Social indicators for Social indicators for policy-makingpolicy-makingDaniel KostzerDaniel KostzerUMKC, April 2006UMKC, April 2006

IntroductionIntroduction The usefulness of social indicators The usefulness of social indicators

for the design and definition of for the design and definition of social policiessocial policies– Define the problems to addressDefine the problems to address– Define targeted populationsDefine targeted populations– Definition of plans, programs and Definition of plans, programs and

toolstools

Methods to meassure Methods to meassure povertypoverty Indirect methodIndirect method

– Household IncomeHousehold Income– Household ExpendituresHousehold Expenditures

Direct methodDirect method– Unsatisfied basic needs indicatorsUnsatisfied basic needs indicators

Merging of methodsMerging of methods– Katzman matrixKatzman matrix

Indirect methodIndirect method Definition of the poverty lineDefinition of the poverty line Definition of indigence lineDefinition of indigence line The problem of circularity in the definition of The problem of circularity in the definition of

the poverty linethe poverty line Using consumptionUsing consumption

– Stable, but does not takes into account savings Stable, but does not takes into account savings (future or past consumption)(future or past consumption)

– Food expenditureFood expenditure Using incomesUsing incomes

– Volatile, defines entitlement, or potential well beingVolatile, defines entitlement, or potential well being

Incomes and expenditure Incomes and expenditure according deciles of income according deciles of income distributiondistribution

0%10%20%30%40%50%60%70%80%90%

100%

1 2 3 4 5 6 7 8 9 10

Income

IngresoExpenditure

Food expenditure by deciles Food expenditure by deciles of income distributionof income distribution

0

10

20

30

40

50

60

1 2 3 4 5 6 7 8 9 10

Sen’s axioms on Sen’s axioms on poverty indicatorspoverty indicators TargetingTargeting

MonotonicityMonotonicity

TransferenceTransference

The index should The index should point out who are the point out who are the poorpoor

When a poor person When a poor person looses its income the looses its income the index should reflect index should reflect thatthat

When a poor person When a poor person transfers his income transfers his income to other less poor but to other less poor but that remains poorthat remains poor

Emerging indicators Emerging indicators with the indirect with the indirect methodmethod

Incidence of Incidence of povertypoverty

Intensity of Intensity of povertypoverty

100.

.populationtotalpoppoorH

1001

PLYPLI N

Combined indirect Combined indirect indicators: Sen’s indexindicators: Sen’s index

HSGini

IHSGini

GiniIIHS

1.0

).1(.

Lorenz curve for Lorenz curve for Argentina 1992-2000Argentina 1992-2000

0

10

20

30

40

50

60

70

80

90

100

0 10 20 30 40 50 60 70 80 90 100

Cumulative percentage of population

Cum

ulat

ive

Perc

enta

ge o

f Inc

ome

1992

2000

Gini coefficient Gini coefficient The formulaThe formula Calculate the area Calculate the area

below the Lorenz below the Lorenz curve Lcurve L

Simpson Simpson integrationintegration

If Gini=0 perfect If Gini=0 perfect equalityequality

If Gini=1 absolute If Gini=1 absolute inequalityinequality

Jjj rSSL

LGini

)(21

50005000

1

Direct indicators (UBN)Direct indicators (UBN) The UBN indicators are direct The UBN indicators are direct

since they emerge after direct since they emerge after direct observation of households and observation of households and individualsindividuals

They do not reflect (necessary) They do not reflect (necessary) monetary incomes of the monetary incomes of the households, but the level of households, but the level of satisfaction of certain needs.satisfaction of certain needs.

Types of direct Types of direct indicatorsindicators Result indicatorsResult indicators

Input indicatorsInput indicators

Access indicatorsAccess indicators

% of households with more than 3 % of households with more than 3 members in each roommembers in each room

% of houses without sanitation% of houses without sanitation % of HH without running water% of HH without running water % of HH with kids that do not % of HH with kids that do not

assist to schoolassist to school

Doctors per 1000 inhabitantsDoctors per 1000 inhabitants Teachers per 1000 inhab.Teachers per 1000 inhab. Public expenditure in healthPublic expenditure in health % of pop. With vaccination% of pop. With vaccination

Free hospitals, schoolsFree hospitals, schools School in X milesSchool in X miles

Combination of Combination of methods: Katzman methods: Katzman matrixmatrix IncomeIncome

