International standards concerning labour market concepts and definitions Farhad Mehran Economic Development Board (LMRA project) Bahrain, 9 May 2006

2 Three lectures on labour market data Labour market concepts and definitions: ILO international standards (9 May 2006) Sources of labour market data: A national statistical programme (June 2006) Combining data from different sources: Principles of labour accounting (July 2006)

3 Labour market concepts and definitions ILO international standards (5’) Employment, unemployment (20’) Underemployment, inadequate employment (10’) Status in employment (5’) Wages (15’) Hours of work (10’) Private/Public sectors (10’) Informal/Formal sectors (5’) GDP and Labour market (5’) Labour productivity (5’)  Bibliography  Index Slide 4p. 1 Slides 5-20pp. 2-5 Slides 21-28pp. 6-7 Slides 29-36pp. 8-9 Slides 37-44pp Slides 45-52pp Slides 53-56p. 14 Slides 57-64pp Slides 65-66p. 17 Slides 67-68p. 17  Slides 69-70p. 18  Slides 71-72p. 18

4 International labour statistics Scope of labour statistics –Economically active population, employment, unemployment, underemployment –Income from employment, wage rates, earnings, labour cost –Normal hours of work, usual hours of work, actual hours worked, and hours paid for –Informal sector employment, and informal employment –Occupations –Status in employment –Occupational injuries and diseases –Labour disputes (& child labour, forced labour, decent work) International standards –ILO Convention 160 & ILO Recommendation 170 –ICLS Resolutions –ILO Manuals on concepts and methods

5 Person Job Establishment Enterprise Main tasks and duties Main goods and services produced Nature of legal entity Occupational category ISCO-1988 Branch of economic activity ISIC Rev 3 Institutional sector SNA 1993 Status in employment ICSE 1993 Worker-employer relationship Activity during reference period Economically active population ICLS 1982 Elements of the statistical system Wages, Hours of work Labour cost, Productivity

6 Usually active population Currently active population (labour force ) Long reference period (e.g. one year) Economically active population Short reference period (e.g. one week) 1 ILO, Resolution concerning statistics of the economically active population, employment, unemployment and underemployment, Thirteenth International Conference of Labour Statisticians, Geneva, October Hussmanns, R., Mehran, F., and Verma, V., Surveys of Economically Active Population, Employment, Unemployment and Underemployment: An ILO Manual on Concepts and Methods, ILO, Geneva (Translated in Arabic, Persian, Portuguese, Russian, and Spanish.) Definition: All persons of either sex who furnish the supply of labour for the production of economic goods and services as defined by the UN systems of national accounts and balances during a specified time-reference period. 1,2

7 Pop15+ Labour force Employed Unemployed Inactive Conceptual framework ICLS 1982 of which Underemployed

8 Definition of employment Employed Paid employment At work With a job but not at work Self- employment At work With an enterprise but not work

9 Definition of “at work” AT WORK = Performed some work for wage or salary, or profit or family gain, in cash or in kind during the reference period WORK = Engagement in economic activity SOME WORK = Work for at least one hour during the reference period

10 Definition of “economic activity” SNA production boundary Production of goods and services Goods For market For own final consumption Services For market For own final consumption Collecting Fire woods Carrying water at long distances

11 Definition of “Absence from work” Persons with a job but not at work = in paid employment if formal job attachment Continued receipt of wage or salary Assurance of return to work Limited elapsed duration of absence Persons with an enterprise but not at work = in self employment if Continued existence of enterprise Specific reason for absence

12 Treatment of particular groups Students, homemakers, pensioners engaged in economic activity Contributing family workers (unpaid family workers) Producers for own and household consumption Apprentices and trainees Members of the armed forces

Standard definition of unemployment Without work during reference week Without work during reference week Currently available for work Currently available for work Actively seeking work in recent period Actively seeking work in recent period Two exceptions Two exceptions Future starts Future starts Lay-offs Lay-offs

Reference periods Interview date Basic reference period Job search period (Last four weeks) Availability period (Last week + 2 weeks) Last week

15 Active steps to seek work Registration at public or private employment exchange (for the purpose of obtaining a job offer) Application to employers Checking at worksites, farms, factory gates, market or other assembly places Seeking assistance of friends or relatives Looking for land, building, machinery or equipment to establish own enterprise Arranging for financial resources Applying for permits and licenses, etc.

