1. International
Labour
Organization

3. labour market policies
an introductory elaborated by
Fred Fluitman
Presented by Mostefa Boudiaf
International Training Centre of the ILO
Turin, Italy, 2007

4. among sources: ILO, World Employment Report 1998/99
Betcherman, G. An Overview of Labor Markets World-Wide: Key Trends and Major Policy Issues, World Bank, 2002
Freeman, R.B.Labor Market Institutions and Policies: Help or Hindrance to Economic Adjustment?, 1993

5. labour market policies
measures meant to address failure in labour markets, in particular measures that reduce unwanted distortions in the process of supply meeting demand.
see Godfrey’s draft manual pp10-11

6. labour the Oxford Dictionary: physical or mental work; exertion; toil
economists:
a production factor
the International Labour Organisation:
“labour is not a commodity”
Explain labour vs. employment (i.e. the use made of the production factor labour; cf. implicare in Latin, i.e. to enfold)
manpower:men and women in the labourforce
cite the Philadelphia Declaration:

7. labour force
all those above a specified age, and during a specified brief period, who are either working, or available for work and seeking it
also known as the economically active population
Check ILO definition
what is “working” = economically active but excludes in particular (women’s) domestic chores
refer to quality factor; indicator = levels of education and skill

8. labour force “the currently active population” Check ILO definition
what is “working” = economically active but excludes in particular (women’s) domestic chores
refer to quality factor; indicator = levels of education and skill
“the currently active population”

10. labour force wage-employed self-employed under-employed unemployed
visible
invisible
*Employment data are always expressed as a percentage of the labour force; e.g an unemployment rate of five per cent means that one of every twenty economically active, i.e. labour force participants, is not working and actively looking for a job.
*Introduce notion of employment status (wage-employment, self-employment, unpaid family worker, employer , if not included among self-employed)
*Major differences among countries by level of development
*unemployment= open unemployment: define = very strict therefore low unemployment in (developing) countries without social safety nets
*under-employment (is not part-time work)
= disguised unemployment , involuntary
because: less hours worked than wanted (visible, i.e measurable)
below level of capacity (invisible) (more people employed than needed)
low productivity as a result of poor health or nutrition
or because lack of complementary inputs
*See ILO/ARTEP 1992 box on p.33 (features of un- and underemployment in LDC’s)
*EXERCICES: calculate from raw data ( aa, bb, cc, dd) (by sex and education level) labour force participation rates, unemployment rates, …..

11. labour force: stock and flow
leaving
entering
stock
31 december 2001
stock
31 december 2002
staying
*Employment data are always expressed as a percentage of the labour force; e.g an unemployment rate of five per cent means that one of every twenty economically active, i.e. labour force participants, is not working and actively looking for a job.
*Introduce notion of employment status (wage-employment, self-employment, unpaid family worker, employer , if not included among self-employed)
*Major differences among countries by level of development
*unemployment= open unemployment: define = very strict therefore low unemployment in (developing) countries without social safety nets
*under-employment (is not part-time work)
= disguised unemployment , involuntary
because: less hours worked than wanted (visible, i.e measurable)
below level of capacity (invisible) (more people employed than needed)
low productivity as a result of poor health or nutrition
or because lack of complementary inputs
*See ILO/ARTEP 1992 box on p.33 (features of un- and underemployment in LDC’s)
*EXERCICES: calculate from raw data ( aa, bb, cc, dd) (by sex and education level) labour force participation rates, unemployment rates, …..
flows

12. *Employment data are always expressed as a percentage of the labour force; e.g an unemployment rate of five per cent means that one of every twenty economically active, i.e. labour force participants, is not working and actively looking for a job.
*Introduce notion of employment status (wage-employment, self-employment, unpaid family worker, employer , if not included among self-employed)
*Major differences among countries by level of development
*unemployment= open unemployment: define = very strict therefore low unemployment in (developing) countries without social safety nets
*under-employment (is not part-time work)
= disguised unemployment , involuntary
because: less hours worked than wanted (visible, i.e measurable)
below level of capacity (invisible) (more people employed than needed)
low productivity as a result of poor health or nutrition
or because lack of complementary inputs
*See ILO/ARTEP 1992 box on p.33 (features of un- and underemployment in LDC’s)
*EXERCICES: calculate from raw data ( aa, bb, cc, dd) (by sex and education level) labour force participation rates, unemployment rates, …..