UBNUBNUnder PLUnder PL Over PLOver PL

With UBNWith UBN Structural Structural PovertyPoverty

Inertial Inertial PovertyPoverty

Without Without UBNUBN

New PoorNew Poor No PoorNo Poor

Targeting and Targeting and resources allocationresources allocation There should be a clear cut There should be a clear cut

between the objective population between the objective population and the eligibility criteria for the and the eligibility criteria for the design of social policiesdesign of social policies

They can be universalThey can be universal They can be targeted (a la WB)They can be targeted (a la WB) Or can be combinedOr can be combined

Tools for targetingTools for targeting Categorical targetingCategorical targeting

– Age groups (kids, old)Age groups (kids, old)– Social groups or clusters (unemployed, Social groups or clusters (unemployed,

poor, ethnic groups)poor, ethnic groups)– RegionalRegional

Proxy to means testingProxy to means testing Self-targetingSelf-targeting

– IncomesIncomes– Waiting lists, linesWaiting lists, lines– Previous registrationPrevious registration

Categorical targetingCategorical targeting Benefits are provided according to demand to Benefits are provided according to demand to

every individual in a certain region, group of every individual in a certain region, group of people or combination of bothpeople or combination of both

Requires the categorization of regions according Requires the categorization of regions according to the intensity of the desired indicatorto the intensity of the desired indicator

It works well when there is high correlation It works well when there is high correlation between poverty and localizationbetween poverty and localization

It requires deep knowledge of the demographic It requires deep knowledge of the demographic composition of the region or groupscomposition of the region or groups

Combining the two systems provides the best Combining the two systems provides the best resultsresults

Proxy of means testingProxy of means testing Assumes incomes to target, but also that there Assumes incomes to target, but also that there

are registration problems due to under or miss are registration problems due to under or miss declarationdeclaration

Uses correlations between HH characteristics Uses correlations between HH characteristics (some of them structural) and incomes (water, (some of them structural) and incomes (water, tv, car, type of house)tv, car, type of house)

These models give a probability that a HH These models give a probability that a HH would have the income required to be into the would have the income required to be into the programprogram

The aplicability of the selection model depends The aplicability of the selection model depends on the relationship existing between the on the relationship existing between the income and HH characteristicsincome and HH characteristics

Self selectionSelf selection

Consist in defining incentives Consist in defining incentives tight enough to avoid tempting tight enough to avoid tempting other people than the intended to other people than the intended to apply for the benefitapply for the benefit

Low benefitLow benefit Work commitmentWork commitment Waiting list and queuesWaiting list and queues Difficulties collecting the benefit Difficulties collecting the benefit

Labor market Labor market institutions and the institutions and the concept of concept of Decent WorkDecent Work

Daniel KostzerDaniel KostzerKansas City, April 2006Kansas City, April 2006

Some figures…Some figures… open unemployment in the world is about 160 open unemployment in the world is about 160

million, of whom some 53 million live in million, of whom some 53 million live in industrialized and transition economies. An industrialized and transition economies. An additional 310 million do not have enough work;additional 310 million do not have enough work;

it is currently estimated that there are some 530 it is currently estimated that there are some 530 million “working poor” earning less than enough to million “working poor” earning less than enough to generate a family income of US$1 per day per generate a family income of US$1 per day per capita to support the rest of the 1.2 billion who are capita to support the rest of the 1.2 billion who are living below the poverty line;living below the poverty line;

in recent years, the global economy has been in recent years, the global economy has been creating about 40 million jobs a year, whereas there creating about 40 million jobs a year, whereas there are 48 million new jobseekers annually;are 48 million new jobseekers annually;

over the next decade, the world’s labor force is over the next decade, the world’s labor force is projected to increase by 500 million workers, 97 per projected to increase by 500 million workers, 97 per cent of whom will be in developing countries.cent of whom will be in developing countries.

Somavia, 1999Somavia, 1999 Decent work as productive toil in Decent work as productive toil in

which rights are respected, security which rights are respected, security and protection are provided , as well and protection are provided , as well as the possibility to take part in all as the possibility to take part in all decisions that may affect workersdecisions that may affect workers

Opportunities for women and men to Opportunities for women and men to obtain decent and productive work in obtain decent and productive work in conditions of freedom, equity, conditions of freedom, equity, security and human dignity.security and human dignity.

