Employment Policy in Latin America: The Missing Link between Economic Growth, Poverty and Income Distribution Class 1

1. Employment Policy in Latin America: The Missing Link between Economic Growth, Poverty and Income DistributionClass 1 Kirsten Sehnbruch Center for Latin American Studies UC Berkeley Feb 18 � March 11, Fridays, 10.00am � 1.00pm

2. Purposes of the Course The objective of this course is to get you to think about labour market issues and how they are linked to Latin America�s biggest problems: poverty and income distribution. who the employed are, what sort of jobs they have, what sort of jobs they don�t have how this relates to poverty and income distribution, and to Latin America�s development process in general how data on the labour market is produced and used by analysts what the principal debates are regarding labour market policy, and where the different political positions come from how labour policy is linked to economic and social policy how to work with research on the labour market (and possibly produce your own research on the subject) what governments can do to enhance their development process through labour policy how the labour market is relevant for your particular field of study (and trust me, it is)

3. Outline of Classes Class 1: Introduction, definitions, measurements and data generation Class 2: Social actors and labour market legislation Class 3: Labour policy and associated social policy Class 4: Discussion of the main debates on labour market issues

4. The Trickle-down Effect

5. Definition of Employment The ILO defines everybody who spent at least one hour working during the week in question as employed. This hour�s work does not necessarily have to have been remunerated in order to be considered employment. The definition excludes criminal activities.

6. Definition of unemployment The ILO considers somebody to be unemployed if he or she did not hold any remunerated employment during the period of reference (not even one hour per week), and is actively looking for employment.

7. Definition of Inactivity The inactive are not engaged in any form of productive work, and they are not looking for work.

8. What�s the ILO? International Labour Organisation UN branch that deals with employment issues Based in Geneva, with regional offices all over the world Labour Conventions Definitions and Data gathering

9. Labor Market Variables Employed + Unemployed = Labor Force Labor Force + Inactive = Population Participation rate: (Economically Active Population, EAP) Labor Force/Population = Employment rate: Employed/ Population + Unemployment rate: Unemployed/Labor Force

10. Who are the Unemployed? Ex: employment survey, Santiago, 1999

11. Growth, Participation and Unemployment Why is the participation rate important? What influences the participation rate? Why is the unemployment rate important? What influences the unemployment rate?

12. Types of Employment Paula works in a department store. She has an employment contract, and her employer pays her social security. Leon works at a construction site as a day laborer. Alejandro has a fruit stall in the market. Maria helps her father look after his shop after she gets home from school. He does not pay her for her help. During the autumn harvest, Antonio picks grapes for a large multinational fruit company. Andrea owns a bakery. She employs 3 women to help her in the shop. Susana is a maid. She works 3 days a week in different households.

13. Types of Employment

14. Types of Contract

15. Employment Surveys (1) 1. Household surveys Main advantage: captures the entire labour force, including the unemployed and inactive (potential labour force) Disadvantage: generally answered by the first �responsible adult� that the interviewer can get hold of Workers have to be interviewed in circumstances where they are free to express themselves

16. Employment Surveys (2) 2. Workplace surveys Main advantage: can interview workers directly Disadvantage: they have to be interviewed in circumstances in which they are free to express themselves Useful as a study of the formal sector (eg. Union activity, accidents and safety at work, application of labour market legislation) In Latin America: never an appropriate assessment of the labour market

17. Employment Surveys (3) Obtaining Longitudinal Data: Repeating the same survey (quarterly, annual, biannual) Panel Surveys (finding the same people repeatedly) Asking for historical information (relying on people�s memory)

18. Employment Surveys (4) The design and methodology of a survey are fundamental to its usefulness as a policy making tool. Badly designed surveys can lead to bad or non-existent policy Example: Encuesta Laboral in Chile interviewed workers in companies sent labour inspectors to do the interviewing!!!

19. The Informal Sector The ILO defines the informal sector as the proportion of the workforce classified as: unremunerated family members non-professional self-employed domestic service or workers of companies that have fewer than 5 (formerly 10) employees.

20. Underemployment Defining and measuring underemployment: People who work and do not earn enough in order to make a living People who work few hours and would like to work more Both of the above

21. Definition of Poverty World Bank: Poverty: < 2 USD/day Extreme Poverty: < 1 USD/day Latin American governments/CEPAL: Poverty: < 2 canasta b�sica/month Extreme Poverty: < 1 canasta b�sica/month Industrialised Countries: Poverty: less than half average wage

22. Income Distribution Gini coefficients Percentiles, deciles or quintiles Ratios: eg. Top 10% of income to bottom 10% of income

23. Poverty and Economic Growth Economic growth is a prerequisite for reducing poverty But, economic is not enough to reduce poverty in countries with severe income inequality Public transfers can have a greater impact than economic growth: over this period in Chile transfers increased very little, whereas in Brazil and Panama they increased significantly