Module 12: Advanced Session on using the RAP

1. Module 12: Advanced Session on using the RAP ILO, 2013

2. Key questions • What is the structure of the ILO RAP model? • What are the main sources of historical data and projections? • Dealing with POP • How to project the population? • How to calculate the survivors and newborns? • How to take into account migration? • Dealing with EAP and LPR/AR • What are the parameters of the labour market? • How to project labour market data and unemployment rate? • Dealing with ECO • How to project GDP and GDP deflator?

3. Labour market (EAP) Demographic data (POP) 1. Input data Structure of RAP General government operations (GGO) Macroeconomic data (ECO) Costing of benefits 2. Estimated cost of benefits in absolute terms, as % of GDP, and as % of government expenditure 3. Projected cost of combined benefit packages Summary and results

4. Structure of RAP 1. Input worksheets AR GGO (SQ) POP EAP ECO 2. Benefit worksheets to estimate the cost of scenarios BS 1 BS 2 BS 3 BS 4 BS 5 SUM 3. Summary of benefit costs

5. Sources of data • national statistical offices • census and surveys • social security institutions and line ministries • ministry of planning: GDP and population projections • ministry of interior: registration for social benefits • ministry of commerce: inflation • ministry of finance: budget, economic indicators • central banks • research institutes, universities • UN/ILO population models, IMF’s World Economic Outlook (alternative data sources)

6. Sources of data • High, medium, and low projections of data reduce chances of error • Finding reliable data is a challenge • Assumptions and projections may need to be done by ourselves • Data from different sources may be conflicting and need to be cleaned up and validated • Partnering with institutions (e.g. Institute of Statistics in Indonesia, HISRO in Thailand) can provide comprehensive and coherent data, and validate assumptions and projections

7. Coresia RAP: ‘Population’

8. Dealing with POP • Projected population by age and gender is used in other projections like labour force, number of unemployed, etc. • Population projections can be obtained from official sources or self-projected using the cohort component method • Cohort component method uses current year (t) population data, no. of newborns (linked to fertility), survivors (linked to mortality), and net migration, to project next year (t+1) population

9. Cohort component method Population in year t Population in year t +1 (for ages > 1) Survival rate Net migration Population in year t+1 (for all ages) Fertility rate Population in year t +1 (for ages < 1 i.e. newborns) Sex ratio at birth

10. Cohort component method

11. Estimating mortality rates • The mortality rate is derived from life tables, from which the number of survivors can be determined • Life tables can be used to depict life expectancy of the population and thus, estimate the number of deaths • We can use life tables of a country, UN life tables and the Coale-Demeny life tables

12. UN life tables • 5 life expectancy patterns were mapped. • The geographical region predominant within each patterns gives the name to that pattern: • Latin American pattern • Chilean pattern • South Asian pattern • Far Eastern pattern • General pattern

13. Estimating mortality rates Survival(2011) = Pop(2010) - Deaths(2010) Deaths(2010) = Mortality(2010) x Pop(2010)

14. Fertility rate • Age-specific fertility rate: Number of child births for women of a particular age. • Total fertility rate: Average number of children a woman can give birth to during her lifetime; it is the sum of the age-specific fertility rates during the child bearing period • Typical child-bearing period is from age 15 to 49 • Sex ratio: Ratio of males to females in the population

15. Estimating number of newborns Newborns = Fertility x Female pop

16. Estimating net migration • Net migration = Immigration (inbound migrants) – Emigration (outbound migrants) • International migration can fluctuate widely every year depending on socioeconomic and political factors. Thus, it is primarily forecast in numbers by age group and gender, rather than as rates. • International migration is usually small compared to total population. • Usually we assume net migration = 0

17. Coresia RAP: ‘Economically Active Population’

18. Labour force data We need historical data, projected distribution of the parameters by age group and gender: • Labour force or Economically Active Persons (EAP) • Labour market participation rate or activity rate • Employed persons • Unemployed persons • Unemployment rate

19. Labour force data Labour force participation rate (%) = Labour force / Total population above legal working age Unemployment rate (%) = No. of unemployed / Labour force

20. Labour force data Demographic and labour force data: Thailand, 2007

21. Estimating unemployment data • Unemployed persons = Projected male EAP x Male unemployment rate + Projected female EAP x Female unemployment rate • Unemployment rate = Unemployed persons / EAP • Historical unemployment rates are used to calculate a trend • The trend is used to project unemployment rates

22. Estimating unemployment data Historical data and trend lines for unemployment rate in Coresia

23. Coresia RAP: ‘Economic’

24. Dealing with ECO • Mainly concerned with projections of economic growth • Macroeconomic projections can be obtained from official sources, research institutes, national authorities, international organizations, or be self-projected • GDP at current price = GDP at constant price (volume effect) x GDP deflator (price effect) • Using the formulas, participants can project one parameter provided the other two are available • GDP at constant price = Productivity * Employment • Employment = Labour force (EAP) – Unemployment

25. Dealing with ECO

26. Dealing with ECO • Inflation is the rate of increase in the average price level of the economy. It is commonly measured by CPI, headline inflation, GDP deflator •  GDP deflator compares prices of all goods and services produced within the country in the current year, with the base year prices • CPI reflects the prices of goods and services purchased by the consumers • Headline inflation reflects the prices of all goods and services consumed in the country, including fuel and food • In developing countries, headline inflation may be preferred