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A GUIDE FOR ASSESSING LABOR MARKET CONDITIONS

IN DEVELOPING COUNTRIES June, 2007

HDNSP & PRMPR 1

ABSTRACT

This guide describes a set of labor market indicators that can be used to help assess current labor market conditions in low- and middle-income countries and how labor market conditions have evolved over time. Specific definitions have been refined based on the results of pilot studies conducted in eight countries: Bangladesh, Brazil, Egypt, Ghana, Jordan, Madagascar, Morocco, and Senegal. The indicators fall into two categories, Level-1 and Level-2 indicators, depending on the amount of analytical time available and the extent of access to policymakers. A five-part country report is suggested: introductory narrative, definitions and results for Level-1 indicators, definitions and results for Level-2 indicators, data limitations and key issues, and summary and conclusions.

TABLE OF CONTENTS Page I. Introduction to the Guide 1

A. Objectives and questions asked B. The need that the guide aims to fill C. Level-1 indicators D. Level-2 indicators E. Country reports

II. Structuring the Country Reports 7 III. In-Depth Discussion of the Level-1 Labor Market Indicators 14

A. List and description of the Level-1 indicators B. Level-1 indicators: Definitions of important concepts, procedures, and measures C. Level-1 indicators: Tables and discussion of results

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1 This guide was prepared by a team led by Gary Fields (Cornell University) and Dhushyanth Raju and including Jean Fares, Amy Luinstra, Pierella Paci, Stefano Scarpetta, and Pieter Serneels. We acknowledge the important contributions made by Ragui Assaad (Population Council for West Asia and North Africa, Egypt), Francis Teal (Oxford University) and Geeta Kingdon (Oxford University) as well as many valuable comments provided by colleagues in AFR, SAR, and MENA.

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IV. In-Depth Discussion of the Level-2 Labor Market Indicators 19 A. List and description of the Level-2 indicators B. Level-2 indicators: Definitions of important concepts, procedures, and measures C. Level-2 indicators: Tables and discussion of results

V. Summary 22

Appendix 1. A Sample Section for Level-1 Indicators: Definitions of Important 25 Concepts, Procedures and Measures Appendix 2. Sample Detailed Tables for Level-1 Indicators 32 Appendix 3. A Sample Section for Level 2 Indicators: Definitions of Important 43 Concepts, Procedures and Measures Appendix 4. Sample Detailed Tables for Level-2 Indicators 50 References 65

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I. Introduction to the Guide

A. Objectives and questions asked in the project

Labor markets are the places where labor services are bought and sold. Labor markets include both wage employment and self-employment. In the case of wage employment, the worker sells his or her labor services to an employer. In the case of self-employment, an individual’s labor services are sold to oneself. This guide has two major objectives in assisting analysts: The first is to provide reliable data on the current labor market conditions in the country under analysis. The second is to assess how these labor market conditions have changed over time. Through the construction and application of the labor market assessment guide, the project aims to answer the following key questions. The first three questions are static in nature while the last two are dynamic in nature.

1. What are the current overall conditions in the labor market with respect to employment and unemployment, earnings levels, and other key indicators?

2. Which groups among the relevant population are relatively disadvantaged as measured by

labor market status, earnings, and other job attributes?

3. What proportion of workers hold “bad” jobs as measured by their labor market earnings and other job attributes, and what share of workers who hold “bad jobs” reside in poor households?

4. How have conditions in the labor market changed over time, and which groups of

workers have experienced the greatest changes? 5. How have the incidence of “bad” jobs and the extent of the overlap of “bad jobs” with

poor households evolved over time?

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B. The need that the guide aims to fill Ample research has demonstrated a two-fold link between economic growth and poverty reduction in low- and middle-income countries. First, when economic growth has taken place, poverty has fallen in the great majority of instances. And second, when poverty has not fallen, it is usually because economic growth has not taken place. The project and the guide rely on a multi-sector labor market framework. Multi-sector labor market models start with the recognition that in a typical developing country, the labor market consists of quite distinct segments that are linked with one another. Accordingly, these models are sometimes called “segmented” or “dualistic” labor market models. In one segment, wages and employment may be determined by supply and demand; in another, by institutions such as minimum wages and trade unions. The segments may be fully integrated with one another, partially integrated, or largely separate. The important point is that not all jobs are equally good, and therefore the better types of work (including both wage employment and self-employment) must be distinguished from the poorer types. For further details, see Fields (2005). What is not known as fully as we would like, and what this project aims to elucidate, is how changing labor market conditions mediate the relationship between growth and poverty reduction. When things are getting better, is it because unemployment is falling or because the quality of employment is improving? Do improvements arise because of the increasing quality of employment within sectors, because of the movement of workers from poorer-quality sectors to better-quality ones, or because of both of these? Disaggregating by gender, region of residence, and other socio-demographic characteristics, which groups have experienced an improvement or deterioration in their labor market situation? The guide starts from the premise that standard indicators used to assess labor market conditions in client countries may not provide an adequate picture in low- and middle-income countries, where low labor productivity and subsistence employment prevail. In this context, standard labor market indicators do not fully depict what labor market conditions currently are, particularly for the most disadvantaged groups, and how these conditions evolve over time. The guide therefore provides a more comprehensive set of indicators and a methodology to review them that could provide a better labor market profiling tool to inform analysts and policy makers in low- and middle-income countries. The guide is based on pilots conducted in Bangladesh, Brazil, Egypt, Ghana, Jordan, Madagascar, Morocco, and Senegal. The pilots were based on an earlier version of this guide and were conducted in the period from November 2006 to the present. The pilots follow a common structure but also give different weights to different indicators depending on the socio-economic context of the different countries. They provided essential insights for revising and enriching the guide. The countries for the pilots were selected based on two criteria primarily:

1. the availability of nationally representative household survey data (including individual-level earnings data) from the same survey instrument for at least two points in time with the latest survey conducted within the last 3 years;

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2. countries where the World Bank is currently engaged, or expects to initiate, substantial labor market work in the near future.

Assessments of countries’ labor market conditions would ideally be based on a multi-topic survey instrument that has national coverage. This guide is designed to be used with a Living Standards Measurement Survey (LSMS) or a similar type of multi-topic household survey, particularly if there is a reasonably good labor market module. Such survey instruments are better than typical labor force surveys, which often have limited coverage (e.g., wage and salaried workers, urban workers, or formal sector workers) and do not have non-labor income and consumption expenditure data, which are important for establishing the poverty status of workers. The main reasons for using a labor force survey would be either 1) there is no nationally-representative multi-topic household survey with a labor market module in the country or 2) the multi-topic household survey is representative of the population as a whole but does not contain data on labor market earnings, while the labor force survey does. If both a multi-topic household survey and a labor force survey are available for a particular country, and both contain individual-level earnings data of comparable quality, the survey with the greatest worker coverage of earnings data should be used. In addition, when possible, it would also be desirable to draw on panel data sets (also called “longitudinal data”), which follow the same people over time. Panel data sets are still relatively rare in developing countries. But when they are available, panel data analysis can provide additional insights that would not have been available from analysis of comparable cross sections of data. The selection criterion for choosing labor market indicators is based on a normative judgment: if we see labor market indicator x increase or decrease over time, prima facie, could we say that labor market conditions have improved or deteriorated? In much the same way that a higher rate of economic growth is regarded as a good thing and an increase in poverty as a bad thing, changes in labor market conditions can be viewed analogously. As examples, an increase in median labor earnings would prima facie be viewed as an improvement in labor market conditions, while an increase in the unemployment rate would prima facie be viewed as a deterioration. The importance given to different labor market indicators will vary from one country to another depending on the labor market context (e.g., in some cases it may be difficult to provide a normative judgment about sectoral shifts in employment or in the types of jobs, though, in general, the shift of employment from agriculture to industry and services is viewed as consistent with standard model of economic development transition). The indicators are divided into two groups according to their importance. “Level-1 indicators,” are considered the key elements of a short briefing to analysts and policymakers and provide a summary of key features of the labor market and how these features have evolved over time. “Level-2 indicators” expand on the different concepts and further enrich the labor market picture. Different Level-1 and Level-2 indicators may have a different relevance in different countries. Thus, in the implementation of the guide, the researchers may decide to focus only on a subset of those that provide a comprehensive, yet parsimonious, picture of labor market conditions in their country. Level-1 and Level-2 indicators proposed here can also be shifted around if the analyst feels that, given the country context, certain Level-1 indicators should be downgraded while certain Level-2 indicators should be upgraded.

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C. Level-1 Indicators Level-1 indicators are those that merit the greatest attention from an analytical and a policy point-of-view. Except where specified, all indicators are constructed for the standard working-age population, namely individuals aged 15-64 years of age. Thirteen Level 1 indicators are recommended, grouped as follows: Whether people are working:

1. Standard unemployment rate 2. Employment-to-population ratio 3. Child labor or work rate (<15 years of age)

If they are working, how much they are earning:

4. Median real earnings, all workers with positive individual earnings data 5. Incidence of low earnings, all workers with positive individual earnings data 6. Share of employed who are (i) wage and salaried workers, (ii) household enterprise

workers, and (iii) employers 7. Median real earnings, wage and salaried workers 8. Incidence of wage and salaried workers with low earnings 9. Median real earnings, household enterprise workers 10. Incidence of household enterprise workers with low earnings 11. Share of low earners who have low earnings due to short work hours, wage and salaried

workers only 12. Share of low earners who are working long hours, wage and salaried workers only 13. Share of non-low earners who are do not have low earnings because they work long

hours, wage and salaried workers only Specific definitions, justifications, and format for tables are given in Section III.

D. Level-2 indicators In addition, twenty supplementary indicators are also proposed. These additional indicators, termed Level-2 indicators, are those that are meaningful from an analytical and a policy point-of- view but less so than the Level-1 indicators. The recommended Level-2 indicators are as follows: Unemployment:

14. Broad unemployment rate 15. Share of unemployed workers who have been jobless for 6 months or more 16. Poverty rate among unemployed workers

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Earnings:

For wage and salaried workers 17. Earnings inequality: Gini coefficient for earnings 18. Poverty rate among low earners

For household enterprise workers

19. Earnings inequality: Gini coefficient for earnings 20. Poverty rate among low earners

Indicators of quality of jobs:

21. Distribution of employed workers by sector in primary job (agriculture only, agriculture and non-agricultural employment, industry, and services).

22. Distribution of employed workers by skill groups based on primary occupation (white-collar, high-skill; white-collar low-skill; blue-collar, high-skill; blue-collar, low-skill).

23. Distribution of employed workers by formal schooling attainment. 24. Distribution of wage and salaried employees by type of employment in primary job

(public sector, formal private sector, and informal private sector). 25. Distribution of employed workers by type of employment contract in primary job (regular

workers with fixed-term contracts, regular workers with open-ended contracts, workers in short-term employment, casual workers, seasonal workers, etc.).