In simple words…In simple words… it is productive and secure work it is productive and secure work it ensures respect of labor rights it ensures respect of labor rights it provides an adequate income it provides an adequate income it offers social protection it offers social protection it includes social dialogue, union it includes social dialogue, union

freedom, collective bargaining freedom, collective bargaining and participation and participation

Dimensions of decent Dimensions of decent work ILO 2000work ILO 2000 a) Opportunities for work; a) Opportunities for work; b) Work in conditions of freedom; b) Work in conditions of freedom;

– Bonded labor, slave, child laborBonded labor, slave, child labor c) Productive workc) Productive work

– To ensure livelihoods of workers and families, as well to ensure To ensure livelihoods of workers and families, as well to ensure sustainable development and competitiveness of enterprises sustainable development and competitiveness of enterprises and countriesand countries

d) Equity in workd) Equity in work– Fair and equitable treatment and opportunities, avoidance of Fair and equitable treatment and opportunities, avoidance of

discriminations.discriminations. e) Security at worke) Security at work

– Safeguarding health, pensions, livelihood, limits to the Safeguarding health, pensions, livelihood, limits to the insecurity of loosing the jobinsecurity of loosing the job

f) Dignity at workf) Dignity at work– Voice and participation in decision making about their own Voice and participation in decision making about their own

working conditionsworking conditions

Measurement categories Measurement categories of decent workof decent work Employment opportunitiesEmployment opportunities Unacceptable workUnacceptable work Adequate earnings and productive workAdequate earnings and productive work Decent hoursDecent hours Stability and security of workStability and security of work Balancing work and family hoursBalancing work and family hours Fair treatment in employmentFair treatment in employment Safe work environmentSafe work environment Social protectionSocial protection Social dialogue and workplace relationsSocial dialogue and workplace relations Economic and social context of decent workEconomic and social context of decent work

Employment Employment opportunitiesopportunities Labor force participation rateLabor force participation rate Employment/population rationEmployment/population ration Unemployment rateUnemployment rate Youth unemployment rateYouth unemployment rate Time related underemployment rateTime related underemployment rate Share of wage employment in total Share of wage employment in total

employmentemployment

Unacceptable workUnacceptable work Children not in school by Children not in school by

employment statusemployment status Children in wage employment or Children in wage employment or

self-employed activitiesself-employed activities Forced laborForced labor

Adequate earnings and Adequate earnings and productive workproductive work Percentage of employed earning Percentage of employed earning

less than one half of median less than one half of median earnings earnings

Average earningsAverage earnings Excessive hours of workExcessive hours of work Time related underemploymentTime related underemployment Employees with recent job trainingEmployees with recent job training

Decent hoursDecent hours Excessive hours of work (over-Excessive hours of work (over-

employment)employment) Time related underemployment Time related underemployment

raterate Atypical or asocial work hours (or Atypical or asocial work hours (or

seasons)seasons)

Stability and security Stability and security at workat work Tenure less than one yearTenure less than one year Temporary workTemporary work Intermittency of employmentIntermittency of employment

Balancing work and Balancing work and family lifefamily life Employment rate for women with Employment rate for women with

children under compulsory school agechildren under compulsory school age Excessive hours of workExcessive hours of work Flexibility of work and accommodation of Flexibility of work and accommodation of

family needs (sick child leave, birth family needs (sick child leave, birth leave, etc.)leave, etc.)

Availability of child careAvailability of child care Workplace issues connected with Workplace issues connected with

population ageingpopulation ageing

Fair treatment in Fair treatment in employmentemployment Occupational segregation by sexOccupational segregation by sex Female share of employment in Female share of employment in

managerial and high level managerial and high level occupationsoccupations

Female share of non-agricultural Female share of non-agricultural wage employmentwage employment

Female/male earnings rationFemale/male earnings ration

Safe workSafe work Fatal occupational injury rateFatal occupational injury rate Labor inspection (number of Labor inspection (number of

inspectors)inspectors) Occupational injury insurance Occupational injury insurance

coveragecoverage Excessive hours of workExcessive hours of work Health insurance coverageHealth insurance coverage Occupational stress and injury rateOccupational stress and injury rate

Social ProtectionSocial Protection Public social security expenditurePublic social security expenditure Public expenditure on needs-based cash Public expenditure on needs-based cash

income supportincome support Beneficiaries of cash income support (% Beneficiaries of cash income support (%

of poor)of poor) Share of population over 65 years Share of population over 65 years

benefiting from pensionbenefiting from pension Share of EAP contributing to pension fundShare of EAP contributing to pension fund Average monthly pension/wagesAverage monthly pension/wages

Social dialogueSocial dialogue Union density rateUnion density rate Collective wage bargaining Collective wage bargaining

coverage ratecoverage rate Strikes and lockoutsStrikes and lockouts

Economic and social Economic and social context of the decent context of the decent workwork Output per employed personOutput per employed person Growth of output Growth of output Inflation rateInflation rate Composition of employment per Composition of employment per

sectorsector Income inequalityIncome inequality PovertyPoverty Informal economy employmentInformal economy employment

Labor market policiesLabor market policiesActive and passive Active and passive interventions in the labor interventions in the labor marketmarket

Labor market policiesLabor market policies Labor market policies (LMPs) are

defined here as policies that provide income replacement and labor market integration measures to those seeking work, usually the unemployed, but also the underemployed and the employedwho are looking for better jobs.

