| Summary: | This paper presents descriptive evidence illustrating possible linkages between labor market outcomes and social cohesion. Uneven access to good jobs can undermine social stability in countries undergoing rapid social and economic transformations, and once a country passes the threshold from low to lower middle income, concerns about interactions between labor market outcomes and social inequalities become more salient. Latent social tensions related to access to jobs may be aggravated as economies grow and diversify, though cross-country comparisons point to a number of statistical regularities in the link between social cohesion and economic and institutional development that may also contain lessons for how these tensions can be mitigated. Increases in average incomes, up to a certain level, tend to raise levels of wellbeing for both the employed and the unemployed, which can lessen conflicts between winners and losers of economic transformation, but in spite of these optimistic conclusions the findings also have potentially more problematic implications for transition economies whose social and political institutions already fall under stress. The results raise questions about the future of collective decision making in societies that have high levels of social inequality and less inclusive institutions to start with, and make it difficult to predict when or why latent tensions in the labor market will erupt into actual conflict.
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