26. Share of workers holding two or more jobs 27. Share of workers affiliated to statutory social security 28. Share of workers registered with the regulatory authorities

Indicators of changes over time using panel data: 29. Proportion of earners whose earnings change was negative from base year to final year 30. For working-age individuals only, a 3x3 transition matrix for out-of-labor-

force/unemployed/employed in base year and final year 31. For working-age labor force participants only, a 3x3 transition matrix for formally

employed/informally employed/unemployed in base year and final year 32. For working-age employed workers only, a 3x3 transition matrix for non-low earners/low

earners/non-earners 33. For working-age employed workers only, a 4x4 transition matrix for employers/wage and

salaried employees/own-account workers/unpaid workers. Proposed definitions, justifications, and format for tables for the Level-2 indicators are given in Section IV. E. Country reports Based on these tables, narrative reports with supporting tables will be written for each country. It is recommended that the country narrative reports provide information on a set of common indicators. The weights and interpretation given to these indicators may, however, will vary depending on the socio-economic and labor market context of each country. Each country report will also provide recommendations for improving the labor market profile. Such

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recommendations may include those related to survey design (e.g., additional questions, refined question phrasing) or survey implementation (e.g., greater coverage). Two alternative structures are recommended for presenting this information in the country reports: Structure 1 – Reporting Level-1 and Level-2 Indicators Sequentially If this structure is followed, the country narrative would go as follows: Introductory Narrative.

The Current Economic Picture Major Changes in Recent Years Data Available for Assessing Labor Market Conditions

Definitions and Results for Level 1 Indicators

Enumeration of the Level 1 Indicators Description of the Level 1 Indicators Narrative on the Results of the Level-1 Indicators

Definitions and Results for Level 2 Indicators

Enumeration of the Level 2 Indicators Description of the Level 2 Indicators Narrative on the Results of the Level-2 Indicators

Data Limitations and Key Issues

Information Gaps in Currently Available Data Possible Changes in Available Statistical Instruments

Summary and Conclusions: Key Features of the Labor Market and Policy Challenges

Structure 2 – Reporting Level-1 and Level-2 Indicators Together If this structure is followed, the country narrative would go as follows: Introductory Narrative.

The Current Economic Picture Major Changes in Recent Years Data Available for Assessing Labor Market Conditions

Definitions and Results for Level-1 and Level-2 Indicators

Enumeration of the Level-1 and Level-2 Indicators Description of the Level-1 and Level-2 Indicators Narrative on the Results of the Level-1 and Level-2 Indicators

Unemployment Employment Earnings

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Other work and working characteristics Data Limitations and Key Issues

Information Gaps in Currently Available Data Possible Changes in Available Statistical Instruments

Summary and Conclusions: Key Features of the Labor Market and Policy Challenges

Section II of this guide discusses these country narratives in greater depth. II. Structuring the Country Reports As part of this project, a sample country report has been produced for Brazil (Fields and Raju, 2007). The Brazil report served as a model for the pilots in the seven other countries. As noted above, two alternative structures are recommended. In the first structure, the country reports would be organized into five major sections: introductory narrative, definitions and results for Level-1 indicators, definitions and results for Level-2 indicators, data limitations and key issues, and summary and conclusions. In the second structure, the discussions of the Level-1 and Level-2 indicators would be combined. Each section is described briefly here. Sections III and IV of this report then discuss the Level-1 and Level-2 indicators sections in detail.

A. Structuring reports with the Level-1 and Level-2 indicators reported sequentially

1. Introductory narrative The introductory narrative should present the current economic picture, major changes in recent years, and the data available for assessing labor market conditions. This section should contain, at minimum, data on recent economic growth and the change in poverty over time. One way of presenting this information is as follows:

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Overview of the economic growth performance of the country over the period of examination

Figure: GDP per capita (constant 2000 US$), 1990-2004

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2800

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1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004

Year

cons

tant

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S$

Figure: GDP growth rate, 1990-2004

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-6

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1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004

Year

Gro

wth

rate

(in

perc

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GDP per capita growth (annual %) GDP growth (annual %)

Overview of poverty reduction performance of the country over the period of examination

Figure: Poverty rate, 1996-2004

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5.5

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1996 1997 1998 1999 2001 2002 2003 2004

Year

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rty ra

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Table: Economic growth and poverty

Level, 2004

Absolute change, 1996-2004

Relative change, 1996-2004

Real GDP per capita (2000 I$) 3,563.5 +186.7 +5.5%

Headcount ratio (PL: US$1/day) 7.6 +0.7 +10.6%

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These data (for Brazil) show that over an eight year period (1996-2004), real GDP per capita grew by just 5.5 percent (cumulative, not annual) and the poverty headcount ratio increased over this period over time. These data enable the reader to contextualize the labor market statistics which follow – in this case, to expect that some labor market indicators will have improved while others will have declined. 2. Level-1 indicators Level-1 indicators are those that are most informative about labor market conditions and their change over time. Two tables on Level-1 indicators would be helpful as part of the text: Table 1: Level 1 labor market indicators

Labor market indicator Level, t2

Absolute change,

t2-t1

Relative change, (t2-t1)/t1

(in percent) Employment and unemployment Unemployment rate Employment-to-population ratio Child labor or work rate (<15 years of age) Wage and salaried workers Median earnings Low earnings rate Share of low earners who have low earnings due to short hours

Share of low earners who work long hours Share of non-low earners who escape low earnings due to long hours

Household enterprise workers Median earnings Low earnings rate

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Table 2: Hierarchical decomposition of the labor market

Tier Level,

t2 (in millions)

Change, t2-t1

(in millions)

Change, (t2-t1)/t1

(in percent) Child population (5-14 years of age) Child laborers or workers Elderly population (65+ years of age) Employed Working-age population (15-64 years of age) Inactive Discouraged Active Unemployed Employed Wage and salaried

With low earnings In household enterprises With low earnings

Additional results can then be obtained from disaggregated analysis; see Section III and Appendices 1 and 2 for further discussion. 3. Level-2 indicators Level-2 indicators are those that are also informative about labor market conditions and their change over time but of lower priority than the Level-1 indicators. Two tables on Level-2 indicators would be helpful as part of the text. The transition matrices should also be included in the text.

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Table 3: Level 2 labor market indicators

Indicator Level, t2

Absolute change, t2-t1

Relative change, (t2-t1)/t1

(in percent) Unemployment Broad unemployment rate Share of long-term unemployed Poverty rate among unemployed workers Earnings, wage and salaried workers Gini coefficient Poverty rate among low earners Earnings, household enterprise workers Gini coefficient Poverty rate among low earners Non-wage employment characteristics Share of workers holding 2 or more jobs Concurrently

Share of workers affiliated to social security Share of registered workers

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Table 4: Level-2 labor market indicators (cont.) Distribution of employed workers along selected characteristics

Level, t2

(in %)

Change, t2-t1

(in % points) Sector of activity Agriculture Industry Services Occupation-based skill class

White-collar, high-skill White-collar, low-skill Blue-collar, high-skill Blue-collar, low-skill Formal schooling attainment (in levels ) Level 1 … Level N Employment status 1 Wage and salaried worker Self-employed worker with employees Self-employed worker w/o employees Unpaid family worker Employment status 2 Wage and salaried worker Employer Household enterprise worker Employment contract Contract type 1 … Contract type N Panel data indicator Proportion of earners with negative earnings change Notes: Additional results can then be obtained from disaggregated analysis; see Section IV and Appendices 3 and 4.

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4. Data limitations and key issues This section should provide an in-depth review of the data issues encountered in the analysis of the previous sections. It should highlight the limits that were imposed upon the analysis due to lack of information on key concepts, lack of data comparability over time, or lack of information for key groups in the labor market. This section should also provide guidance on how existing statistical instruments could be improved to facilitate the labor market analysis along different dimensions:

• Adding questions to the existing questionnaire to provide additional data considered key for improving the labor market analysis.

• Revise existing questions in order to increase the reliability of responses and standardize concepts along the lines of internationally-agreed definitions.

• Improving comparability across time by standardizing questions and response categories.

5. Summary and conclusions This section should be written in two parts. The first will present the text of a ten-minute briefing that the analyst would present to a policymaker on the Level-1 indicators covering i) what the current conditions are and ii) how these conditions have evolved over time. The second will present the text of a second ten-minute briefing that the analyst would present to a policymaker on the Level-2 indicators covering i) what the current conditions are and ii) how these conditions have evolved over time. The section will also provide suggestions on policy issues that have emerged from the in-depth review of the labor market in the country under analysis and on how improvements in the statistical instruments could contribute to further refine the analysis and thus provide better insights for policy making.

B. Structuring reports with the Level-1 and Level-2 indicators reported together The narrative structure just proposed proceeds in a systematic fashion through each of the proposed Level-1 labor market indicators, discussing the level in the current year followed by changes over time, both for the entire relevant population and important cross-sections of it, and then to do the same for the proposed Level-2 labor market indicators. An alternative narrative structure, which could also be successful in producing a coherent story, would begin by setting the backdrop in terms of economic growth and poverty and then discussing current and changing labor market conditions by proceeding through the proposed labor market indicators grouped as follows: unemployment, employment, earnings, and other work and working characteristics. This narrative structure pulls together both Level-1 and Level-2 indicators and reorganizes them in a meaningful way from a labor market perspective. In this alternative narrative structure, the sections on introductory narrative, data limitations and key issues, and summary and conclusions would be identical to what was proposed for the first structure. However, the section on the Level-1 and Level-2 indicators would differ from the preceding. Now, the section would begin with the enumeration of the indicators used followed by a description of the indicators. The section would then proceed to a narrative which we

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propose be organized into four subsections: unemployment, employment, earnings, and other work and working characteristics. In each section, the author would discuss what the important cross-sectional patterns that emerge are and whether these patterns are similar or different across the indicators included in the section. The unemployment section would be comprised of a discussion of the unemployment rate, the broad unemployment rate, the share of long-term unemployed, and the poverty rate among unemployed workers. Similarly, the employment section would be comprised of a discussion of the employment-to-population ratio, the child labor (work) rate, and the distribution of employment by, among others, sector, occupation, formal schooling, and employment status. The earnings section would be comprised of a discussion of median earnings, earnings inequality, low earnings, the role of working hours in explaining low earnings, and the poverty rate among low earners. Finally, the work and working characteristics section would be comprised of a discussion of indicators such as the share of workers covered by social security, the share of registered workers, the share of workers with multiple jobs, etc.

