The Quality of Employment: Concepts and Methodologies in Developed and Developing Countries by Prof Kirsten Sehnbruch

Kirsten Sehnbruch

LSE, 11th February 2015

The Quality of Employment: Concepts

and Methodologies in Developed and

Developing countries

w w w . d e v -o u t . c l

Overview

• Why does the QoE matter in developing countries?

- Some empirical examples

• Efforts to conceptualise and measure the QoE in the literature:

- Focus on DW and HDI in comparative perspective

- Eurofound (2012)

- OECD (2014)

• Proposal for a QoE indicator

• Conclusions


Presentation based on4 theoretical papers:Kirsten Sehnbruch, Brendan Burchell, Agnieszka Piasna,

and Nurjk Agloni:• “The Quality of Employment and Decent Work: Definitions,

Methodologies, and Ongoing Debates”, Cambridge Journal of Economics

• “Human Development and Decent Work: Why some Concepts succeed and others fail to impact the Development Agenda“, Development and Change

• “Why has ‘Decent Work’ not worked internationally? A conceptual model of ‘job quality’ for evidence-based policy”, Politics, Philosophy and Law

• “The Quality of Employment: Methodologies and Measurement”, Working Paper

+ several empirical papers on Latin America to be

published in International Labour Review 2015


New LM problems in Developing Countries• Employment conditions in the formal sector have changed

without being monitored (no data)

• LM flexibilisation has led to high job rotation, short-term contracts, sub-contracting, multiple tax IDs, freelance contracts for salaried workers, etc.

• Flexibilisation ocurred even without legislative changes: Antiquated legislation segments LM further (esp. severance pay), low % of LF covered, and labour reform stalled

• Excessive job rotation has negative impact on investment in HC, VT and productivity levels

• Weak unions (unconstructive in development process), further weakened by job rotation


Why care about the QoE in developing countries?

• Excessive focus on unemployment rates as LM indicator (induces focus on the short-term)

• Multidimensional poverty indicators: employment conditions can deteriorate despite improvements in other social dimensions

• Within QoE: income levels may increase while other employment conditions deteriorate

• Informal sectors have always been a problem, if formal sectors also become precarious, social security systems become fiscally unsustainable


Data problems and monitoring• LMs have been left to their own devices following

“flexibilisation” mantra of the Washington Consensus

• Lack of data, so we do not know exactly extent of problem

• “We measure what we believe in” (Somavia)

• “We ignore what we don’t measure” (Ward)

Political focus on unemployment rate, not quality of employment

Policy makers shocked by results of admin. data


Multidimensional Poverty in Chile, 1990-2009, Source Sehnbruch and Siavelis, 2013

Table 10.4: Multidimensional Poverty using CONEVAL

Methodology

Year

Ed

ucation

Health

Em

ploym

ent

Hou

sing

MD

Poverty

Extrem

e MD

Poverty

Not M

D P

oor

Incom

e

Vu

lnerab

ility

Vu

lnerab

ility

by S

ocial

Need

s

1900 20.3% 34.7% 28.3% 51.1% 31.0% 2.8% 19.3% 4.2% 45.5%

1992 20.4% 31.2% 28.4% 48.5% 25.4% 1.7% 22.5% 4.2% 47.8%

1994 19.1% 23.3% 29.4% 43.0% 21.2% 1.4% 29.1% 3.3% 46.4%

1996 18.2% 23.3% 26.8% 40.2% 17.5% 1.2% 32.8% 3.1% 46.7%

1998 17.3% 26.9% 30.4% 36.7% 16.6% 1.3% 32.7% 2.6% 48.1%

2000 16.0% 19.5% 31.0% 31.9% 15.5% 1.1% 37.3% 3.0% 44.3%

2003 14.9% 16.8% 31.7% 28.7% 13.5% 0.7% 38.7% 3.3% 44.5%

2006 15.9% 18.8% 33.2% 25.4% 9.9% 0.5% 39.0% 2.3% 48.7%

2009 15.6% 16.0% 33.8% 22.2% 10.6% 0.4% 39.5% 3.4% 46.4%


Empirical Evidence ChileChilean Labour Force by Occupational Status, 2009 - 2012


Job rotation in Chile

2009 2010 2011 2012 2013

Open-ended contracts 61.5% 62.4% 62.1% 62.9% 64.3%

Short-term contracts 38.5% 37.6% 37.9% 37.1% 35.7%

Total 100% 100% 100% 100% 100%

Av. Duration Ocs 21.6 24.9 27.3 28.4 27.4

Av. Duration SCs 7.2 7.2 7.4 7.4 7.6

Av. Duration Total 25.2 21.4 23.6 22.9 22.4

% OCs < 3 months 13.2% 11.8% 12.2% 12.2% 8.6%

% SCs < 3 months 50.2% 52.3% 51.6% 52.1% 50.1%


Example of public policy:

Coverage of UI system %

Open ended insufficient contributions 24.2

Atypical insufficient contributions 24.5

Other reasons 5.7

Atypical covered single payment 6.5

Right to FCS 13.4

Enough savings, no FCS 25.7

Total 100.0

Also pension system replacement rates: 20-40% rather

than 80-120% as estimated during 1980s.