16 Reasons for not seeking work Illness, disability, pregnancy Child care, family responsibilities School or other training Already found work to start later Awaiting recall to former job Awaiting replies from employers, results of competitions Awaiting busy season Believing no suitable work available (in area or relevant to one’s skills) Lacking employers’ requirements (qualifications, experience, age, etc.) Could not find suitable work Do not know how or where to seek work Not yet started to seek work Other reasons (bad weather, holidays, awaiting national service call, near retirement age, etc.)

17 Extended definition of unemployment Partial relaxation of “seeking work” criterion Persons temporarily laid off without formal job attachment Discouraged workers Seasonal workers awaiting busy season

18 MoL/BCSR Labour force survey December ’800 18’ ’600 27’000 26’ ’600 1’ ’700292’ ’ ’500 Employed 117’000 Unemployed 26’000 Inactive 149’700

19 Methods of job-search of unemployed Bahrainis Survey jobseekers26’000 search effort = Ministry of Labour12’ ’778 3 MoL CSB 3’ ’862 4 CBS - Employment services 3’500 - Newspaper ads10’500 - Internet 1’000 - Friends & relatives 8’700 - Starting own business Other 4’200 Total= 44’ ’600; 2 2’800 among core jobseekers. 3 Indicators of the Labour Market , (in Arabic) by Isma Al-Khalifa, Sana Maci, Anwar Al-Khunaisi, Ministry of Labour, Kingdom of Bahrain, May Civil Service Bureau, Kingdom of Bahrain, Annual Report 2004, p. 13.

20 Reservation wage of unemployed Bahrainis Reservation wage: Each worker has a specific wage rate that induces him or her to perform paid market work. A worker seeking work employment will accept jobs paying above his or her reservation wage, and reject those paying less.

Beyond unemployment Unemployment and its halo Unemployment and its halo Underemployment Underemployment Over-employment Over-employment Soft-employment Soft-employment Other issues: Other issues: – Child labour – Full-time employment of women with low age children – Old age without pension

22 Underemployment and inadequate employment situations 1 Characteristic of “employment” Based primarily on “current capacities and work situations of worker” (not potential capacities and desires for work) Judged against “alternative employment situation in which worker is willing and available to engage” 1 ILO, Resolution concerning the measurement of underemployment and inadequate employment situations, Sixteenth International Conference of Labour Statisticians, Geneva, October 1998.

23 Time-related underemployment Willing to work additional hours Available to work additional hours Worked less than a threshold relating to working time Two particular groups : Persons who usually work part-time schedules and want to work additional hours Persons who during the reference period worked less than their normal hours of work Definition:

24 Inadequate employment situations Skill-related inadequate employment wanting or seeking to change their current work situation in order to use their current occupational skills more fully, and were available to do so Income-related inadequate employment wanting or seeking to change their current work situation in order to increase income limited as result of low levels of organisation of work or productivity, insufficient tools or equipment and training or deficient infrastructure, and were available to do so Inadequate employment related to excessive hours wanting or seeking to work less hours either in the same job or in another job, with a corresponding reduction of income

25 Other forms of inadequate employment situations Wanting to change current work situation or to make changes to work activities and/or environment For following reasons: –Excessive hours of work –Precarious job –Inadequate tools, equipment or training for assigned tasks –Inadequate social services –Travel to work difficulties –Variable, arbitrary or inconvenient work schedules –Recurring work stoppages because of delivery failures of raw material or energy –Prolonged non-payment of wages –Long overdue payments from customers

26 Underemployment and inadequate employment situations 1’ ’300 24’500 82’600 34’400 7’200

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29 Status in employment 1 EmployeesEmployers Own-account workers Members of producers’ cooperatives Contributing family workers Workers not classifiable by status 1 ILO, International Classification of Status in Employment, Fifteenth International Conference of Labour Statisticians, Geneva, Classification :

30 Employees Working in “paid employment job” –Holding explicit (written or oral) or implicit employment contract –Remuneration not directly dependent upon the revenue of the unit for which they work Remuneration: –Wages and salaries –Commission from sales –Piece-rates –Bonuses –In-kind payments such as food, housing or training Definition :