* * * We turn now to a more detailed examination of the Level-1 and Level-2 indicators in turn. III. Level-1 Labor Market Indicators A. List and description of the Level-1 indicators Level-1 indicators are those that merit the greatest attention from an analytical and a policy point-of-view. The Level-1 indicators measure, first, whether people are working and, second, if they are working, how much they are earning in a standard period (week, month, or year, depending on the country). Unless explicitly stated, all indicators are constructed only for the working-age population. Thirteen Level-1 indicators are recommended, grouped as follows Whether people are working:

1. Standard unemployment rate 2. Employment-to-population ratio 3. Child labor rate (<15 years of age)

If they are working, how much they are earning:

4. Median earnings, all workers with earnings data 5. Overall incidence of low earnings, all workers with earnings data 6. Share of employed who are (i) wage and salaried workers, (ii) household enterprise

workers, and (iii) employers 7. Median earnings, wage and salaried workers 8. Incidence of wage and salaried workers with low earnings 9. Median earnings, household enterprise workers 10. Incidence of household enterprise workers with low earnings

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11. Share of low earners who have low earnings due to short work hours, wage and salaried workers

12. Share of low earners who are working long hours, wage and salaried workers 13. Share of non-low earners who do not have low earnings because they work long hours

An important element of the analysis proposed in the guide is to look at the different types of jobs to which workers have access. Most dedicated labor force and multi-topic household surveys gather information on the status of employment, typically classifying employed workers into (at least) three mutually-exclusive categories: (1) wage and salaried workers (also sometimes referred to as employees); (2) self-employed workers; and (3) unpaid family workers (also sometimes referred to as contributing family workers). Self-employed workers are in many cases broken into two categories: self-employed workers with employees (also referred to as employers) and self-employed workers without employees (also referred to as own-account workers). The guide proposes to look at three categories of workers: (1) wage and salaried (WS) workers; (2) household enterprise (HE) worker (comprised of own-account workers and unpaid family workers); and (3) employers. These three worker samples are defined as follows:

• Wage and salaried worker. An individual is a wage or salaried worker if s/he was employed by others.

• Household enterprise worker. An individual is a household enterprise worker if s/he was either own-account worker, or an unpaid family worker residing in the same household as an own-account worker.

• Employer. An individual is an employer if s/he employed at least one other person for pay.2

The project also seeks to examine the quality of such jobs, where job quality is gauged by emphasizing one measure above all others: labor market earnings. Employers are excluded from this analysis as they usually represent a very small fraction of total employment. For the other two groups of workers – wage and salaried workers and household enterprise workers – earnings are gauged using two measures: the median earnings for that group of workers and the rate of low earners among that group. Earnings data for wage and salaried workers are the worker’s individual reported earnings. For household enterprise workers, this may not necessarily be the case. For own-account workers that live in households without other own-account workers and/or unpaid workers, the earnings 2 In the Brazil case study, the household enterprise worker group is broken into two groups: (1) own-account workers who reside in households without other own-account workers and/or unpaid workers: (2) own-account workers or unpaid workers who reside with (other) own-account workers. The first group is labeled “individual own-account workers” and the second group is labeled “household enterprise workers.” This decomposition of the household enterprise worker group proposed here proves to be a useful distinction given systematic differences in the cross-sectional and inter-temporal patterns between the two.

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data are their individual reported earnings. For own-account workers living in households with other own-account workers and/or unpaid workers, the total earnings of all own-account workers living in a given household should be added up and distributed among all the own-account workers and unpaid workers in that household in proportion to hours worked in the reference week by the individual worker. For example, if there is one own-account worker living with an unpaid worker, and the own-account worker worked 40 hours in the reference week and the unpaid worker worked 20 hours, the earnings of the own-account worker are distributed among the two in the ratio of 2:1. By assuming that own-account workers and unpaid workers living in the same household belong to the same household enterprise, and by distributing the earnings of own-account workers in the manner described, one is able to incorporate unpaid workers into the analysis of earnings. This exercise is especially relevant for low-income countries where unpaid workers constitute a significant share of total employment. To help interpret the low earning rate for wage and salaried workers, information on work hours is combined with earnings status using three additional Level-1 indicators. The same cannot be done for household enterprise workers, as hours data are used to construct earnings for own-account workers and unpaid workers living together. The three indicators are (1) the share of low earners who have low earnings due to short work hours (i.e., less than full-time), (2) the share of low earners who work long hours (i.e., full-time or more), and (3) the share of non-low earners who do not have low earnings due to working long hours. In this project, in order, to establish the low earner status of the worker, we compare the labor market earnings of the worker to a “low earnings” line. Our method is different from what others have done before. The approaches taken in the existing literature more generally fail to directly take into account the labor market earnings of individual workers, and thus fail to give a sense of the size and distribution of “good” and “bad” jobs in an economy. The definition proposed in this project looks at the individual labor market outcomes in terms of job attributes and earnings from work. In particular, a worker’s labor market earnings relative to a “low earnings line” is defined for an individual and then adjusted for the labor market dependency ratio in the economy.3

3 In the literature, the “working poor” have been defined in different ways, but mainly from the perspective of the household and low consumption expenditure rather than the individual worker and low earnings. In the United States, the Bureau of Labor Statistics (BLS) defines the working poor as persons who have devoted at least half a year to labor market efforts, being either employed or actively searching for a job during that period, and who live in poor families (see Klein 1989). In France, a similar definition is applied by the National Statistical Institute (INSEE). A publication by the Sub-group of the EU Social Protection Committee defines the working poor as those working-age individuals who are either employed or unemployed in the conventional sense and reside in a poor household defined on the basis of (equivalized) per capita consumption expenditure or income (Atkinson et al 2002). Similarly, recognizing that nationally-representative household survey data might be unavailable for a number of countries, particularly for developing countries, the ILO proposes a more readily estimable measure of the working poor based on published statistics. This definition of the “working poor” essentially takes the population poverty rate determined by using the international poverty lines of $1/day or $2/day and then multiplies it by an estimate of the size of the labor force. Though definitely simple to apply, the ILO definition of the “working poor” makes strong assumptions of fixed proportions as one moves from the general population to the working population, and then from the working population to the labor force. In cases where micro data are available, the ILO proposes a definition of the “working poor” almost identical to the one proposed by the EU.

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We propose that one low earnings line always be used, perhaps supplemented by another. The one always to be used is what is labeled below an internationally-comparable low-earnings line. A second possible low earnings line is the official national poverty line for countries that have them. The internationally-comparable low-earnings line is based on the internationally-accepted poverty line of $2.16 per person per day in 1993 PPP dollars; adjusting for inflation, the corresponding figure in 2007 is $3.05. Then, recognizing that an earner typically supports more people than just himself/herself, this $3.05 figure needs to be scaled upward. The ILO (2007) reports that at the end of 2006, there were 2.9 billion people aged 15 and older who were at work. The U.S. Census Bureau (2007) estimates the world population at 6.5 billion. Dividing 6.5 billion by 2.9 billion gives an international scaling factor of 2.24. Putting the two figures together, if low earnings for an individual is $3.05 and a scaling factor of 2.24 is applied, the product, of the two is $6.84. This is the first internationally-comparable low-earnings line that is recommended for use. For low-income countries, the $6.84 figure may produce a very low-earnings rate. In such cases, the analyst may instead use a low-earnings line derived from the $1 a day poverty line rather than the $2 a day poverty line – that is, a poverty line of $3.42. The $6.84 and $3.42 lines are expressed in 2007 PPP dollars. For earlier years, these lines should be adjusted by the appropriate PPP factor in that year. Details of how to carry out this adjustment will be presented in a future edition of this guide. A country-specific low earnings line might be used instead in those cases where a country has a clearly-defined poverty line that is widely-used. In India, the official per capita consumption poverty line is state-specific; within each state, there are separate poverty lines for urban areas and rural areas. For example, in the state of Andhra Pradesh, the urban poverty line was roughly 543 rupees per month, while the rural poverty line was 293 rupees per month in 2004-05 rupees (Government of India Planning Commission, 2007). In Ghana, a single poverty line is used for the entire country. The lower or extreme poverty line, based on minimum nutritional requirements, is 700,000 cedis per month per adult equivalent. The upper poverty line which includes the minimum purchase of basic non-food items is 900,000 cedis (see GSS, 1999). Both poverty lines are set in 1997/98 cedis. These definitions of the “low earnings” line are clearly not without their shortcomings. For example, they intentionally abstract away individuals outside of the standard working age who might be engaged in the labor market. Furthermore, tying the “low earnings line” to the characteristics of the typical household disconnects the line from endogenous household labor supply responses to the earnings situation of the concerned worker.

* * *

For these Level-1 indicators, each country report should contain two major sections. The first is a definition for each indicator. The second is a set of tables presenting the empirical findings along

18

with a narrative highlighting the major results. The remainder of Section II details what should be done.

B. Level-1 indicators: Definitions of important concepts, procedures, and measures Each country study should include an explanation for each Level-1 indicator:

• How specifically the indicator is defined. • What specifically that indicator tells us about labor market conditions. • If alternative definitions exist for the same underlying concept, why a particular

definition was chosen for use in this country. An example of what such a section might look like appears in Appendix 1. C. Level-1 indicators: Tables and discussion of results The next step is to present tables containing the results for the Level-1 indicators as well as accompanying text. These tables should include both the current conditions and the change over time from an earlier year to a later year. Specifically, for each indicator, this section should present:

• Aggregated data o t2 statistic o Change over time in the indicator (t1 to t2), both in absolute terms (t2-t1) and in

relative terms (t2-t1)/t1)

• Disaggregated data on groups that are comparatively disadvantaged (e.g., women, youth, minorities, etc.)

o In terms of the incidence of labor market condition x in group y (t2 statistics) o Change in the incidence of labor market condition x in group y (t1 to t2)

• Disaggregated data on the composition of labor market advantage/disadvantage o In terms of incidence of group y in labor market condition x (t2 statistics) o Change in the incidence of group y in labor market condition x (t1 to t2)

The presentation of the results for the Level-1 indicators should be presented in two parts. First, the main highlights should be included in the text of the country study. See Tables 1 and 2 above for examples of these tables. Second, selected results from the disaggregated analysis should also be presented. These results should draw on Tables A1-A11 as shown in Appendix 2.

19

IV. Level-2 Labor Market Indicators A. List and description of Level-2 indicators The Level-2 indicators provide additional measures of unemployment, earnings, and quality of jobs. Again, unless explicitly specified, these indicators are constructed for individuals aged 15-64 years. Twenty Level-2 indicators are recommended, grouped as follows: Unemployment:

14. Broad unemployment rate 15. Share of unemployed who have been jobless for 6 months or more 16. Share of unemployed workers residing in poor households

Earnings:

For wage and salaried workers 17. Earnings inequality: Gini coefficient for earnings 18. Poverty rate among low earners

For household enterprise workers

19. Earnings inequality: Gini coefficient for earnings 20. Poverty rate among low earners

Indicators of quality of jobs:

21. Distribution of employed workers by sector in primary job (agriculture only, agricultural plus non-agricultural employment, industry, and service).

22. Distribution of employed workers by skill groups based on primary occupation (white-collar, high-skill; white-collar low-skill; blue-collar, high-skill; blue-collar, low-skill).

23. Distribution of employed workers by formal schooling attainment. 24. Distribution of wage and salaried employees by type of employment in primary job

(public sector, formal private sector, informal private sector). 25. Distribution of employed workers by type of employment contract in primary job (regular

workers with fixed-term contracts, regular workers with open-ended contracts, workers in short-term employment, casual workers, seasonal workers, etc.).