Passive labor market Passive labor market policiespolicies So-called “passive” policies are concerned

with providing replacement income during periods of joblessness or job search

They are not conditional upon the integration to the labor market or training– unemployment insurance, – Unemployment assistance – early retirement

Active Labor Market Active Labor Market PoliciesPolicies “active” policies refer to labour market integration

through demand or supply side measures– labor market training, – job creation in the form of public and community work

programmes, – enterprise creation programmes – hiring subsidies.

They are usually targeted at specific groups facing particular labor market integration difficulties– younger and older people– women – disabled

Why ALMPs?Why ALMPs? They are also an answer to the

growing critique that pure income replacement policies might entail disincentives to work once unemployment becomes of longer duration.

Expenditure in LMPs in Expenditure in LMPs in the EUthe EU

Expenditure in LMPs per Expenditure in LMPs per one percent of one percent of unemploymentunemployment

Expenditure in ALMP Expenditure in ALMP increases with economic increases with economic opennessopenness

USA

NZ

J apan

CanadaAustraliaUK Switzerland

Sweden

SpainP ortugal

Norway

Netherland

Italy

IrelandGermanyFrance

F inland

Denmark

Belgium

Austria

R 2 = 0.3352

0

0.2

0.4

0.6

0.8

1

1.2

1.4

1.6

1.8

2

2.8 3.3 3.8 4.3 4.8Openness (% of external trade in GDP )

Perception of insecurity and Perception of insecurity and expenditure in ALPs expenditure in ALPs (% of people worried to loose (% of people worried to loose the job)the job)

Austria Belgium Finland

France Germany

Ireland

Italy

Netherland

Portugal Spain

Sweden UK

Japan

US

30

35

40

45

50

55

0 0.5 1 1.5 2 ALMP spending in % of GDP

Types of ALMPsTypes of ALMPs TrainingTraining Public works, Public works, Temporary work creationTemporary work creation Employment subsidiesEmployment subsidies Self employment Self employment Small enterprise creationSmall enterprise creation

Problems with ALMPs Problems with ALMPs types: trainingtypes: training Insufficient levels of qualificationsInsufficient levels of qualifications Mismatch between supply and demandMismatch between supply and demand Bad image of unemployedBad image of unemployed Unclear knowledgeUnclear knowledge Disconnection between training Disconnection between training

institutions and employersinstitutions and employers Overeducated unemployedOvereducated unemployed Gender, age, race biasGender, age, race bias

Problems: Public Problems: Public works, temporary job works, temporary job creationcreation Bad image of the long term unemployed, Bad image of the long term unemployed,

stigmatization of participantsstigmatization of participants End of measure equals being again into End of measure equals being again into

unemployment and povertyunemployment and poverty Gender, age, race biasGender, age, race bias Potential displacement from private Potential displacement from private

sector???sector??? Difficulties to enforce the work Difficulties to enforce the work

conditionalityconditionality

Problems: employment Problems: employment subsidiessubsidies Uncertain or no effects in the Uncertain or no effects in the

informal sectorinformal sector High dead weightHigh dead weight Timing of the subsidyTiming of the subsidy Obsolete sectorsObsolete sectors

Problems: Self-Problems: Self-employment, small-employment, small-enterprise creationenterprise creation Problems targetingProblems targeting Access to further credit and Access to further credit and

expansionexpansion Consultancy and trainingConsultancy and training Low productivityLow productivity Enlarging the informal sector???Enlarging the informal sector???

Problems: Employment Problems: Employment servicesservices Administering rather than serving Administering rather than serving

the unemployedthe unemployed Difficulties in remote regionsDifficulties in remote regions Centralized structures?Centralized structures? Low vacancy reportingLow vacancy reporting Low share in employmentLow share in employment Gender bias?Gender bias?

ConclusionConclusion There is no silver bullet. One size There is no silver bullet. One size

does not fit alldoes not fit all Employment is the best social Employment is the best social

and economic policy in the and economic policy in the capitalist frameworkcapitalist framework

Decent work is the best kind of Decent work is the best kind of employmentemployment