31 Employers Working on own-account or with one or a few partners In “self employment job”: Remuneration is directly dependent on the profits (or potential for profits) derived from the goods and services produced or for own consumption Engaging one or more “employees,” on a continuous basis, determined by national circumstances Definition :

32 Own-account workers Working on own-account or with one or a few partners In “self employment job Not engaging any “employees,” on a continuous basis, during the reference period Definition :

33 Members of producers cooperatives Working in a cooperative producing goods and services In “self employment job” Engaging or not any “employee” on a continuous basis Definition :

34 Contributing family workers Working in a market-oriented establishment operated by a household member, who cannot be regarded as partner In “self employment job” Engaging or not any “employee” on a continuous basis Definition :

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36 Source:

37 System of Wages Statistics Wages as price of labour: Wages as income to worker: Wages as cost to employer: Income from employment 3 Wage rate 1 Earnings 1 Labour cost 2 1 Twelve International Conference of Labour Statisticians, Geneva, October Eleventh International Conference of Labour Statisticians, Geneva, October Sixteenth International Conference of Labour Statisticians, Geneva, October 1998.

38 Wage rate  Basic wages  Cost-of-living allowances  Other guaranteed and regularly paid allowances Excludes: Overtime payments, Bonuses and gratuities, Family allowances, Other social security payments by employers, Payments in kind, supplementary to normal wage rates Definition: Rate of pay per period of time or per unit of production for an employee on a given job. Includes:

39 Earnings Direct wages and salaries Direct wages and salaries Remuneration for time not worked Remuneration for time not worked Bonuses and gratuities Bonuses and gratuities Payments in kind Payments in kind Excludes: Employers’ contributions to social security and pension schemes, severance and termination pay. Definition: Remuneration in cash or in kind paid to employees, as a rule at regular intervals, for time worked or work done together with remuneration for time not worked such as annual vacation and other paid leave or holidays.

40 Labour cost Earnings Earnings+ Employers’ social security expenditure Employers’ social security expenditure Cost of vocational training Cost of vocational training Cost of welfare services Cost of welfare services Taxes regarded as labour cost Taxes regarded as labour cost Other (transport, clothing, recruitment) Other (transport, clothing, recruitment) Definition: Labour cost is the cost incurred by the employer in the employment of labour.

41 Three types of labour cost Basic labour cost: Hourly labour cost: Unit labour cost: Labour cost per worker Labour cost per hour Labour cost per unit of output Labour cost index: The labour cost index measures the change in labour cost during a given period adjusted for employment shifts among occupations and branches of economic activity in that period.

42 Employment-related income Income related to paid employment Earnings Profit-related pay Employment-related social security benefits received directly from employer, or from social security or compulsory insurance schemes or the State Income related to self-employment Gross profit (or share of profit) Remuneration received by owner-manager of corporations and quasi- corporations Employment-related social security benefits received Excludes: Income derived from property income, annuities, gifts, etc. and allowances paid by social security schemes or the State without regard to allowances paid by social security schemes or the State without regard to employment status employment status Definition: Payments, in cash, in kind or in services, which are received by individuals, for themselves or in respect of their family members, as a result of their current or former involvement in paid or self-employment jobs.

43 Jordan 1997 Economic activity Isic Rev 3 Earnings Labour cost * Ratio Dinars/MonthDinars/Year Textile Office machinery TV, radio, etc * Compensation of employees

44 Labour cost = wage rate * (1 + r) + a r = variable component a = fixed component

45 Hours of work 1 Normal hours of work Normal hours of work Actual hours worked Actual hours worked Usual hours of work Usual hours of work Hours paid for Hours paid for 1 Tenth International Conference of Labour Statisticians, Geneva, October 1962.

