People at work: persons involved in the production of goods and services. As production requires working time and human capital, firms and other organizations pay people, providing them with a key component of their income.

Particularly low national employment rates may signal a long-lasting depression and underdevelopment.

The kind of job of a person is one of the determinants of his belonging to social groups.


Employment can be expressed in number of people working or in total working hours. A mixed measure is the number of hours divided by standard working hours to give a full-time equivalence to jobs.

If considered in terms of the number of people, employment is purposefully divided along principal 8 axes:

1. economic activity, like agriculture, mining, manufacturing, services.
2. occupation, as with workers, clerks, managers, self-employed…;
3. institutional sector (public, private, cooperatives,...);
dimension of the employing organization (small, medium, large firms);
5. kind of legal contract, with its clauses regarding durability over time, method of remuneration, guarantees…;
6. level of wages and other remunerations;
7. age;
8. gender;
9. education and skill level and horizontal differentiation.

Along their professional life, people are hired, change job (internally or externally to their organization) and finish their career. In many countries, they thus become pensioners and receive pensions from Social Security or private funds. Accordingly, important events for employment dynamics are hiring, firing and retirement, which in turn means that labour market economic models should include routines for hiring, firing and retirement. Dysfunctional mechanisms may lead to long and uncertain transition from school to work and from one workplace to another, with long spells of unemployment.

It's also important to monitor whether groups of workers face unhealthy conditions, too long working hours, sexual harrassment, and other humiliating conditions. An assessment about Filipino domestic workers overseas is here.

Changes in the composition of employment can happen even if the total remains unchanged.


In a macroeconomic perspective, levels of employment depend on levels of economic activity (broadly measured by GDP) and on intensity of labour per unit of product (productivity).

An important role is played by institutional arrangements (as laws, contracts and collective negotiations) on how to react to slow-downs in GDP.

Employment in a certain activity may be ceiled up by the number of employable skilled people and by timing, contents, and effectiveness of vocational training. Job openings signal to external population that a jobplace is available, either because of a previous co-worker's fireing / retiring / moving along or away the career ladder or because of the addition of a new jobplace (for higher production or a new production).

General population dynamics is a very broad framework for employment and should not be used as a proxy for its dynamics, since demographic variables are extremely slow in changes, whereas employment reacts to economic climate.

The relationship with wages is twofold: higher wages may reduce the incentive for firms to employ but, conversely, high employment may give more power to employees in wage negotiations, thus increasing their remuneration.

Employment creation happens both in the private and the public sector, while policies and rules on the labour market and the general economy exert an impact on both. Politicians promising job creation may mean to foster public expenditure for goods and services produced in the private sector, thus increasing the number of jobs there.

Impact on other variables

High levels of employment rate and longer working hours mean, also at the same wages, a larger income for employee. Income distribution gets more equitable with a sharp reduction of poverty. On-the-job training raise skills.

Working conditions usually improve and people have confidence in maintaining their jobs and even getting better ones. This perspective is conducive to investment in human capital.

As we said, in this environment it is likely an increase of wages. Consumption of employee will be boasted but global consumption may follow a slower path if reduction in other income source takes place. Global consumption depends on consumption/saving attitude of different social groups and their income share.

Happiness at the individual level is linked to fair working conditions, in terms of stability, personal relationships with colleagues, suppliers and clients, as well as of the pay and the actual content of operations.

The willingness of voters to confirm the current government can be influenced by the labour market conditions. In particular, a rising unemployment can make the voters less likely to support it, with growing anger and anxiety. Jobless recovery makes the incumbent particularly vulnerable, because GDP rise would authorise to boast success, whereas people will be unwilling to recognize it because of the difficulties in finding jobs.

Long-term trends

Employment has always grown, but at a very different pace according to countries. Where its growth has been the highest, reduced productivity growth have usually kept GDP dynamics low (often from an already low level). Where its growth has been the lowest, productivity has usually (but not always) been high with a relatively good GDP performance (often from an already high level). In between these two extremes, employment growth has been matched with any other situation.

In many countries, employment has followed short-term GDP dynamics, especially in prolonged recessions when a fall in employment takes place, with more moderate growth than GDP along growth path in the long-term, because of increases in productivity.

In other countries, employment has been static at the same level for some decades, with GDP dynamics mirroring itself only on productivity.

It is expected that "green jobs" in environment-related clean sectors will play an important role in overcoming the present crisis linked to climate change and that innovative economic policies should maximise the co-benefit of employment and environment protection.

Business cycle behaviour

At the beginning of recession, overhead hours usually fall, reducing average received wages because overhead are typically much better paid than normal hours. Employment is static for a more or less long period after recession has begun, because of institutional arrangements (as contracts) and of the fact that firms forecast that the recession will be short: they are unwilling to dismiss people since they will soon need the same workers in the future, the more so as these employees have firm-specific and task-specific skills that would be necessary to build up if a completely new personnel would be hired.

As recession hits harder, perspectives gloom, and strategic decisions on restructuring take places: the number of firing rises dramatically. It first touch weak workers in the firm hierarchy, but then extend to mid-management.

It is often in this case that a fall in employee consumption is not counterbalanced by an increase of other groups' consumption, since also they are touched by recession. Through the Keynesian multiplier, recession worsen.

This overall bad condition is conducive to changes in government composition and its policies, possibly with the introduction of pro-growth packages of measures.

With recovery, firms exploit better their production capacity and personnel, thus GDP can growth without new employees and machines ("jobless recovery"). This is particularly true if recovery was achieved by a fall in wages, a rise in profits and a more un-equal income distribution, so that GDP growth is led by a small number of purchase of higher-quality goods purchased by the rich.

Employment starts growing during expansion, when the perspective of growth are consolidated, limits to overheads are reached, and firms urgently need new personnel, possibly in connection with new investments (both requiring new skills and widening the number of people with the same skills).

At peaks, in many activity branches, a shortage of personnel may be felt and employment increases less than it could otherwise. Fims become less selective in their hiring, which is particularly favourable for discriminated categories. Minorities, young, women and immigrants see their employment opportunities steeply rising.


Effective hours worked during a business cycle: 1998-2013

2004 employment levels and trends in all countries of the world
Industry-level US data
Data for all the variables in IS-LM model
EU data for all the variables in IS-LM model (Germany, France, Italy, Spain, UK, Switzerland and other 13 European countries)
Daily time spent on different activities by employment status, sex, and age
Women and the economy in India
Gender-specific labour statistics
An in-depth description of 1500 job profiles
Empirical survey on vacancies

More statistics about employment

Formal models

An interactive map of how the economy works according to a basic macroeconomic scheme: the IS-LM model

Labour market in Peru: the transition path from unemployment to employment and the reverse

The economics of ex ante coordination

Key concepts
  Industrial dynamics  
  Business cycles  
  Labour market