13. the market

14. the market

15. the market exchange exchange supply demand supply demand
allocation and
price fixing
buy, rent borrow,
hire
buy, rent borrow,
hire
supply demand
supply demand

16. the vegetable market production exchange consumption supply demand
sell &buy
rice or potatoes
supply demand

17. the housing market production exchange use supply demand
sell&buy or rent
a house
supply demand

18. the money market production exchange use supply demand lend & borrow

19. the labour market employer, or worker, or employment potential
opportunity
worker, or
potential
worker

20. the labour market production exchange use supply demand
offer&hire of labour
potential
supply demand

21. the labour market production exchange use supply demand allocation and
price fixing
supply demand

22. labour market the virtual space where,
in a more or less organised manner,
the demand for and the supply of
all sorts of labour will meet
and where wages are determined
In labour markets, exchanges are taking place: negotiations between employers and workers (or their representatives). The employer, ready to employ a certain quantity and quality of workers, considers alternatives to hiring labour, if any exist, in the light of the wages he (or she) is expected to pay; workers consider alternative jobs (if available) in the light of wages offered and other conditions of employment. The outcome of their respective considerations may or may not be a match; if it is, there is a price (wage) the employer is willing to pay and the worker is prepared to accept. At the end of the day, however, it may turn out that the supply of labour exceeded the demand, or vice versa. The imbalance may or may not be explained in terms of wage levels. If employers don’t find enough candidates they may wish (or have to) raise the wage they had in mind, and if there are too many they would certainly be tempted to lower it. But then, the workers they are looking for may not exist whatever the wage offered, or, in the alternative case, there may be a legal minimum wage, even in circumstances where there are by far not enough jobs for all who are seeking one.

23. free? market?
in free (labour) markets the forces of supply and demand are allowed to operate unhampered by government regulation or other interference; decisions by individual “buyers” and “sellers”are coordinated by movement in prices.

24. free? market? in reality, free labour markets don’t exist:
labour is not a commodity
people have rights
competition is far from perfect
contractual relationship inherently unbalanced
considerable information problems
decisions are subject to regulation
formal or informal

25. regulation different mixes of three modes of regulation:
statutory, i.e. through laws and decrees
hiring, firing, job security
minimum wages
“voice”, i.e. through collective bargaining
wages and other working conditions
market-based

26. regulation opposing views on its employment outcomes: Freeman(1993):
the “institutionalist” view
the “distortionist” view

27. regulation the “institutionalist” view:
regulation ensures social protection seen as instrumental in productivity growth (training, accumulating firm-specific skills) and as a means of moderating the effects of downswings in aggregate demand

28. regulation the “distortionist” view:
institutional forms of regulation impede adjustment to economic shocks, discourage hiring, and favour “insiders” (regular workers, mostly prime-age males) over “outsiders” (e.g.women and young workers)

29. regulation at the international level
the ILO Declaration on Fundamental Principles and Rights at Work (1998)
freedom of association and the effective right to collective bargaining
the elimination of all forms of forced or compulsory labour
the effective abolition of child labour
the elimination of discrimination in employment and occupation

30. labour market industrialised country
Between 1996 and 1999 both the demand and supply in this imaginary labour market increased. Only in 1998 did demand outstrip supply, meaning that certain vacancies remained unfilled and, probably, that certain wages were under an upward pressure. The equilibrium found in early 1999 is more likely, however, an outcome of factors other than wage levels, notably the sudden economic crisis starting in mid-1998 and manifest in a drastic reduction in domestic output.
By the way, what exactly do the figures on the vertical axis tell us? Let the group decide but the answer is: “nothing really”.
Is the triangle of 1998 an indication of the number of unemployed?
industrialised country