26. Share of workers holding two or more jobs 27. Share of workers affiliated to statutory social security 28. Share of workers registered with the regulatory authorities

Indicators of changes over time using panel data: 29. Proportion of earners whose earnings change was negative from base year to final year 30. For working-age individuals only, a 3x3 transition matrix for out-of-labor-

force/unemployed/employed in base year and final year 31. For working-age labor force participants only, a 3x3 transition matrix for formally

employed/informally employed/unemployed in base year and final year 32. For working-age employed workers only, a 3x3 transition matrix for non-low earners/low

earners/non-earners

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33. For working-age employed workers only, a 4x4 transition matrix for employers/wage and salaried employees/own-account workers/unpaid workers.

The additional unemployment measures provide an indication of the severity of unemployment. The broad unemployment rate counts as unemployed not only those individuals who are openly unemployed by standard ILO definitions but also those who are discouraged workers but willing to work if work is available. The share of long-term unemployed indicates whether the pool of unemployed consists of a relatively fixed group of people or whether it is a rapidly changing group. The share of unemployed workers residing in poor households is an indicator of the severity of unemployment as a social problem. The earnings data follow a similar logic. Taking wage and salaried workers and household enterprise workers in turn, two additional earnings measures are proposed. The Gini coefficient for earnings tells us how unequally that type of earnings is distributed. The share of low earners residing in poor households is another indicator of the severity of low earnings as a social problem. Other Level-2 indicators provide additional measures of the quality of jobs in which the employed are working. The sectoral distribution of employment indicates whether the employed are moving into higher-paying sectors. The occupational distribution of employment can be interpreted similarly. Other employment composition indicators will be taken as a sign of improved labor market conditions: higher schooling attainment, a reduction in the proportion of unpaid family workers, an increase in the proportion of regular workers with more permanent contracts, a reduction in the share of workers holding multiple jobs, an increase in the share of workers affiliated to statutory social security, and an increase in the share of workers registered with the regulatory authorities. Finally, five Level-2 indicators are based on panel data. These indicators answer the question, when the same people are followed over time, what happens to their earnings, employment status, and sector of employment?

* * *

For these Level-2 indicators, each country report should contain three major sections. The first is a definition for each indicator. The second is a set of tables presenting the empirical findings. The third is a narrative highlighting the major results. The remainder of Section III details what should be done on these three issues.

B. Level-2 indicators: Definitions of important concepts, procedures, and measures Each country study should include an explanation for each Level-2 indicator:

• How specifically the indicator is defined. • What specifically that indicator tells us about labor market conditions. • If alternative definitions exist for the same underlying concept, why a particular

definition was chosen for use in this country.

21

An example of what such a section might look like appears in Appendix 3. C. Level-2 indicators: Tables and discussion of results The next step is to present tables containing the results for the Level-2 indicators. These tables should include both the current conditions and the change over time from an earlier year to a later year. Specifically, for each indicator, this section should present:

• Aggregated data o t2 statistic o Change over time in the indicator (t1 to t2), both in absolute terms (t2-t1) and in

relative terms (t2-t1)/t1)

• Disaggregated data on groups that are comparatively disadvantaged (e.g., women, youth, minorities, etc.)

o In terms of the incidence of labor market condition x in group y (t2 statistics) o Change in the incidence of labor market condition x in group y (t1 to t2)

• Disaggregated data on the composition of labor market advantage/disadvantage o In terms of incidence of group y in labor market condition x (t2 statistics) o Change in the incidence of group y in labor market condition x (t1 to t2)

The presentation of the results for the Level-2 indicators should be in two parts. First, the main highlights should be included in the text of the country study; see Tables 3 and 4 above for examples. Second, selected results from the disaggregated analysis should also be presented. These results should draw on Tables A12-A19 as shown in Appendix 4. Finally, Tables A20-A26 in Appendix 4 provide additional information on low earnings and unpaid family work. The incidence of low earnings and the socio-demographic composition of low earners are presented separately for wage and salaried employees and individual self-employed workers using alternative low earnings lines, namely $2.13 per day (PPP 1993 $), with and without the representative household adjustment factor proposed in the guide. Without the adjustment factor, the application of the low earnings line answers a much more direct question: does the individual worker earn enough to support a minimum standard of living for him- or herself alone? The appendix also includes a detailed table on the incidence of unpaid family work and the socio-demographic composition of unpaid family workers. This table should be included in the country study if unpaid family work constitutes a non-trivial share of total employment. These tables are to be discussed in the text of the country study at the discretion of the researcher(s), depending on whether the statistics reported here provide additional insights which would be useful for the policymaker in understanding how the labor market has fared in general as well as for specific groups of workers.

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V. Summary This guide has described a set of labor market indicators that can be useful in developing a rich labor market profile that can serve an important base for further data analysis and/or policy discussion. This guide has two major objectives in assisting analysts. The first is to provide statistics on current labor market conditions in the country under analysis. The second is to assess how these labor market conditions have changed over time. Both the current and inter-temporal analysis are to be conducted for the population as a whole as well for important cross-sections of the population. The project aims to answer the following key questions. The first three questions are static in nature while the last two are dynamic in nature.

1. What are overall conditions in labor markets with respect to employment and unemployment, earnings levels, and other key indicators?

2. Which groups among the working aged population are relatively disadvantaged as

measured by labor market status, earnings, and other job attributes?

3. What proportion of workers hold “bad” jobs as measured by their labor market earnings and other job attributes, and what share of workers who hold “bad jobs” reside in poor households?

4. How have conditions in the labor market changed over time, and which groups of

workers have experienced the greatest changes? 5. How have the incidence of “bad” jobs and the extent of the overlap of “bad jobs” with

poor households evolved over time? The guide started from the premise that standard indicators used to assess labor market conditions may not provide an adequate picture in low- and middle-income countries, where low productivity and subsistence employment prevail. Accordingly, two sets of indicators have been developed. “Level-1 indicators” are considered the key ingredients of a short briefing and provide a summary of key features of the labor market and how these features have evolved over time. Level-1 indicators were detailed in Section III and the accompanying Appendices 1 and 2. “Level-2 indicators” expand on the different concepts and add dimensions to the labor market picture. Level-1 indicators were detailed in Section IV and the accompanying Appendices 3 and 4. Two structures for country reports have been suggested. The first structure reports on the Level 1 indicators first and the Level 2 indicators afterwards. The outline for country reports structured in this way is as follows.

23

Introductory Narrative

The Current Economic Picture Major Changes in Recent Years Data Available for Assessing Labor Market Conditions

Definitions and Results for Level-1 Indicators

Enumeration of the Level-1 Indicators Description of the Level-1 Indicators Narrative on the Results of the Level-1 Indicators

Definitions and Results for Level-2 Indicators

Enumeration of the Level-2 Indicators Description of the Level-2 Indicators Narrative on the Results of the Level-2 Indicators

Data Limitations and Key Issues

Information Gaps in Currently Available Data Possible Changes in Available Statistical Instruments

Summary and Conclusions: Key features of the labor market and the policy challenges A second structure is possible. At the discretion of the author, the discussions of the two levels of indicators may be combined. A report structured in this way would look like this:

Introductory Narrative

The Current Economic Picture Major Changes in Recent Years Data Available for Assessing Labor Market Conditions

Definitions and Results for Level-1 and Level-2 Indicators

Enumeration of the Level-1 and Level-2 Indicators Description of the Level-1 and Level-2 Indicators Narrative on the Results of the Level-1 and Level-2 Indicators

Unemployment Employment Earnings Other work and working characteristics Data Limitations and Key Issues

Information Gaps in Currently Available Data Possible Changes in Available Statistical Instruments

Summary and Conclusions: Key Features of the Labor Market and Policy Challenges An example of such a country report has been prepared for Brazil. See Fields and Raju (2007).

24

We would be very grateful to receive feedback on the usefulness of this guide in subsequent country studies.

`

25

Appendix 1 A Sample Section for Level-1 Indicators:

Definitions of Important Concepts, Procedures and Measures Appendix 1 provides definitions of the proposed Level 1 indicators and their underlying concepts. The standard labor market indicators included among the Level 1 indicators (e.g., the unemployment rate and the employment-to-population ratio) are defined according to international guidelines (see ILO, 2000). However, we recognize that these guidelines might not be appropriate in certain settings and encourage researchers to adapt these definitions to better suit local conditions and realities – for example, with respect to the definition of working-age, the reference period for establishing employment, unemployment and earnings, the number of hours that constitutes a standard workweek, etc. In cases where the definitions used deviate from international norms or the directions provided in the guide, a short justification should be included. Working-Age An individual is classified as working-age if the individual is between 15 and 64 years of age. The age bounds suggested follow standard practice. These bounds should however be adapted to suit the local labor market environment. In conducting an analysis of the various labor market indicators disaggregated by age, the following age groups (in years) are proposed: 15-24, 25-54 and 55-64. The age group 25-54 is of particular interest as this group is generally considered to be the prime-age worker group, the age group that individuals are usually expected to be economically active. Employment A working-age individual is classified as employed if 1) the individual worked or 2) had a job or enterprise but was temporarily absent from work during the reference period, typically, the last week. Employed individuals are defined as those that worked for wage or salary, for profit or family gain, either cash or in-kind, for at least one hour in the reference week. This hours floor applies to all categories of workers, including unpaid family workers. This definition follows ILO guidelines (see ILO, 2000, for more details). The employment-to-population ratio is defined as the proportion of working-age individuals classified as employed. It is typically used to provide information on the job creation capacity of the economy, with a high (increasing) employment-to-population ratio generally seen as a positive labor market outcome (development), though, clearly, the indicator does not provide any information about the nature or quality of employment. In addition, in countries where there is good reason to believe that women are largely involuntarily excluded from employment opportunities, an increase in the female employment-to-population ratio over time may be construed as a positive development in such contexts. In addition to estimating the overall employment-to-population ratio, the guide proposes that the employment-to-population ratio be estimated, where possible, by gender, age group (15-24, 25-54, 55-64), ethnicity/race (if considered relevant), urban/rural, region (if considered relevant), and formal schooling levels (consistent with the country’s educational system).

