Labor Market Indicators for lowmiddleincome countries Paul Cichello

1
Labor Market Indicatorsfor low/middle-income
countries Paul Cichello

• May 1, 2009
• The Employment Lab
• New Diagnostic Tools for Employment Focused
  Development

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Motivation

• Standard indicators inadequate in depicting labor
  market conditions in low/middle-income countries.
• LM characteristics in low-income settings
• low labor productivity, segmentation, subsistence
  or survival employment, low regulation, low
  unemployment, self-employment and household labor
  activities, multiple jobs.
• Need for indicators that describe the quality of
  employment.
• Primary focus labor earnings.

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Some standard indicators

• Fraction of working-age population actively
  engaged in the labor market
• Fraction of working-age population employed
• Share of the labor force which is unemployed
• All unemployed persons for an extended period (1
  year or longer)
• Fraction of employed population in waged and
  salaried job, etc.

• Labor force participation rate
• Employment-to-population ratio
• Unemployment rate
• Long-term unemployment
• Status in employment (waged and salaried,
  self-employed, unpaid family workers)

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Why arent they appropriate?

• In low-income countries, participation and
  unemployment are not an issue
• Think about family enterprises
• Unemployment rate is usually low
• Often high educated people from rich households,
  or
• ex-formal worker looking for a new job while
  getting unemployment subsidies
• Need to focus on employment, not just as an
  aggregate measure (ER, E-T-PR, UR, etc.), but on
  the distribution by status
• Waged and salaried workers
• Self-employed (without paid employees,
  own-account)
• Employers (Self-employed with paid employees)
• Unpaid family enterprise workers (contributing
  family worker).

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Cont.

• Most of working-age population is employed, but
  workers are often underemployed and working poor.
• How much are they earning?
• Median earnings, all workers, wage and salaried
  workers, self-employed, employers and household
  enterprise workers
• Low earnings rate, all workers, wage and salaried
  workers, self-employed, employers and household
  enterprise workers

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Earnings

• Earnings considered primary measure of job
  quality
• Issues in developing countries
• (1) Earnings data collected from wage and
  salaried workers only and
• (2) Significant share of unpaid workers

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Distribution of earnings

• Wage and salaried workers
• Self-reported earnings in reference period
• Household enterprise workers
• Total household enterprise earnings in reference
  period (sum of reported earnings of own-account
  workers) distributed to own-account and unpaid
  workers in proportion to hours worked.
  Alternatively, run a profit function, predict
  profits and individual contribution to total
  profits, then split profits according to
  individual contribution.

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Low Earnings Line

• Low earnings line 1 individual poverty line
• Why individual poverty line?
• To see if the worker earnings enough to
  individually escape poverty

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Low Earnings Line

• Low earnings line 2 individual poverty line x
  scaling factor for household dependency on
  individual earnings
• Why scale up?
• Earnings of worker also typically used to
  support other members of the household
• Proposed country-specific low earnings line
• national individual poverty line x the median
  ratio of household members to working-age
  employed household members