31. structural over-supply
labour market
structural over-supply
Between 1996 and 1999 both the demand and supply in this imaginary labour market increased. Only in 1998 did demand outstrip supply, meaning that certain vacancies remained unfilled and, probably, that certain wages were under an upward pressure. The equilibrium found in early 1999 is more likely, however, an outcome of factors other than wage levels, notably the sudden economic crisis starting in mid-1998 and manifest in a drastic reduction in domestic output.
By the way, what exactly do the figures on the vertical axis tell us? Let the group decide but the answer is: “nothing really”.
Is the triangle of 1998 an indication of the number of unemployed?
developing country

32. employment in developing countries
rural
urban
wage-
employment
self-
informal sector
agriculture
non-agric.

33. factors affecting labour markets
affecting both supply and demand side
failing institutions
labour market information
political instability, conflict
natural disasters
health crises

34. factors affecting labour markets
affecting the supply side
population growth
changes in labour force participation
migration within and between countries
the state of education and training

35. factors affecting labour markets
affecting the demand side:
economic/financial crises
changes in economic structure
technological change (ICT!)
proces innovation
product innovation
globalisation

36. labour markets of developing countries
structural over-supply of labour
generally low levels of education and training
significant un- and underemployment
more self-employment than wage-employment
large informal sector of the economy
institutional forms of regulation remain modest

37. labour market policies
production exchange use
supply demand

38. labour market policies
production
e.g. investing in human resources

39. labour market policies
exchange
e.g. labour market information

40. labour market policies
use
e.g. social protection

41. active labour market programmes
primary objectives: (re-) integration of the unemployed; productivity/income growth of under-employed
to increase the supply of needed skilled workers (e.g. training employed and unemployed, programmes for the disabled)
to increase the demand for workers (e.g. direct jobcreation, incentives to employers, self-employment/ SME promotion)
to improve matching workers and jobs (e.g.job search assistance, public employment services, mobility incentives)

42. passive labour market programmes
primary objective: income support to the unemployed
early retirement
severance pay
unemployment insurance
unemployment assistance
public works programmes

44. globalisation trade liberalisation and export growth
increase in direct foreign investment
globalisation of financial markets
rapid technological change
information revolution

45. globalisation increasing competitiveness
more flexible production systems
labour market flexibilisation
structural change
privatisation

46. globalisation
world-wide liberalisation of trade, investment and capital flows
exports world-wide are rising as a proportion of GDP
foreign direct investment flows have also risen sharply
growth of global production systems, incl. intra-firm trade in intermediate products, subcontracting, licensing, franchising, and out-sourcing arrangements across national frontiers
huge growth in volume of international trading in foreign exchange, bonds and equities, and new financial instruments

47. globalisation
With a view to maintaining competitiveness in international markets and to safeguard their balance of payments, Governments are under pressure to get their macro-economic policies “right” , to minimise “market distortions”, and to improve “allocative efficiency”.

48. globalisation
Hence, the widespread trend towards smaller government, including lower expenditure and taxes, reduced political support for redistributive measures, and deregulation of markets, including labour markets.

49. globalisation
At the same time, the pace of technological change and product obsolescence has increased, as enterprises try to keep one step ahead of their competitors at home and abroad. The aim is for flexible production systems:

50. globalisation flexible automation, lean production,
just in time delivery,
total quality management, and
flexible work forces

51. labour market segmentation
supply
supply
demand
demand
demand
supply

52. labour market segmentation
women

53. labour market segmentation
urban
rural

54. labour market segmentation
informal
formal

55. labour market segmentation
north
east
south
west

56. labour market segmentation
services other than commerce
commerce
manufacturing
agriculture
mining

57. labour market segmentation
unskilled workers
semi-skilled workers
technicians and other skilled workers
professional workers and managers

58. labour market indicators
population and labour force growth
labour force participation rates
education levels
per capita income data
income distribution data

