The Employment Intensity of Growth: Trends and Macroeconomic Determinants

Abstract

Employment-related economic indicators, particularly those that measure the ability of economies to generate sufficient employment opportunities for their populations, often provide valuable insights into economies’ overall macroeconomic performance. Among the most widely publicized indicators along these lines are unemployment rates, employment-to-population ratios, and labor force participation rates. Another labor market indicator that, perhaps owing to its somewhat less accessible title, receives less attention in the literature is the employment intensity of growth, or elasticity of employment with respect to output.¹ The most basic definition of this indicator is that it is a numerical measure of how employment varies with economic output—for instance, of how much employment growth is associated with 1 percentage point of economic growth. Though discussed less frequently than other key labor market indicators, employment elasticities can provide important information about labor markets. In their most basic use, they serve as a useful way to examine how growth in economic output and growth in employment evolve together over time. They can also provide insights into how employment generation varies for different population subsets in an economy, and assist in detecting and analyzing structural changes in employment over time.