OECD Rpt:

Less than

10%

replacement

rate. Among

lowest in

OECD


History of the Papers• LM outcomes must be monitored better:

• Overview of the development of concepts related to the quality of employment in the development literature….ILR paper

• ‘quality of working life’ concepts and measures (1960s and 1970s), job satisfaction studies (1970s and 1980s), Job Quality concerns, (1990s), Decent Work 1999....CJE paper

• Empirical, methodological and conceptual approaches remain fragmented, contradictory and often confused...PPL paper

• Most “successful” results: European Union (Eurofound), eg European Working Conditions Survey and OECD

• Most “unsuccessful” approach (academically, but not rhetorically): Decent Work…Dev & Change paper


Relevance of ImpactComparison DW & HDI• A comparison of the relative success of two

development concepts: explaining the intuitive

• Lessons from HDI and DW are relevant for many policy and development issues: eg. environment, industrial diversification, health, happiness, etc.

• Allows us to discuss the use and relevance of indicators for public policy and development

• Allows us to examine the relative advantages and disadvantages of synthetic vs dashboard indicators

• Most importantly: DW hold important lessons for others measuring the QoE such as the OECD or EU


Decent work ILO launched this concept in 1999

Definition: “Opportunities for women and men to obtain decent and productive work in conditions of freedom, equity, security and dignity.”

No systematic and significant effort to gather internationally comparable data (unlike inf. sec. 1950s)

The ILO’s intention was to achieve a standardiseddefinition that could serve as a basis for empirical measurement, and international comparisons…

But the ILO is a tripartite institution….

DW now consists of 61 different indicators of employment conditions


Conceptual confusions

• From which perspective do you measure QoE?

- Employees?

- Employers?

- Public Policy?

• This determines whether you focus on jobs, legislation, labour rights, productivity, etc.

• DW (and many other approaches in the literature mix different levels of analysis)


Human Development

• Launched in 1990 with first Human Development Report and HDIs (i.e. data!)

• “We need a measure of the same level of vulgarity as GNP – only a number – but a measure which is not as blind to the social aspects of human life as is GNP.”

• HDI: 3 indicators summed up: income, education (literacy rates) and health (life expectancy at birth)

• A development of successive multidimensional indicators of human development and poverty


Comparison of HDI & DW Impacts• Internet searches of terminology

• Searches of academic papers, books and other publications (DW: lots of self-referencing)

• Institutions working with concepts: eg EU, OECD, IABD

• Qualitative interviews with policy makers, academics, officials from international institutions

HD has founded a new academic discipline, HDI and follow up indicators are most widely used indicators

DW has had rhetorical impact: everybody talks about it, but nobody knows what it means


Eurofound (2012)

• Synthetic indicator based on several dimensions using data from the European Working Conditions Survey (EWCS):

• Dimensions: earnings, prospects, intrinsic job quality (skills, social and physical conditions, intensity), working time quality

• Indicator is too complicated methodologically, uses too many variables and produces some “strange” results

• Not officially an “EU” indicator….that effort is still underway

• Not at all useful for developing countries as it ignores basic aspects such as formality, type of contract social sec. contributions, or job rotation


OECD Job Quality Index

• Uses 3 dimensions (income, labour market security and good working environment) with two sub-dimensions each

• Data requirement also quite sophisticated (eg risk of job loss)

• Produces a dashboard indicator

• Does not produce rankings, but groups countries according to the number of dimensions on which they are strong/weak

• It does not cover the most important aspects in less developed OECD countries and other LDCs


Two serious efforts now to measure QoE

• EU and OECD, with synthetic and dashboard indicators respectively

• Regional (or similar country, eg OECD) indicators are easier to implement

• Both efforts are significantly more useful than what the ILO and other approaches have produced

• But neither of them will work in developing countries

• Indicators comparable across a broader range of countries have more impact


Successful Synthetic Indicators Based on a coherent theoretical framework (e.g.

capability approach)

Coherent definitions and methodology that is easy to understand and simple to calculate (Press efficient!!!)

Minimal data requirements (especially if comparing developed and developing countries)

International comparability makes them more interesting to the public

See Quantifying the World: United Nations Ideas and Statistics, Ward, 2004


An International Alternative: Alkire Foster Method• Individual based: Defines 3 dimensions, 10 sub-dimensions

• Defines cut-off points of deprivation or non-deprivation (binary indicators)

• Counts how many people are deprived, in how many dimensions

• Defines an overall lines of deprivation: e.g. people deprived in 2 dimensions out of 3 are very deprived

• Final result expressed as a %

• Advantage that you can measure deprivation, distribution and extent of deprivation (intensity)

• Experience of use: MPI, individual countries, MPI 2.0


Key LM variables to focus on in developing countries• Income and its distribution relative to median

• Level of formality (Contracts, license, employer ID number, pays taxes)