59. labour market indicators
employment and unemployment data
wages and earnings data
output growth data
labour productivity data
employment elasticities

60. an introductory presentation by Fred Fluitman
employment policies
an introductory presentation by
Fred Fluitman
International Training Centre of the ILO
Turin, Italy, 2002

61. employment policies
according to the ILO (C122): all measures aimed, directly or indirectly, at promoting full, productive and freely chosen employment for women and men

62. such as policies which contribute to:
sustainable economic growth
an equitable distribution of income
employment-intensive investment
equal opportunities for all
a healthier labour force
greater employability and adaptability
enhanced entrepreneurship
the better functioning of labour markets
………………….

63. e.g. in the European Union:
the European Employment Guidelines call for concrete and urgent action along four lines:
employability
entrepreneurship
adaptability
equal opportunities

64. employability
making sure that people can develop the right skills to take up job opportunities in a fast changing world
active measures, e.g. training, as soon as possible after becoming unemployed
special help for groups facing the greatest difficulties in getting work, e.g.disabled people
targets for life-long learning opportunities

65. entrepreneurship
making it easier to start and run a business and to employ people in it
reforms in tax systems
cutting red tape
training for small enterprises

66. adaptability
developing new flexible ways of working to reconcile security and flexibility
new forms of employment and innovative ways of work organisation
making it easier and cheaper for companies to invest in training for their staff

67. equal opportunities
equal access to jobs for women and men, equal treatment at work
the same training and support opportunities for women and men to participate in the labour market on an equal footing
active policies making it less difficult to combine working life with family responsibilities, and to return to the labour force after a long absence

68. employment and development

69. employment and poverty

70. the problem of poverty in developing countries is largely an employment problem: that of the working poor

71. no work means
no income, means
poverty

72. not enough work means
not enough income, means
poverty

73. low productivity means
low income, means
poverty

74. achieving growth in output, by increasing both the quantity
reducing poverty means:
achieving growth in output,
by increasing both the quantity
and the quality of labour inputs

75. achieving growth in output, by creating additional jobs
reducing poverty means:
achieving growth in output,
by creating additional jobs
and raising productivity

76. increasing productive employment for women and men+ O E

77. pertinent policies: more productive workers more output
more and better jobs
more productive workers

78. more output fiscal and monetary reform removing trade restrictions
broadening access to credit
as well as access to technology
investing in infrastructure

79. more and better jobs
promoting the use of efficient, yet employment-intensive techniques
reallocating investment in favour of labour-absorbing sectors
targeting the disadvantaged
improving conditions for small and micro-enterprises

80. more productive workers
education and training
heath and nutrition
appropriate technology
safety at work

81. the roots of poverty lacking sufficient (labour) income
lacking assets (valuable possessions)
inequality, discrimination
lacking a voice, lacking power
adverse shocks
lacking social protection

82. reducing poverty as summed up by the ILO: by promoting decent work:
productive employment for all
respect for fundamental rights at work
social protection
social dialogue

83. reducing poverty creating an appropriate climate peace and stability
social dialogue
taking pertinent policy decisions
sufficient “homework”
a comprehensive, coherent, integrated approach
political will and implementation capacity

84. reducing poverty addressing employment and income
achieving high rates of sustainable growth
ensuring that growth is employment-intensive without sacrificing productivity and efficiency
providing the poor greater access to employment
doing away with discrimination at work
raising productivity (income) of the working poor in particular by addressing their (lack of) assets
increasing terms of trade for what the poor produce

85. reducing poverty addressing assets
addressing asset inequalities, access to assets
boosting human capital: health, education, ...
investing in physical capital, infrastructure, ….
caring for natural assets: land, water, …..
allowing social assets to develop: networks, ...
broadening access to financial assets: credit, ...

86. reducing poverty empowering the working poor
respecting human rights and core labour standards
giving people a voice
boosting representation and social dialogue
providing for effective decentralisation
increasing social protection
extending insurance schemes
putting safety nets in place

87. employment policies