26

Unemployment A working-age individual is classified as unemployed if 1) the individual is without work in either paid employment or self-employment in the reference period (typically, the last week), 2) is available to work in the reference period, and 3) actively sought work in the reference period, where “active seeking” is defined in specific terms (for details, see ILO 2000). In some surveys, active seeking is left undefined and the question “availability for work?” is not asked. In such cases, at the very loosest, the worker should be without work and should have searched for work in the reference period for the worker to be classified as unemployed. The unemployment rate is defined as the proportion of the labor force classified as unemployed, where the labor force is comprised of unemployed and employed workers. The unemployment rate provides information on the extent of unutilized labor supply in an economy, and, as such, a high (increasing) rate is generally seen as an undesirable outcome (occurrence), though it may not necessarily be so – for example, in the case of frictional unemployment which facilitates more efficient worker-firm matches and when hitherto discouraged workers begin to actively search for work given increased labor demand such as during times of robust economic expansion. Notwithstanding, prima facie, an increase in the unemployment rate is to be construed as a negative labor market development. In addition to estimating the overall unemployment rate, the guide proposes that the unemployment rate be estimated, where possible, by gender, age group, ethnicity/race (if considered relevant), urban/rural, region (if considered relevant), and formal schooling levels (consistent with the country’s educational system). Child Labor Consistent with the definition used in the UNICEF Multiple Cluster Surveys (MICS), a child is to be classified as a child laborer if: (a). the child is 5-11 years of age and did at least one hour of work in an economic activity or at least 28 hours in domestic work in the reference week; or (b). the child is 12-14 years of age and did at least 14 hours of work in an economic activity or at least 28 hours of domestic work in the reference week.4 If information on domestic work is unavailable, the child labor status of the child should be based on the remaining applicable criteria, and the specific missing data should be noted. If data on both hours of work and domestic work are unavailable, the child can be classified as a child worker or an economically active child if the child engaged in an economic activity for at least one hour in the reference week. This last definition is the one that has been used most commonly in empirical research on child labor to date. For more information on defining child labor, including economic and non-economic activities, see, for example, Ritualo et al. (2003). The child labor rate is defined as the proportion of children of a given age group classified as child laborers. Alternatively, the child work rate is defined as the proportion of children of a given age group classified as child workers. Prima facie, an increase in the child labor (work) rate is to be construed as a negative labor market development.

4 More information on MICS and the definition of child labor can be found at www.childinfo.org.

27

In addition to estimating the overall child labor rate, the guide proposes that the child labor rate be estimated by gender, age group (5-11 and 12-14), ethnicity/race (if considered relevant), and urban/rural. Employment Category Most dedicated labor force and multi-topic household surveys gather information on the category of employment, typically classifying employed workers into (at least) one of three mutually-exclusive categories: (1) wage and salaried workers (also sometimes referred to as employees); (2) self-employed workers; and (3) unpaid family workers (also sometimes referred to as contributing family workers). Some surveys additionally separate self-employed workers into two categories: (1) self-employed workers with paid employees (employers) and (2) self-employed workers without paid employees (own-account workers). For information on the definitions of these employment statuses, see ILO (2000). We recommend an alternative three-way classification:

• Wage and salaried worker. An individual is a wage or salaried worker if s/he was employed by others.

• Household enterprise worker. An individual is a household enterprise worker if s/he was either an own-account worker, or an unpaid worker residing with at least one own-account worker.

• Employer. An individual is an employer if s/he employed at least one other person for pay.

The table below presents how the reclassification scheme affects workers in the case of Brazil. By design, wage and salaried workers as well as employers remain unaffected. All own-account workers are reclassified as household enterprise workers. Finally, in 2004, roughly 60 percent of unpaid workers resided with at least one own-account worker. These workers were reclassified as household enterprise workers. The remaining 40 percent did not live with own-account workers and consequently were categorized as unclassified. Note however that these unpaid workers may have resided with employers or wage and salaried workers.

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Table: Cross-tabulation of reported and constructed employment statuses Cell description: Level, 2004 (%) Change, 1996-2004 (% points)

Constructed employment status (primary job)

Reported employment status

(primary job)

Wage and salaried worker

Employer Household enterprise

worker Unclassified

Wage and salaried worker 100.0 0.0 -- -- --

Employer 100.0 0.0 -- --

Own-account worker -- -- 100.0 0.0 --

Unpaid family worker -- -- 59.2 0.8

40.9 -0.8

Notes: -- indicates that, by construction, the cell should not have any observations. Earnings Individual earnings Employers are omitted from the analysis of earnings as they usually represent a very small share of total employment. For example, in the case of Brazil in 2004, they constituted 5 percent of total employment (Fields and Raju, 2007). For wage and salaried workers and own-account workers, earnings are defined as total cash and monetized in-kind earnings in the reference period. Where possible, the reference period is considered to the month preceding the survey. Earnings should be measured as comprehensively as possible, including earnings in-kind and the monetized value of benefits when feasible. Earnings from all jobs worked in the reference period should be added together. Per-worker household enterprise earnings For own-account workers residing in households without any other own-account workers and/or unpaid workers, the earnings data are individual reported earnings. For own-account workers residing in households with other own-account workers and/or unpaid workers, a simple algorithm is used to distribute the earnings of own-account workers among themselves as well as to unpaid workers. This allows unpaid workers, specifically those unpaid workers residing with own-account workers, to be included in the earnings analysis. The algorithm is as follows: In households where an own-account worker resides with other own-account workers and/or unpaid workers, the total earnings of all own-account workers are added together. This represents total household enterprise earnings. Similarly, the total hours worked by all own-account workers and unpaid workers in the household are added together. This represents total household enterprise hours. Total household enterprise earnings are distributed to all own-account and unpaid workers in proportion to the share of total household enterprise workers worked. If data on hours worked are unavailable, total household enterprise earnings should be distributed evenly across the relevant workers.

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Nominal earnings in the reference period should be converted to real earnings using a consumer price index (CPI) that reflects differences in prices between urban and rural areas and between different regions in the country. If such as a CPI is unavailable, the national (aggregate) CPI is to be applied instead. Median real earnings are to be reported separately for WS and HE workers. Note for WS workers, earnings refer to individual labor earnings while for HE workers, depending on the employment status of the worker and the employment statuses of household members, earnings could be either reported or constructed. For both worker groups, an increase in median earnings is viewed as a positive labor market development. The guide proposes that median earnings be estimated for the country as a whole, as well as separately by gender, age group, ethnicity/race (if considered relevant), urban/rural, region (if considered relevant), formal schooling level, and sector of economic activity (agriculture, industry and services). Low earnings Apart from examining median earnings, earnings relative to a predefined low earnings line should also be examined. This low earnings line is to be identical for WS and HE workers. Given that the guide takes as its main target audience the country policymaker, the low earnings line should be set equal to the official poverty line used by the country. If the country has changed its official poverty line for reasons other than for adjusting for price changes, the most recent official poverty line is to be used. Note the poverty line should be an individual poverty line, not a household poverty line, and should be converted to real terms using the appropriate price index. Additionally, an official poverty line that is differentiated geographically (e.g., by region and urban/rural) is preferable to a single national official poverty line. However, in order to allow cross-country comparisons, it may also be important to examine low earnings in relation to an internationally-comparable low earnings line. For this purpose, the guide proposes to use the international poverty line of $2.13 per day (1993 PPP $) converted to real terms as an alternative low earnings line. This poverty line should also be used as the primary low earnings line if the country does not have an official poverty line. If the international poverty line is used as a low earnings line in addition to the official poverty line, statistics constructed using this low earnings line can be relegated to the appendix and do not need to be discussed in the body of the paper. Representative Household Adjustment to the Low-Earnings Line The team will also consider possible adjustments of the poverty line to reflect the common reality that the worker’s earnings are used to support him- or herself as well as other members of the worker’s household. The low earnings lines (the official poverty line and $2.13 per day) could be adjusted (scaled up) by the median ratio of household members to working-age employed household members in the economy. The median ratio is used instead of the worker’s own-household ratio in order to abstract away from the potential endogenous labor market responses of other household members to the earnings situation of the worker.

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Two low earnings rates are defined. The low earnings rate among wage and salaried workers is defined as the proportion of wage and salaried workers that are classified as low earners. The low earnings rate among household enterprise workers is defined analogously. An increase in any of the low earnings rates is viewed as a negative labor market development. The guide proposes that the low earnings rate for each worker sample be estimated for the country as a whole, as well as separately by gender, age group, ethnicity/race (if considered relevant), urban/rural, region (if considered relevant), formal schooling level, and sector of economic activity (agriculture, industry and services). Short and long hours among low earners Low earnings as defined above do not take into account hours worked. A given worker might have low earnings because he or she works a low number of hours (less than full-time) or if the worker has a low hourly wage rate. Of particular concern are workers who work full-time or more and have low earnings. The measures proposed here examine the role of hours worked in explaining the low earnings status of the worker. They should be constructed if data on hours worked are available. Standard hours adjusted-hours earnings is defined as monthly earnings multiplied by the ratio of full-time weekly hours to hours worked in the reference week. The implicit assumption here is that the reported hours worked in the reference week are representative of the hours worked in other weeks, in particular, the weeks which comprised the reference month for the earnings data. The share of low earners who have low earnings due to short hours worked (less than full-time work) is defined as the share of workers classified as low earners on the basis of reported monthly earnings who are classified as non-low earners if their hourly earnings multiplied by the standard monthly hours results in constructed monthly earnings above the low earnings line. A high (increasing) value of this statistic indicates that short hours more than low hourly wages is a (increasingly important) factor behind the incidence of low earnings in the economy. This measure however does not provide useful information on whether labor market conditions have improved or deteriorated over time. The share of low earners who work long hours (full-time or more) is defined as the share of workers with reported monthly earnings less than the low earnings line and who worked the standard number of hours or more in the reference week. If the share of low earners who work full-time or more is high (increases), this should be seen as a negative labor market outcome (development). The share of non-low earners who worked long hours (more than full-time) to escape low earnings. This is defined as the share workers classified as non-low earners on the basis of reported monthly earnings who would be reclassified as low earners if their hourly earnings are multiplied by the standard monthly hours. If this share is high (increasing over time), this should be seen as a negative labor market outcome (development).

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All three measures are to be calculated only for wage and salaried workers, as the earnings of household enterprise workers already incorporate hours worked in constructing earnings. There is no official ILO definition of full-time work largely because the definition of full-time work varies substantially across countries or is even left undefined in some. In countries that provide an hours threshold for full-time work, use this number for constructing the above measures. In countries that provide an hours range for full-time work, use the lower hours bound. For countries that do not define full-time work, apply local norms or use 40 hours per week. The guide proposes that both these measures be estimated for the country as a whole, as well as separately by gender, age group, ethnicity/race (if considered relevant), urban/rural, region (if considered relevant), formal schooling level, and sector of economic activity (agriculture, industry and services).

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Appendix 2 Sample Detailed Tables for Level-1 Indicators

Suggested table shells for the disaggregated examination of Level 1 indicators are provided below. These tables should be relegated to the appendix of the country study. Table A1: Unemployment

Unemployment rate by group

Group share among unemployed workers

Group Level, t2

(in %)

Change, t2-t1

(in % points)

Level, t2

(in %)

Change, t2-t1

(in % points) Total -- -- Gender Female Male Age group 15-24 25-54 55-64 Ethnicity/race (if relevant) Ethnic group 1 … Ethnic group N Urban/rural Urban Rural Region (if relevant) Region 1 … Region N Formal schooling (in levels based on the country’s educational system) Level 1 … Level N Notes: Provide information on the precise definition of unemployment used even if it is consistent with the definition suggested in the guide.

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Table A2: Employment

Employment-to-population ratio by group

Group share among employed workers

Group Level, t2

(in %)

Change, t2-t1

(in % points)

Level, t2

(in %)

Change, t2-t1

(in % points) Total -- -- Gender Male Female Age group 15-24 25-54 55-64 Ethnicity/race (if relevant) Ethnic group 1 … Ethnic group N Urban/rural Urban Rural Region (if relevant) Region 1 … Region N Formal schooling (in levels based on the country’s educational system) Schooling level 1 … Schooling level N Notes: Provide information on the precise definition of employment used even if it is consistent with the definition suggested in the guide.

