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Employment and Development: Good Jobs and Bad Jobs Turin, Monday, May 22, 2006

Employment and Development: Good Jobs and Bad Jobs Turin, Monday, May 22, 2006. Fran çois Bourguignon Senior Vice President and Chief Economist The World Bank Group. Motivation.

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Employment and Development: Good Jobs and Bad Jobs Turin, Monday, May 22, 2006

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  1. Employment and Development: Good Jobs and Bad JobsTurin, Monday, May 22, 2006 François Bourguignon Senior Vice President and Chief Economist The World Bank Group

  2. Motivation • Increasing concern about the issue of employment both in developed and developing countries (even the most dynamic ones.) • But real concern is about potential increase in income inequality and slowdown of poverty reduction. • Need to assess not only quantity of jobs but also their “quality” • Standard labor market indicators must be complemented by monitoring ‘good’ and ‘bad’ jobs • How should we proceed? Luca D’Agliano Lecture

  3. Outline • Evidence on the evolution of inequality, poverty and the labor market. • The relationship between income distribution, poverty, employment and the structure of earnings • Defining ‘good’ and ‘bad’ jobs • Extended labor market indicators : 3 examples of application (Mexico, Ghana, Russia) • Conclusion Luca D’Agliano Lecture

  4. 1. Evidence on the evolution of inequality, poverty and the labor market Luca D’Agliano Lecture

  5. International inequality is falling (although mainly because of strong growth in China and India) … International inequality (weighted) Source: Branko Milanovic, Worlds Apart: Measuring International and Global Inequality, Princeton University Press, 2006. Luca D’Agliano Lecture

  6. … while inequality is increasing in a number of countries … Source: WIDER Income Inequality database, 2005 Luca D’Agliano Lecture

  7. .7 .6 ANT ISL USA SWE ABW DNK JPN DEU HKG NLD FRA LUX AUT .5 FIN ESP MLT CRI NOR AUS BHS EST LKA ZAF CZE Labor share 2002-2004 KOR NZL ITA ARM LVA POL .4 IRL CHL NAM SVK KAZ MDA JOR TUN IND BRA COL BGR BHR PAN TTO MEX VEN .3 MAC THA OMN KGZ PHL PER AZE IRN DZA .2 .2 .3 .4 .5 .6 .7 Labor share 1992-1994 … And the labor share in GDP is declining Source: UN national accounts Luca D’Agliano Lecture

  8. Growing within country income inequalities often are associated with widening disparities in earnings Earnings dispersion (P90/P10) in selected OECD countries Source: OECD Luca D’Agliano Lecture

  9. Earning inequality may be increasing in fast growing developing countries too Source: Labor Markets in Asia: Issues and Perspectives, ADB, forthcoming Luca D’Agliano Lecture

  10. Growth becomes less labor intensive Source: Felipe and Hasan 2006, “The Challenge of Job Creation in Asia”, ADB Luca D’Agliano Lecture

  11. Implications for poverty reduction Increasing income inequality reduces the elasticity of poverty with respect to growth Examples : China (1990+), India (1990+), Mexico (1984-94), Uganda (1993+), … Luca D’Agliano Lecture

  12. 2. The relationship between income distribution, poverty, employment and the structure of earnings Luca D’Agliano Lecture

  13. The state of the labor market and the distribution of household incomes Labor market Households’ income (per capita) Job 1 : w1 Household 1 (1 earner) : (w1)/n1 Job 2 : w2 Household 2 (1 earner) : (w2+y2)/n2 Job 3 : w3 Household 3 (2 earners): (w3+w78)/n3Poor Household 4 (1 unemployed): (0+y4)/n4 Poor Household 5 (1 earner + 1 unemployed): (w5+0)/n2 Job k : wk Etc… Job N : wN Job N +1: wN+1 Luca D’Agliano Lecture

  14. The state of the labor market and the distribution of household incomes Labor market Households’ income (per capita) Job 1 : w1 Household 1 (1 earner) : (w1)/n1 Job 2 : w2 Household 2 (1 earner) : (w2+y2)/n2 Job 3 : w3 Household 3 (2 earners): (w3+w78)/n3Poor Household 4 (1 unemployed): (wN+1+y4)/n4 Poor Household 5 (1 earner + 1 unemployed): (w5+0)/n2 Job k : wk Etc… Job N : wN Job N +1: wN+1 Luca D’Agliano Lecture