46 Normal hours of work Hours of work fixed by or in pursuance of –laws and regulations –collective agreements –arbitral awards (If not fixed as above) Hours of work in excess of which –remuneration is at overtime rate, or –forms an exception to the rules or customs of the establishment relating to the class of workers concerned Definition :

47 Actual hours worked Hours worked during normal hours of work Overtime work Time spent at the place of work on –preparation of work –waiting or standing by –short rest periods including tea or coffee breaks Definition :

48 Hours paid for Hours actually worked Hours paid for but not worked –Paid annual leave –Paid public holidays –Paid sick leave –Paid meal breaks –Time spent travelling between home and workplace Definition :

49 Usual hours of work Hours worked in an activity during a typical week Modal value of hours actually worked per week over a long period Definition : Calculation :

50 Source:

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53 Institutional units Household Household unincorporated market enterprise Household enterprise producing for own final use Other types of household Legal or social entity Government unit Corporation Company Partnership Cooperative Proprietorship Other legal forms Non-profit institution Definition of an institutional unit: An economic entity that is capable, in its own right, of owning assets, incurring liabilities and engaging in economic activities and in transactions with other entities.

54 Institutional units by sector Institutional units Sectors Non- financial corporatio ns sector Financial corporations sector General govern ment sector NPIserving hslds sector House- hold sector Corporations 1 xx Government units x Non-profit institutions xxxx Householdsx 1 Including all quasi-corporations, whether owned by households, government units or non-resident institutional units.

55 Public – Private sector boundaries 1 Total economy Public sector Non-market sector General government Market sector Public corporations Public non- financial corporations Public financial corporations Private sector “controlled + mainly financed” “economically significant prices” 1 United Nations, “Government/Public Sector/Private Sector Delineation Issues,” Task Force on Harmonisation of Public Sector Accounting, Fourth meeting of the Advisory Expert Group on National Accounts, 30 January – 8 February 2006, Frankfurt, SNA/M1.06/17. Ability to determine the entity’s general corporate policy, by appointing directors, if necessary Prices that have a significant influence on the amounts the producers are willing to supply and on the amounts the purchasers wish to buy

56 Public sector employment in Bahrain, 2004 Sub-sector Total employed Bahraini employed Government services and public administration 83’80049’300 Public non-financial corporations 13’100 9’100 9’100 Public financial corporations Other (education and health?) - - Total (32%/49% of total employment) 97’60059’000 Source: Ministry of Labour, Bahrain Centre for Studies and Research, Labour Force Survey, December 2004.

57 Domestic workers Free visas Ghost workers

58 Informal Informal sector 1 - Economic units with informal features - Economic units with informal features Informal employment 2 Informal employment 2 - Jobs with informal features 1 ILO, Resolution on the measurement of employment in the informal sector, Fifteenth International Conference of Labour Statisticians, Geneva, January ILO, Guidelines on statistics of informal employment, Seventeenth International Conference of Labour Statisticians, Geneva, November 2003.

59 Informal sector enterprises Subset of household enterprises (SNA unincorporated enterprises owned by households) Informal own-account enterprises –Either all own-account enterprises –Or, only those that are not registered under specific forms of national legislation Enterprises of informal employers –Small in terms of employment –Not registered (in the same sense as for informal own-account enterprises) –Non-registration of its employees

60 Household sector Employers Enterprises of informal employers Own-account workers Informal own-account enterprises Employees Recipients of property and transfer incomes Recipients of property income Recipients of pensions Recipients of other transfer incomes Informal sector

61 Informal employment Combination of following criteria:  Written or oral contract  Paid annual leave  Paid sick leave  Employer’s contribution to social security schemes

62 Employment in the Informal Economy (Brazil, percentages, 1999) Informal employment Formal employment Informal sectorA (33.1%) B (4.7%) Other sectorsC (27.4%) D (34.8%) Employment in the informal sector: A + B(37.8%) Informal employment: A + C(60.5%) Informal employment outside the informal sector: C (27.4%) Employment in the informal economy: A + B + C (65.2%)

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65 GDP and the Labour Market 1Population 2 Population 15+ 2/1 Proportion of population aged15 years and over 3 Labour force 3/2 Labour force participation rate 4Employed4/3 1-Unemployment rate 5 Hours worked 5/4 Average hours worked 6GDP6/5 Labour productivity 6/1 GDP per capita

67 Labour productivity Amount of output per unit of labour Value-added based measure: Value-added based measure: Quantity index of value added Quantity index of labour input Quantity index of labour input Output based measure: Quantity index of gross output Quantity index of labour input