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Table A3: Child labor

Child labor rate by group

Group share among child laborers

Group Level, t2

(in %)

Change, t2-t1

(in % points)

Level, t2

(in %)

Change, t2-t1

(in % points) Total -- -- Gender Male Female Age group 5-11 12-14 Ethnicity/race (if relevant) Ethnic group 1 … Ethnic group N Urban/rural Urban Rural Attending school Yes -- -- No -- -- Household poverty Poor -- Non-poor -- -- Type of work Economic work only -- -- Domestic work only -- -- Economic & domestic work -- -- Sector (if economically active) Agriculture -- -- Industry -- -- Services -- -- Employment status (if economically active) Wage and salaried worker -- -- Self-employed worker -- -- Unpaid family worker -- -- Notes: Provide information on the precise definition of child labor (work) used even if it is consistent with the definition suggested in the guide.

35

Table A4: Earnings, wage and salaried workers

Median monthly earnings by group

Gini coefficient for monthly earnings by group

Group Level, t2

(in 2005 US$)

Change, (t2-t1)/t1

(in percent)

Level, t2

(in units)

Change, (t2-t1)/t1

(in percent)

Total -- -- Gender Male Female Age group 15-24 25-54 55-64 Ethnicity/race (if relevant) Ethnic group 1 … Ethnic group N Urban/rural Urban Rural Region (if relevant) Region 1 … Region N Formal schooling (in levels based on the country’s educational system) Level 1 … Level N Sector of activity Agriculture Industry Services Notes:

36

Table A5: Low earnings rate, wage and salaried workers Low earnings line: Official individual poverty line × representative household scaling factor

Low earnings rate by group

Group share among earners with low earnings

Group Level, t2

(in %)

Change, t2-t1

(in % points)

Level, t2

(in %)

Change, t2-t1

(in % points) Total -- -- Gender Male Female Age group 15-24 25-54 55-64 Ethnicity/race (if relevant) Ethnic group 1 … Ethnic group N Urban/rural Urban Rural Region (if relevant) Region 1 … Region N Formal schooling (in levels based on the country’s educational system) Level 1 … Level N Sector of activity Agriculture Industry Services Notes: Provide information on what the value of the low earnings line is, including the values of the representative household scaling factor in years t1 and t2.

37

Table A6: Earnings, individual self-employed workers

Median monthly earnings by group

Gini coefficient for monthly earnings by group

Group Level, t2

(in 2005 US$)

Change, (t2-t1)/t1

(in percent)

Level, t2

(in units)

Change, (t2-t1)/t1

(in percent) Total -- -- Gender Male Female Age group 15-24 25-54 55-64 Ethnicity/race (if relevant) Ethnic group 1 … Ethnic group N Urban/rural Urban Rural Region (if relevant) Region 1 … Region N Formal schooling (in levels based on the country’s educational system) Level 1 … Level N Sector of activity Agriculture Industry Services Notes:

38

Table A7: Low earnings rate, individual self-employed workers Low earnings line: Official individual poverty line × representative household scaling factor

Low earnings rate by group

Group share among earners with low earnings

Group Level, t2

(in %)

Change, t2-t1

(in % points)

Level, t2

(in %)

Change, t2-t1

(in % points) Total -- -- Gender Male Female Age group 15-24 25-54 55-64 Ethnicity/race (if relevant) Ethnic group 1 … Ethnic group N Urban/rural Urban Rural Region (if relevant) Region 1 … Region N Formal schooling (in levels based on the country’s educational system) Level 1 … Level N Sector of activity Agriculture Industry Services Notes: Provide information on what the value of the low earnings line is, including the values of the representative household scaling factor in years t1 and t2.

39

Table A8: Per-worker earnings, workers in household enterprises

Median monthly per-worker household enterprise earnings by

group

Gini coefficient for monthly per-worker household enterprise earnings

by group Group Level, t2

(in 2005 US$)

Change, (t2-t1)/t1

(in percent)

Level, t2

(in units)

Change, (t2-t1)/t1

(in percent) Total -- -- Gender Male Female Age group 15-24 25-54 55-64 Ethnicity/race (if relevant) Ethnic group 1 … Ethnic group N Urban/rural Urban Rural Region (if relevant) Region 1 … Region N Formal schooling (in levels based on the country’s educational system) Level 1 … Level N Sector of activity Agriculture Industry Services Notes:

40

Table A9: Low earnings rate, workers in household enterprises Low earnings line: Official individual poverty line × representative household scaling factor

Low earnings rate by group

Group share among workers with low earnings

Group Level, t2

(in %)

Change, t2-t1

(in % points)

Level, t2

(in %)

Change, t2-t1

(in % points) Total -- -- Gender Male Female Age group 15-24 25-54 55-64 Ethnicity/race (if relevant) Ethnic group 1 … Ethnic group N Urban/rural Urban Rural Region (if relevant) Region 1 … Region N Formal schooling (in levels based on the country’s educational system) Level 1 … Level N Sector of activity (primary job) Agriculture Industry Services Notes: Provide information on what the value of the low earnings line is, including the values of the representative household scaling factor in years t1 and t2.

41

Table A10: Short and long hours among low earners, wage and salaried workers

Share of low earners who have low earnings due to short hours

(<x hours/week)

Share of low earners who work full-time+

(x+ hours/week) Group Level, t2

(in %)

Change, t2-t1

(in % points)

Level, t2

(in %)

Change, t2-t1

(in % points) Total Gender Male Female Age group 15-24 25-54 55-64 Ethnicity/race (if relevant) Ethnic group 1 … Ethnic group N Urban/rural Urban Rural Region (if relevant) Region 1 … Region N Formal schooling (in levels based on the country’s educational system) Level 1 … Level N Sector of activity Agriculture Industry Services Notes:

42

Table A11: Short and long hours among low earners, individual self-employed workers

Share of low earners who have low earnings due to short hours

(<x hours/week)

Share of low earners working long hours

(x+ hours/week) Group Level, t2

(in %)

Change, t2-t1

(in % points)

Level, t2

(in %)

Change, t2-t1

(in % points) Total Gender Male Female Age group 15-24 25-54 55-64 Ethnicity/race (if relevant) Ethnic group 1 … Ethnic group N Urban/rural Urban Rural Region (if relevant) Region 1 … Region N Formal schooling (in levels based on the country’s educational system) Level 1 … Level N Sector of activity Agriculture Industry Services Notes:

43

Appendix 3 A Sample Section for Level 2 Indicators:

Definitions of Important Concepts, Procedures and Measures Appendix 3 provides information on the definitions of the proposed Level 2 indicators and their underlying concepts. Discouragement A working-age person is considered to be discouraged if the person is without work in the reference period (e.g., in the reference week), is available to work, did not actively seek work in the reference period, but would accept work if offered. Alternatively, a working-age person is considered to be discouraged if the person is without work in the reference period, is available to work, but did not actively seek work in the reference period because the person viewed search as a futile endeavor. If the data for establishing discouragement as defined above are unavailable, at the very loosest, discouragement should be defined as without work and available to work in the reference period; these two criteria constitute the first two of the three criteria for determining the unemployment status of the worker (see Appendix 1 for the definition of unemployment). The broad unemployment rate is defined as the proportion of the labor force classified as unemployed or discouraged, where the labor force is now comprised of employed, unemployed and discouraged workers. A high (increasing) broad unemployment rate is viewed as a negative labor market outcome (development). In addition to estimating the broad unemployment rate for the country as a whole, the measure should be estimated, where possible, separately by gender, age group, ethnicity/race (if considered relevant), urban/rural, region (if considered relevant), and formal schooling levels. Long-Term Unemployment The preponderance of empirical evidence suggests that the duration of unemployment has more serious implications for the labor market and economic prospects of the worker than unemployment per se (see Machin and Manning 1999). While short-term unemployment may occur due to seasonal fluctuations in employment opportunities, school-to-labor market transitions, and the reallocation of workers among jobs, and, hence, may often have efficiency-enhancing effects, long-term unemployment may indicate structural problems (mismatches in the demand and supply of skills) and may have efficiency-reducing effects. From the perspective of the individual, long-term unemployment may also lead to a serious deterioration in the economic circumstances of the worker, as well as have long-term economic consequences by diminishing the employability and earnings capacity of the worker due to, for example, skill depreciation arising from non-usage. The standard international definition of long-term unemployment is that an unemployed worker has been continuously unemployed for at least 12 months, that is, the worker has been without work, has been available to work, and has actively looked for work through the entire period. There are two particular problems with this definition. First, establishing that the worker has continuously met the criteria for unemployment over an extended period of time would be

44

difficult with cross-sectional data. Consequently, what may be ultimately feasible would be to identify whether the unemployed worker was without a job for an extended period of time (what the ILO terms long-term joblessness). Second, the 12 months threshold for establishing long-term unemployment may be too high when applied to developing countries. The definition was conceived with developed countries in mind where (often generous) public income support for the unemployed, typically in the form of unemployment insurance or unemployment assistance benefits, are offered to workers. Given that most developing countries do not offer any public income support to unemployed workers, just as unemployment is often a luxury in these countries, long-term unemployment may be even more so. Consequently, the guide proposes to use 6 months as the threshold for establishing long-term unemployment. The choice of this threshold is largely arbitrary as we do not have any strong priors or empirical basis for choosing some other threshold. The share of unemployed who are long-term is defined as the share of unemployed workers who have not worked in the past 6 months or more. A high (increasing) share of long-term unemployed should be viewed as a negative labor market outcome (development). In addition to estimating the share of long-term unemployed for the country as a whole, the measure should be estimated, where possible, separately by gender, age group, ethnicity/race (if considered relevant), urban/rural, region (if considered relevant), and formal schooling levels. Unemployment and Poverty In order to investigate more directly the prevalence of economic hardship among unemployed workers, the guide proposes to examine the correspondence between the unemployment status (defined in Appendix 1) and the household poverty status of the worker. Specifically, the guide proposes to calculate the poverty rate among unemployed workers, i.e., the share of unemployed workers with per capita monthly household consumption expenditure (or income) below the official poverty line. Note if consumption expenditure data are unavailable, total household income data should be used instead. If the country does not have an official poverty line, the international poverty benchmark of $2.13 per day (1993 PPP $) should be used. A high (increasing) poverty rate among unemployed workers is viewed as a negative outcome. In addition to estimating the poverty rate among unemployed workers for the country as a whole, the measure should be estimated, where possible, separately by gender, age group, ethnicity/race (if considered relevant), urban/rural, region (if considered relevant), and formal schooling levels. Earnings Inequality Earnings inequality is to be measured using the commonly-used Gini coefficient. The Gini coefficient satisfies most of the properties generally considered desirable in an inequality measure, including anonymity, population independence, scale independence and the transfer principle (Fields 2001). The coefficient can be calculated in a number of ways. The easiest way to understand what the measure captures is to calculate it based on the Lorenz curve – the Gini coefficient equals the ratio of the area between the Lorenz curve of the actual distribution and the 45-degree-line (i.e., the perfect distribution line) to the area under the 45-degree-line. Given this, the coefficient takes a number between 0 and 1, with 0 signifying perfect equality (i.e., every worker in the sample has the same earnings level) and with 1 signifying perfect inequality (i.e.,

