Labour Markets

Policy-makers while implementing a strategy for sustained inclusive economic growth and alleviation of poverty should pursue policies that not only promote growth, but also provide equal opportunities and skills to the poor to contribute to that growth. In relation to this, they must ensure a well-functioning labour market which allows everyone to participate in it fully including the poor, women and other marginalized groups. However, labor markets in developing countries, including Pakistan are rife with market failures such as information asymmetries, search and matching frictions between employers and employees, and inadequate creation of jobs which help individuals meet their full potential and prosper. Labour markets are also characterized by a large proportion of workers in subsistence agriculture, substantially low share of women’s participation relative to men’s, informality in the urban areas and poor  working conditions.

In this background, some of the work at CREB focuses on understanding the role social networks and search frictions such as information asymmetries, wage rigidity and large search costs for employees and employers play in the context of matching casual day labourers with employers in Pakistan. Other studies also try to quantify how the labor market values graduates’ postsecondary educational backgrounds which is useful in informing students regarding where to invest their resources in decisions regarding college enrollment in order to improve their employability in the future. Other work at the centre concentrates on ways to improve female’s labour force participation, in which case on the supply side, it aims to study the challenges firms’ face such as inaccurate beliefs regarding women’s productivity that hampers them from hiring women. On the demand side, using randomized control trials, studies try to test if a low-cost, motivational nudge in the form of stories of female role-models can encourage female graduates of public colleges from low-income households to seek jobs more actively. Therefore, it ascertains if a low-touch motivational nudge can be effective in improving labor force participation under difficult labor market conditions.