Combatting Unemployment IZA Prize in Labor Economics Series

Why is unemployment higher in some countries than others? Why does it fluctuate between decades? Why are some people at greater risk than others? Layard and Nickell have worked on these issues for thirty years. Their famous model, first published in 1986, is now used throughout the world. It asserts that unemployment must be high enough to reduce the real wages for which workers settle to the level justified by productivity. So what affects 'wage push'? The authors showed early on that the key factors affecting 'wage push' are how unemployed workers are treated and how wages are negotiated. If unemployed people get benefits without being required to accept jobs, vacancies go unfilled and mass unemployment results. The solution is welfare-to-work policies like those now introduced in most parts of the world. The authors have proposed these policies for the last twenty-five years in a series of key articles reproduced in this book. Their original analysis explains the subsequent movement of unemployment over the last two decades. They conclude the book with a new chapter on what should be done in the recession: no-one, they say, should be given unemployment benefit beyond a year, after which they should be offered work.

Until 2003 Richard Layard was the founder-director of the Centre for Economic Performance at the London School of Economics. He now heads the Centre's Programme on Well-Being. He has worked on unemployment, inflation, education, inequality, and post-Communist reform. He was an early advocate of the welfare-to-work approach to European unemployment, and with S. Nickell and R. Jackman authored Unemployment: Macroeconomic Performance and the Labour Market (OUP 1991, 2e 2005). Their ideas have been implemented in many countries including in Britain's New Deal, to which Layard was a consultant. His book Happiness - Lessons from a New Science (2005) appears in 20 languages. Richard Layard was also an active member of The Children's Society Inquiry into The Good Childhood and was co-author of its recent report: A Good Childhood (Penguin, 2009). Layard is a fellow of the British Academy and of the Econometric Society. Since 2000 he has been a member of the House of Lords. Stephen J. Nickell is Chairman of The Advisory Committee on Civil Costs (MOJ) and a Board Member of the UK Statistics Authority. Previously he has held Economics Professorships at both LSE and Oxford and was President of the Royal Economic Society from 2000 to 2003. He was a member of the Bank of England Monetary Policy Committee from 2000 to 2006. He is a Fellow of the Econometric Society and the British Academy, as well as a foreign honorary member of the American Economic Association and the American Academy of Arts and Sciences.