  15. The state of the labor market and the distribution of household incomes Labor market Households’ income (per capita) Job 1 : w1 Household 1 (1 earner) : (w1)/n1 Job 2 : w2 Household 2 (1 earner) : (w2+y2)/n2 Job 3 : w3 Household 3 (2 earners): (w3+w78)/n3Poor Household 4 (1 unemployed): (wN+1+y4)/n4 Poor Household 5 (1 earner + 1 unemployed): (w5+0)/n2 Job k : wk Etc… Job N : wN Job N +1: wN+1 Luca D’Agliano Lecture

  16. “Quality” of jobs as a complement to standard labor market indicators • Monitoring poverty requires: • Monitoring the labor market: quantity and quality of jobs being created (or destroyed) • Following changes in participation, non-labor incomes, family size, conditionally on changes in labor market • Caution : Jobs may be created (or destroyed) by firms or by the households themselves (self-employment or family business) • Aggregate unemployment/employment rates may not be very relevant labor market indicators in developing countries Luca D’Agliano Lecture

  17. The two sides of the labor market unemployment and working poor (ILO), 2004 ILO, World Employment Report, 2005 Luca D’Agliano Lecture

  18. 3. Defining “good” and “bad” jobs Luca D’Agliano Lecture

  19. How to assess the “quality” of jobs • Job quality is a multi-dimensional concept (Somavia’s ‘decent job’). • Job attributes include: • Occupational health and safety • Employer’s adherence to Core Labor Standards • Affiliation to statutory social security schemes • Other employee benefits • Employment and earnings stability • Number of hours of work • Formal/Informal • Level of earnings (‘working poor’, this paper) Luca D’Agliano Lecture

  20. Alternative definitions of “working poor” • EU-ILO definition (using micro data): working poor are those individuals in the labor force living in poor households. • ILO definition (using aggregate statistics): poverty rate for the population adjusted for different factors - demographics and participation rates. In the calculation of the worldwide count of working poor, ILO uses the poverty headcount ratio for the population times the size of the labor force. • Both EU and ILO use the household as the unit of reference and assess links between household poverty and the employment status of its members. This makes it impossible to isolate the role of labor market in the evolution of poverty. Luca D’Agliano Lecture

  21. Low pay as the definition of ‘bad jobs’ In the present study, bad jobs are defined as workers with earnings insufficient to maintain the median family above an arbitrary poverty line. Low pay threshold = 50% of the median per capita consumption expenditure * median dependency ratio (total household size/employed members) Luca D’Agliano Lecture

  22. 4. Examples of application : extended labor market indicators in Ghana, Mexico and Russia Luca D’Agliano Lecture

  23. Methodological issues in implementation • Data source : Household Survey or Labor Force Surveys at two points of time. • Time varying low pay threshold so as to define ‘bad jobs’ in relative terms • Distinguishing between employment and price effects • Definition of universe and earnings • Unpaid family workers (+unreported earnings) • Self-employed/wage workers • Hourly vs. monthly earnings • Urban/Rural Luca D’Agliano Lecture

  24. The importance of low-pay jobs Luca D’Agliano Lecture

  25. Changes in labor market conditions in Ghana, 1991-1998 Luca D’Agliano Lecture

  26. Net job creation in the urban wage sector : Ghana 1991-1998 Luca D’Agliano Lecture

  27. Composition of the change in low-pay jobs, Ghana, 1991-1998 Luca D’Agliano Lecture

  28. Changes in labor market conditions in Mexico, 1994-2002 Luca D’Agliano Lecture

  29. Changes in labor market conditions in Russia, 1994-2003 Luca D’Agliano Lecture

  30. 5. Conclusions Luca D’Agliano Lecture

  31. General conclusions • Raising inequality and employment problems endanger development. • Growth with little poverty reduction and possibly increasing relative poverty is possible • Redistribution may mitigate the problems. What form should it take? What are its limits? • Close monitoring of labor market outcomes including job quality indicators necessary. Luca D’Agliano Lecture

  32. Methodological conclusions • Pay-based bad jobs/good jobs distinction is a way forward: conceptually clear and relatively easy to quantify. • Alternative definitions to be explored and discussed • Usefulness and policy relevance still to be explored • How much of observed changes in poverty does this distinction explain? Luca D’Agliano Lecture

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