Labor on demand: How economic and trade policies affect the market

The concept of supply and demand applies to almost every aspect of economics, as well as everyday life for that matter. There are always two sides to every situation, and the labor market is no different; there is a supply of labor and there is a demand by employers. The first Labor and Human Development ERF annual conference session features two papers tackling the effect of macroeconomic and trade variables on the labor market (i.e. the demand side).

Dr. Ragui Assaad (ERF research fellow and professor at the Humphrey School of Public Affairs, University of Minnesota) argues that this is a very welcome focus because most of the work in the MENA region has been on the supply side; to help people determine whether they want to participate or not, what their qualifications for the labor market are, etc. On the other hand, there is much less research from the demand side looking at what firms do in the labor market and how economic and trade policies affect the market.

[youtube https://www.youtube.com/watch?v=vPoWy8spmnI]

Female employment..
Both papers, explains Dr. Assaad, look at important policy variables vs. desirable outcomes. One of the authors study the female share in employment in the manufacturing sector, and what sort of firms tend to hire women more than others. Assaad finds the paper quite insightful, as it addresses the ever desirable outcome of reducing the barriers to female participation in the labor market and understanding how to increase female employment, especially in the Middle East.

Trade reform..
The other paper looks at trade and exchange rate reform, primarily in manufacturing firms in Iran and on wages of workers in these firms. Dr. Assaad summarizes the findings saying:

“In trade, when an industry is less protected wages go down; because when the industry is protected they can afford to pay high wages, but when they have to compete in the world market they have to pay lower wages. On the contrary with tradeable industry, exchange rates devaluation would harm protected firms but benefit unprotected firms.”