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69Bibliography ILO, Resolution concerning statistics of hours of work, Tenth International Conference of Labour Statisticians, Geneva, October ILO, Resolution concerning statistics of labour cost, Eleventh International Conference of Labour Statisticians, Geneva, October ILO, Resolution concerning an integrated system of wages statistics, Twelve International Conference of Labour Statisticians, Geneva, October ILO, Resolution concerning statistics of the economically active population, employment, unemployment and underemployment, Thirteenth International Conference of Labour Statisticians, Geneva, October ILO, International Classification of Status in Employment, Fifteenth International Conference of Labour Statisticians, Geneva, ILO, Resolution concerning of statistics of employment in the informal sector, Fifteenth International Conference of Labour Statisticians, Geneva, January ILO, Resolution concerning the measurement of employment-related income, Sixteenth International Conference of Labour Statisticians, Geneva, October ILO, Resolution concerning the measurement of underemployment and inadequate employment situations, Sixteenth International Conference of Labour Statisticians, Geneva, October 1998.

70 Bibliography (cont’d) ILO, Guidelines on statistics of informal employment, Seventeenth International Conference of Labour Statisticians, Geneva, November ILO, Hussmanns, R., Mehran, F., and Verma, V., Surveys of Economically Active Population, Employment, Unemployment and Underemployment: An ILO Manual on Concepts and Methods, ILO, Geneva (Translated in Arabic, Persian, Portuguese, Russian, and Spanish.) Kingdom of Bahrain, Ministry of Labour, and Bahrain Centre for Studies & Research, Labour Force Survey, December 2004, SPSS data file. Kingdom of Bahrain, Central Informatics Organisation, Census of Population, Housing, Buildings, and Establishments – 2001, Part two The Demographic, Social, Economic Characteristics of the Population, Housing, Buildings and Establishments, December Kingdom of Bahrain, Civil Service Bureau, Annual Report 2004, p. 13. Kingdom of Bahrain, Ministry of Labour, Indicators of the Labour Market , (in Arabic) by Isma Al-Khalifa, Sana Maci, Anwar Al-Khunaisi, Ministry of Labour, May United Nations, “Government/Public Sector/Private Sector Delineation Issues,” Task Force on Harmonisation of Public Sector Accounting, Fourth meeting of the Advisory Expert Group on National Accounts, 30 January – 8 February 2006, Frankfurt, SNA/M1.06/17.

71 Index Economically active population Currently active population Usually active population Labour force Labour force participation rate Economic activity Production boundary WorkEmployment Employment-population ratio Seeking work Availability for work Unemployment Unemployment rate Seasonal worker Discouraged worker Underemployment Time-related underemployment Inadequate employment Skill-related inadequate employment Income-related inadequate employment Over employment JobOccupation Branch of economic activity Absence from work Formal job attachment Paid employment job Self-employment job Status in employment EmployeeEmployer Own-account worker Unpaid family worker (Contributing family worker) Member of producer’s cooperative

72 Index (cont’d) Establishment Institutional unit EnterpriseCorporationQuasi-corporation Government unit Non-profit institution Public sector Private sector Market sector Non-market sector Household sector Informal sector Informal employment Informal economy Hidden economy Unrecorded activities Wages Wage rate Earnings Labour cost Labour cost index Unit labour cost Hourly labour cost Employment-related income Hours of work Normal hours of work Actual hours worked Usual hours of work Hours paid for GDPGoodsServices Value added Labour productivity

73 Questionnaire 3. Which topics have been the most clearly described? a. ________________________ b. ________________________ c. ________________________ 4. Which topics, in your view, require further clarification? a. _________________________ b. _________________________ c. _________________________ 5. Were the numerical examples appropriate for comparing Bahrain in relation to other countries? a. Yes, explain ______________ b. No, explain ______________ 1.Among the topics discussed in the lecture, which do you think are more relevant for the analysis of the labour market in Bahrain? a. _________________________ b. _________________________ c. _________________________ 2. Are there any other topics not discussed in the lecture that you think should be included in relation to the analysis of the labour market in Bahrain? a. _________________________ b. _________________________ c. _________________________