45

one worker in the sample has all the earnings while all other workers have zero earnings). The Gini index is the Gini coefficient expressed as percentage, and equals the Gini coefficient multiplied by 100. Prima facie, a high (increasing) Gini coefficient for earnings is viewed as a negative labor market outcome (development). In addition to estimating the Gini coefficient for the national sample, the guide proposes that the Gini coefficient be estimated, where possible, by gender, age group, ethnicity/race (if considered relevant), urban/rural, region (if considered relevant), formal schooling levels, and sector of economic activity. This is to be performed for each of the three worker samples, namely wage and salaried workers, individual self-employed workers and household enterprise workers. Low Earnings and Poverty Similar to the examination of the extent of correspondence between the unemployment status and household poverty status of the worker, in order to understand whether low earnings implies economic hardship, the guide proposes to examine the extent of correspondence between the low earnings status (defined in Appendix 1) and the household poverty status of the worker. Specifically, the guide proposes to calculate the poverty rate among low earners, i.e., the share of low earners with per capita household consumption expenditure (or income) below the official poverty line. Note the poverty line used to determine the household poverty status of the worker should be identical to the poverty line used as part of the low earnings line to determine the low earnings status of the worker. Again, if the country does not have an official poverty line, the international poverty line $2.13 per day (1993 PPP $) should be used. If household consumption expenditure data are unavailable, total household income should be used instead. A high (increasing) poverty rate among low earners is viewed as a negative outcome. In addition to estimating the poverty rate among low earners for the country as a whole, the measure should be estimated, where possible, by gender, age group, ethnicity/race (if considered relevant), urban/rural, region (if considered relevant), formal schooling levels, and sector of economic activity. This is to be performed for each of the three worker samples, namely wage and salaried workers, individual self-employed workers and household enterprise workers. Distribution of Employment by Sector The distribution of employment by sector – namely agriculture only, agriculture plus off-farm employment, industry, and services – provides information on the state of economic development; changes in the sectoral distribution of employment over time, particularly structural shifts in employment from agriculture to industry and (in turn) to services, is traditionally seen as the stages of (or route to) economic development (Rostow 1959 and Lewis 1954). If the sectoral classifications are not readily available in the data, they should be constructed using the more detailed industry classifications usually available instead. Typically, the industrial classifications follow the International Standard of Industrial Classification (ISIC) of all Economic Activities (Revisions 2 (1968), 3 (1990), 3.1 (2002) 4 (2006, approved)).5 These detailed industrial classifications can be easily condensed into the three sectors. As they have become available, many countries have shifted from an older ISIC system to a newer one, which might potentially affect comparisons over time. While these changes can have large

5 Information on ISIC can be found at http://unstats.un.org/unsd/class/default.htm.

46

effects at very detailed levels of industrial classification, they should have little or no impact on inter-temporal comparisons at the sectoral level. Distribution of Employment by Broad Skill Groups The distribution of employment by broad skill groups should be examined. These skill groups are based on the ILO’s International Standard Classification of Occupations (ISOC 1988), which were designed with the objective of providing an indication of the skill structure in the labor market (Elias and McKnight 2001).6 The major groups of ISOC-88 can be condensed into 4 skill groups as follows: (1). White-collar, high-skill (legislators, senior officials and managers, professionals, technicians and associate professionals); (2). White-collar, low-skill (clerks, service workers, and shop and sales workers); (3). Blue-collar, high-skill (skilled agricultural and fishery workers, and craft and related trade workers); and (4). Blue-collar, low-skill (plant and machine operators and assemblers and elementary occupations). If the country does not collect or organize occupation data (mostly) consistent with ISOC-88, an skill-based worker classification system that is appropriate for the country context should be developed. Alternatively, the distribution of employment by major occupation categories used by the country can be reported. A high (increasing) proportion of workers in high-skilled occupations is seen as a positive labor market outcome (development). Distribution of Employment by Schooling Levels The distribution of employment by formal schooling levels serves as a proxy indicator of the distribution of skill levels among workers, with schooling attainment shown conclusively to be important determinant of earnings level, earnings security, and other desirable non-pecuniary job attributes (see, for example, Psacharopoulos 1994 and Card 1999). The levels of formal schooling should follow the structure of the schooling system in the country. If the levels of formal schooling can be aligned with UNESCO’s International Standard Classification of Education (ISCED 1997) with minimal adjustments, this should be attempted as it would allow international comparisons.7 Alternatively, the ISCED 1997 classification scheme can be further condensed into the classification scheme used by the ILO for examining the educational attainment of workers. These categories are as follows: (1). less than primary (ISCED level 0); (2). primary (ISCED levels 1 and 2); (3). secondary (ISCED level 3 and 4); and (4). tertiary (ISCED levels 5 and 6). A high (increasing) proportion of workers with higher levels of formal schooling is seen as a positive outcome (development).

6 Information on ISCO-88 can be found at http://laborsta.ilo.org/applv8/data/isco88e.html. Last accessed: October 10, 2006. 7 Information on ISCED-97 can be found at http://www.unesco.org/education/information/nfsunesco/doc/isced_1997.htm. Last accessed: October 11, 2006.

47

Distribution of Employment by Type of Employment A four-way categorization of wage and salaried employees is suggested here: public sector employees (in some countries, it may be desirable to separate out those in government employment as opposed to state-owned enterprises), private sector employees, informal sector employees, and non-wage employees. Most labor force and multi-topic household surveys collect data on the employment status of workers. As mentioned before, typically, these surveys distinguish between three types of workers: (1). wage and salaried workers (employees); (2). self-employed workers; and (3). unpaid family workers (contributing family workers). Sometimes, self-employed workers are further separated into (1). self-employed workers with employees (employers) and (2). self-employed workers without employees (own-account workers) (see ILO 2000 for definitions). In many cases, this information is used as a crude proxy indicator of the degree of labor market informality and labor market development – a higher share of wage and salaried workers is often viewed positively, suggesting lower levels of labor market informality and higher levels of labor market development. Conversely, a higher share of unpaid family workers is viewed negatively, suggesting labor market underdevelopment and the rurality of employment. Here, prima facie, high (increasing) shares of wage and salaried workers and self-employed workers with employees are viewed as a positive labor market outcome (development). Distribution of Employment by Employment Contract In the absence of panel household data that allows one to examine the incidence and magnitude of employment and earnings insecurity among workers, as a second-best option, the guide proposes to use cross-sectional household survey data to examine the distribution of employment by type of employment contract. In so doing, we clearly recognize the shortcomings inherent using cross-sectional data for gauging the extent of the employment and earnings precariousness in the labor market. In many countries, this indicator cannot be constructed as information on the nature of the employment relationship beyond the employment status categories described earlier is not available. The classification scheme for contract type can be as simple as formal (written) vs. informal (unwritten) employment contracts, or permanent vs. non-permanent employment. The classification scheme can also be significantly richer. For example, the ILO (see ILO 2000) provides more detailed contract-related categories for workers such as owner-managers of household enterprises, regular employees with open-ended contracts, regular employees with fixed-term contracts, casual workers, seasonal workers, workers with short-term contracts, etc. The increased detail however comes at a potential cost – it increases the likelihood that the various categories might not be mutually-exclusive. As it stands, there is no international standard for the classification of workers according to contract type. Consequently, a classification scheme appropriate for the country’s labor market context would need to be devised. Multiple Jobs Holding two or more jobs concurrently is often seen in a positive light, a sign of diversifying the risk of employment and earnings loss. This is particularly so if occupational diversification is across industries or sectors, such as when rural workers undertake both farm and non-farm employment activities. On the flip side, holding multiple jobs often arises because earnings in a

48

single job are unsatisfactory, so the worker takes on a second (or a third) job to make ends meet. Given this perspective, holding multiple jobs can be judged as undesirable, and may indicate employment instability and earnings insecurity. The multiple jobs rate is defined as the share of working-age employed workers who held two or more jobs in the reference period (e.g., reference week). Prima facie, a high (increasing) multiple jobs rate is viewed as a negative labor market outcome (development). In addition to estimating the multiple jobs rate for the country as a whole, the measure should be estimated, where possible, separately by gender, age group, ethnicity/race (if considered relevant), urban/rural, region (if considered relevant), formal schooling levels, sector of activity, employment status in the primary job, and employment contract in primary job. Labor Registration Countries often require (certain categories of) employers to register workers with the local labor authorities. Registration obligates the employer to comply with all the legal labor provisions that apply to it. Registration also aids labor authorities in monitoring and enforcing compliance with all applicable labor laws. In cases where the employer fails to fully comply with these provisions, registered workers can seek assistance with grievance redressal. Given this, in the absence of household survey data on terms and conditions of employment, the registration status of the worker, if such information is available, could serve as a proxy indicator of employment quality. In addition, the registration status of the worker is sometimes used to distinguish between formal and informal sector workers (see, for example, Henley et al. 2006 for the case of Brazil). Whether worker registration should be interpreted in this way is left to the researcher to decide – the decision should be based on a careful understanding of the specifics of the country under examination and in view of the accepted (or commonly-used) definition of the informal sector in the country. The share of registered workers is defined as the proportion of eligible workers who are registered with the appropriate labor authorities in the reference period (e.g., last month or the last week). A note should be made of the relevant sample of workers that the country’s worker registration requirements apply to. In many countries, worker registration requirements only apply to wage and salaried workers. A high (increasing) share of registered workers is viewed as a positive labor market outcome (development). In addition to estimating the share of registered workers for the country as a whole, the measure should be estimated, where possible, separately by gender, age group, ethnicity/race (if considered relevant), urban/rural, region (if considered relevant), formal schooling levels, sector of activity, employment status in the primary job (if worker registration requirements apply to more than one employment status), and employment contact in primary job (if worker registration requirements apply to more than one employment contract type). Statutory Social Security Participation The social security participation rate is defined as the proportion of eligible workers who participated in employment-based statutory social security in the reference period (e.g., the last week or month). It is important to note which workers are eligible for social security

49

participation. In many developing countries, social security coverage is limited to wage and salaried workers in the public sector and in firms and farms of a certain minimum workforce size. A high (increasing) social security participation rate is viewed as a positive labor market outcome (development). In addition to estimating the social security participation rate for the country as a whole, the measure should be estimated, where possible, separately by gender, age group, ethnicity/race (if considered relevant), urban/rural, region (if considered relevant), formal schooling levels, sector of activity, employment status in the primary job (if social security participation is open to more than one employment status), and employment contact in primary job (again, if social security participation is open to more than one employment contract type). Panel Data Indicators When panel data are available, five panel data indicators are recommended. The proportion of earners whose earnings change was negative from base year to final year gives an indication of the extent to which economic growth was shared broadly among working people. The proportion of initially employed people who were unemployed in the final year is an indicator of employment instability. The last three indicators – involving respectively transitions between formal and informal employment, earnings levels, and employment category - give a sense of economic mobility or lack thereof.