• Contributions to social security system (pensions)

• Duration of employment

• Investment in vocational/general training or career prospects

IMPORTANT: Focus on employment conditions from public policy perspective


Two alternatives of measurement

• Alkire/Foster method

• Indicator based on point scores


A proposal for a QoE Indicator

Dimension 1 Dimension 2 Dimension 3

33% 33% 33%

Income Formality and Social Sec. Duration and Prospects

Absolute Income from work per hour 16.6%

Formality:Salaried: Contract Yes/No

OrSelf-employed or Employer

Tax ID/license/pays taxes

Duration:More or less than 3 years

and and and

Relative Income from work per hour 16.6%

Social Security:Contributes to pension

systemYes/No

Training:Received formal (certified)VT or on the job training

OrConsiders to have good job

prospects Yes/NO


Or alternatively….

Dimension 1 Dimension 2 Dimension 3 Dimension 4 Dimension 5

20% 20% 20% 20% 20%

Income Formality Social Security Duration Training

Absolute Income from

work per hour 10%

Salaried: Contract Yes/No

Contributes to pension system

Yes/No

More or less than 3 years

Received formal

(certified) VT or on the job

training

and or and

Relative Income from

work per hour 10%

Self-employed or Employer

Tax ID/license/pays

taxes

Considers to have good job

prospects Yes/NO


(Alternative 2): scores

• Indicators based on point scores are methodologically even simpler

• They do not force you into a binary system:

– Can distinguish between different types of contracts

– Can evaluate duration more gradually

– Can distinguish between different types of VT

• Allow distinction between different categories of job quality

• But…they have never been used for any major international indicator


Example of a Score IndicatorDimesion 1: Contract and SS

Open-ended contract with ss 2

Open-ended contract, no ss 1

Atypical contract with ss 1

Atypical contract, no ss 0

No contract 0

Dimesion 2: Duration

>3 years 2

1-3 years 1

<1 year 0

Dimension 3: Income

>3 min wages 2

1-3 min wages 1

< 1 min wage 0

Add up total

points for each

individual and

divide by 3 to get

an overall score:

eg. (2+1+1)=1.3

Then define

categories of

good, medium

and bad quality

jobs


1. Conclusions: • LMs in developing countries (esp LA) have not necessarily

done what they were expected to do as a result of economic growth: ie create more and better jobs, reduce informality and inequality It is not enough to monitor the ur

• A QoE indicator will focus political attention on aspects that normally receive only residual attention: eg tenure, training

• Synthetic indicators prompt governments into action provided results are internationally ranked and press efficient

• The QoE could/should be measured across high and middle income countries


2. Conclusions:

• The Social Security Dilemma: The link between employment conditions and social policy requires rethinking:

LM flexibilisation

Requires more social security (flexicurity)

Social securityis based on

ISAs

Increased fiscal cost of universal benefits


Policy Options

• focus on both improving ss systems AND improving LMs:

– Charge employers for job rotation

– Offset hiring costs with training subsidies

– Incentives for formality: eg EITCs

• CCTs and anti-poverty policies require rethinking to incorporate employment and employment conditions


Bibliography

• Kirsten Sehnbruch, Brendan Burchell, Agnieszka Piasna, and Nurjk Agloni “Human Development and Decent Work: Why some Concepts succeed and others fail to impact the Development Agenda", Development and Change, 2015: 46 (2)

• Brendan Burchell, Kirsten Sehnbruch, Agnieszka Piasna, and Nurjk Agloni “The Quality of Employment and Decent Work: Definitions, Methodologies, and Ongoing Debates”, Cambridge Journal of Economics, 38 (2): 459-477

• Sehnbruch, Brendan Burchell, Agnieszka Piasna, and Nurjk Agloni “Methodologies for Measuring Decent Work”, work in progress

• José Antonio Ocampo and Kirsten Sehnbruch “The Quality of Employment in the Development Literature”, Introduction to a Special Issue on the Quality of Employment, The International Labour Review (forthcoming)

• Joseph Ramos and Kirsten Sehnbruch “Employment in the Post-WWII Latin American Development Literature”, The International Labour Review (forthcoming)

• Jaime Ruiz-Tagle and Kirsten Sehnbruch“The Quality of Employment in Chile”, The International Labour Review (forthcoming)

• Federico Huneeus, Javiera Selman, Esteban Puentes and Oscar Landerretche “The Quality of Employment in Brazil”, The International Labour Review (forthcoming)


Bibliography

• Sehnbruch and Carranza (2014) The Chilean System of Unemployment Insurance Savings Accounts. Report for ILO

• OECD Employment Outlook 2014

• Munoz de Bustillo et al. (2011) Measuring More than Money, Edward Elgar

• Eurofound (2012) Trends in job quality in Europe

• Ward, M. (2004) Quantifying the World: UN Ideas and Statistics. Minneapolis, MN: Indiana University Press.

Economy & Finance

The Quality of Employment: Concepts and Methodologies in Developed and Developing Countries by Prof Kirsten Sehnbruch