Shaping employment policies

Exploring not only the factors that influence total job creation but also the sectors that attract most jobs has obvious implications for policy-makers. The aim is to make policy recommendations based on a clearer understanding of how European labour markets function. Prof. Pissarides offers the example of Sweden which “creates twice as many jobs in social sectors like healthcare or childcare as Italy. This partly explains why Sweden has more overall employment than Italy, especially of women. Preliminary research tells us that a main factor behind this difference is Sweden’s social policy which heavily subsidises social care, whereas Italy’s subsidies are miniscule.”

The results of this research are still preliminary. Early observations have revealed that European-wide patterns disguise a lot of interesting differences between countries. Women are key to these differences. The UK and the Netherlands have labour market policies which privilege part-time jobs, whereas Scandinavia subsidises jobs in health, care and education: all traditionally female dominated areas. These findings could have implications for future female employment rates because they offer a policy model for how to encourage women into work.

This research builds on previous work on European employment trends. Despite existing efforts in this area, there has been little research into employment activity by sector: work which is vital if we are to better understand the effect of policy on employment patterns. We need to learn not only how many people work but also what kind of jobs they do.

Beyond university

Prof. Pissarides explains that this work is of great significance beyond academia because “it is about citizens’ jobs and their wages. Most citizens spend the majority of their time in their place of employment. Family welfare depends on the income generated in those jobs. Knowing how many and what kind of jobs a country can support is essential to understanding how we can improve ordinary citizens’ employment situations.”

Prof. Pissarides’s research into labour economics is driven by the desire to understand and explain problems. When he began, published work in this area said very little about how to model solutions to the problems being described: “We learned several different approaches, each with its own conclusions and policy recommendations, but we were never told which one was right and which wrong. I decided to start my research by ignoring all those, starting from a new beginning and then, when I had my tools, checking where the other approaches could be fitted.”

Prof. Pissarides describes himself as working “best in an office without music or other interruptions”: “Just an empty desk in front of me populated only by pen and paper or a laptop. The biggest threat to that ideal environment is the internet and the many things that it brings you: email and access to websites connected with work and some not so connected. Of course, I am not blind to the benefits of the internet: it is indispensable in my work. But frequently it takes more discipline than I can muster to use it efficiently before it takes over my whole being.”

The origin of ideas

Economics was not his first choice: “It was a coincidence. I never planned to do it as a young man. I much preferred sciences or architecture. But when my parents told me that I should become an accountant I reluctantly agreed on condition that I do it via an economics degree. When doing economics I discovered that it satisfied my curiosity for scientific discovery. After this I stuck with it.”

Prof. Pissarides traces the origins of his current research back to the moment when he wrote “two simple equations that could represent the famous Beveridge curve (the empirical relation between unemployment and vacancies).” “I could see them working exactly in the way empirical labour economists described it and as candidates to open up the whole area of research in the study of markets with frictions: markets that do not jump to full employment in the way described by mainstream theory.”

This was the beginning of a publication cited as the origins of the research which won Prof. Pissarides the Nobel Prize in 2010.* Despite its significance, he describes it as a “eureka moment but not of the kind that makes you run naked in the street. Just as well I guess, London is pretty cold, not to mention other potential hazards.”

Prof. Pissarides characterises the effect of the ERC grant as enabling you to “focus on one big issue and providing you with the support that you need to pursue it. Every single thing that they offer contributes to the research: from the administrative support, through the assistants and collaborators, to the time release that they negotiate with your institution. I am very fortunate to have it.”

* The Sveriges Riksbank Prize in Economic Sciences in Memory of Alfred Nobel - awarded jointly to Christopher Pissarides, Peter Diamond and Dale Mortensen.