50

Appendix 4 Sample Detailed Tables for Level-2 Indicators

Suggested table shells for the disaggregated examination of Level 2 indicators are provided below. These tables should be relegated to the appendix of the country study. Table A12: Broad unemployment

Broad unemployment rate by group

Group share among broad unemployed workers

Group Level, t2

(in %)

Change, t2-t1

(in % points)

Level, t2

(in %)

Change, t2-t1

(in % points) Total -- -- Gender Male Female Age group 15-24 25-54 55-64 Ethnicity/race (if relevant) Ethnic group 1 … Ethnic group N Urban/rural Urban Rural Region (if relevant) Region 1 … Region N Formal schooling (in levels based on the country’s educational system) Level 1 … Level N Notes: Provide information on the precise definition of broad unemployment used even if it is consistent with the definition suggested in the guide.

51

Table A13: Long-term unemployment

Share of long-term unemployed by group

Group share among long-term unemployed workers

Group Level, t2

(in %)

Change, t2-t1

(in % points)

Level, t2

(in %)

Change, t2-t1

(in % points) Total -- -- Gender Male Female Age group 15-24 25-54 55-64 Ethnicity/race (if relevant) Ethnic group 1 … Ethnic group N Urban/rural Urban Rural Region (if relevant) Region 1 … Region N Formal schooling (in levels based on the country’s educational system) Level 1 … Level N Notes: Provide information on the precise definition of long-term unemployment used even if it is consistent with the definition proposed in the guide.

52

Table A14: Poverty and unemployment

Poverty rate among unemployed workers by group

Group share among poor unemployed workers

Group Level, t2

(in %)

Change, t2-t1

(in % points)

Level, t2

(in %)

Change, t2-t1

(in % points) Total -- -- Gender Male Female Age group 15-24 25-54 55-64 Ethnicity/race (if relevant) Ethnic group 1 … Ethnic group N Urban/rural Urban Rural Region (if relevant) Region 1 … Region N Formal schooling (in levels based on the country’s educational system) Level 1 … Level N Notes: Provide information on the precise definition of household poverty used even if it is consistent with the directions (definition) provided in the guide.

53

Table A15: Poverty and low earnings, wage and salaried workers

Poverty rate among low earners by group

Group share among poor low earners

Group Level, t2

(in %)

Change, t2-t1

(in % points)

Level, t2

(in %)

Change, t2-t1

(in % points) Total -- -- Gender Male Female Age group 15-24 25-54 55-64 Ethnicity/race (if relevant) Ethnic group 1 … Ethnic group N Urban/rural Urban Rural Region (if relevant) Region 1 … Region N Formal schooling (in levels based on the country’s educational system) Level 1 … Level N Sector of activity Agriculture Industry Services Notes: Provide information on the precise definition of household poverty used even if it consistent with the directions (definition) provided in the guide.

54

Table A16: Poverty and low earnings, individual self-employed workers

Poverty rate among low earners by group

Group share among poor low earners

Group Level, t2

(in %)

Change, t2-t1

(in % points)

Level, t2

(in %)

Change, t2-t1

(in % points) Total -- -- Gender Male Female Age group 15-24 25-54 55-64 Ethnicity/race (if relevant) Ethnic group 1 … Ethnic group N Urban/rural Urban Rural Region (if relevant) Region 1 … Region N Formal schooling (in levels based on the country’s educational system) Level 1 … Level N Sector of activity Agriculture Industry Services Notes: Provide information on the precise definition of household poverty used even if it is consistent with the directions (definition) provided in the guide.

55

Table A17: Multiple jobs

Multiple jobs rate by group

Group share among multiple job holders

Group Level, t2

(in %)

Change, t2-t1

(in % points)

Level, t2

(in %)

Change, t2-t1

(in % points) Total -- -- Gender Male Female Age group 15-24 25-54 55-64 Ethnicity/race (if relevant) Ethnic group 1 … Ethnic group N Urban/rural Urban Rural Region (if relevant) Region 1 … Region N Formal schooling (in levels based on the country’s educational system) Level 1 … Level N Sector of activity (primary job) Agriculture Industry Services Employment status (primary job) Wage and salaried worker Self-employed worker Unpaid family worker Employment contract (primary job) Contract type 1 … Contract type N Notes:

56

Table A18: Worker registration

Share of registered workers by group

Group share among registered workers

Group Level, t2

(in %)

Change, t2-t1

(in % points)

Level, t2

(in %)

Change, t2-t1

(in % points) Total -- -- Gender Male Female Age group 15-24 25-54 55-64 Ethnicity/race (if relevant) Ethnic group 1 … Ethnic group N Urban/rural Urban Rural Region (if relevant) Region 1 … Region N Formal schooling (in levels based on the country’s educational system) Level 1 … Level N Sector of activity (primary job) Agriculture Industry Services Employment status (primary job) (if eligibility applies to multiple employment statuses) Wage and salaried worker Self-employed worker Unpaid family worker Employment contract (primary job) (if eligibility applies to multiple contract types) Contract type 1 … Contract type N Notes: Provide information on the precise definition of worker registration even if it is consistent with the definition suggested in the guide.

57

Table A19: Social security participation among workers

Social security participation rate by group

Group share among social security participants

Group Level, t2

(in %)

Change, t2-t1

(in % points)

Level, t2

(in %)

Change, t2-t1

(in % points) Total -- -- Gender Male Female Age group 15-24 25-54 55-64 Ethnicity/race (if relevant) Ethnic group 1 … Ethnic group N Urban/rural Urban Rural Region (if relevant) Region 1 … Region N Formal schooling (in levels based on the country’s educational system) Level 1 … Level N Sector of activity (primary job) Agriculture Industry Services Employment status (primary job) (if eligibility applies to multiple employment statuses) Wage and salaried worker Self-employed worker Unpaid family worker Employment contract (primary job) (if eligibility applies to multiple contract types) Contract type 1 … Contract type N Notes: Provide information on the precise definition on social security participation even if it is consistent with the definition proposed in the guide.

58

Table A20: Low earnings rate, wage and salaried workers Low earnings line: $2.13 per day (1993 PPP $) × representative household scaling factor

Low earnings rate by group

Group share among earners with low earnings

Group Level, t2

(in %)

Change, t2-t1

(in % points)

Level, t2

(in %)

Change, t2-t1

(in % points) Total -- -- Gender Male Female Age group 15-24 25-54 55-64 Ethnicity/race (if relevant) Ethnic group 1 … Ethnic group N Urban/rural Urban Rural Region (if relevant) Region 1 … Region N Formal schooling (in levels based on the country’s educational system) Level 1 … Level N Sector of activity Agriculture Industry Services Notes: Provide information on what the representative household scaling factor is in years t1 and t2.

59

Table A21: Low earnings rate, wage and salaried workers Low earnings line: $2.13 per day (1993 PPP $)

Low earnings rate by group

Group share among earners with low earnings

Group Level, t2

(in %)

Change, t2-t1

(in % points)

Level, t2

(in %)

Change, t2-t1

(in % points) Total -- -- Gender Male Female Age group 15-24 25-54 55-64 Ethnicity/race (if relevant) Ethnic group 1 … Ethnic group N Urban/rural Urban Rural Region (if relevant) Region 1 … Region N Formal schooling (in levels based on the country’s educational system) Schooling level 1 … Schooling level N Sector of activity Agriculture Industry Services Notes:

60

Table A22: Low earnings rate, individual self-employed workers Low earnings line: $2.13 per day (1993 PPP $) × representative household scaling factor

Low earnings rate by group

Group share among earners with low earnings

Group Level, t2

(in %)

Change, t2-t1

(in % points)

Level, t2

(in %)

Change, t2-t1

(in % points) Total -- -- Gender Male Female Age group 15-24 25-54 55-64 Ethnicity/race (if relevant) Ethnic group 1 … Ethnic group N Urban/rural Urban Rural Region (if relevant) Region 1 … Region N Formal schooling (in levels based on the country’s educational system) Schooling level 1 … Schooling level N Sector of activity Agriculture Industry Services Notes: Provide information on the representative household scaling factors in years t1 and t2.

61

Table A23: Low earnings rate, individual self-employed workers Low earnings line: $2.13 per day (1993 PPP $)

Low earnings rate by group

Group share among earners with low earnings

Group Level, t2

(in %)

Change, t2-t1

(in % points)

Level, t2

(in %)

Change, t2-t1

(in % points) Total -- -- Gender Male Female Age group 15-24 25-54 55-64 Ethnicity/race (if relevant) Ethnic group 1 … Ethnic group N Urban/rural Urban Rural Region (if relevant) Region 1 … Region N Formal schooling (in levels based on the country’s educational system) Schooling level 1 … Schooling level N Sector of activity Agriculture Industry Services Notes:

62

Table A24: Low earnings rate, household enterprise workers Low earnings line: $2.13 per day (1993 PPP $) × representative household scaling factor

Low earnings rate by group

Group share among earners with low earnings

Group Level, t2

(in %)

Change, t2-t1

(in % points)

Level, t2

(in %)

Change, t2-t1

(in % points) Total -- -- Gender Male Female Age group 15-24 25-54 55-64 Ethnicity/race (if relevant) Ethnic group 1 … Ethnic group N Urban/rural Urban Rural Region (if relevant) Region 1 … Region N Formal schooling (in levels based on the country’s educational system) Schooling level 1 … Schooling level N Sector of activity (primary job) Agriculture Industry Services Notes: Provide information on the representative household scaling factors in years t1 and t2.

63

Table A25: Low earnings rate, household enterprise workers Low earnings line: $2.13 per day (1993 PPP $)

Low earnings rate by group

Group share among earners with low earnings

Group Level, t2

(in %)

Change, t2-t1

(in % points)

Level, t2

(in %)

Change, t2-t1

(in % points) Total -- -- Gender Male Female Age group 15-24 25-54 55-64 Ethnicity/race (if relevant) Ethnic group 1 … Ethnic group N Urban/rural Urban Rural Region (if relevant) Region 1 … Region N Formal schooling (in levels based on the country’s educational system) Schooling level 1 … Schooling level N Sector of activity (primary job) Agriculture Industry Services Notes:

64

Table A26: Unpaid family workers

Incidence of unpaid family work Group share among unpaid family workers

Group Level, t2

(in %)

Change, t2-t1

(in % points)

Level, t2

(in %)

Change, t2-t1

(in % points) Total -- -- Gender Male Female Age group 15-24 25-54 55-64 Ethnicity/race (if relevant) Ethnic group 1 … Ethnic group N Urban/rural Urban Rural Region (if relevant) Region 1 … Region N Formal schooling (in levels based on the country’s educational system) Schooling level 1 … Schooling level N Sector of activity (primary job) Agriculture Industry Services Notes:

65

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