Methodology for Assessing the Impact of Major Projects on Employment Sara Savastano, UVAL

Methodology for Assessing the Impact of Major Projects on Employment OBJECTIVES ex ante evaluationTo make and ex ante evaluation of employment impact of Major Projects (COUNCIL REGULATION 1260/1999 Art. 25/26) To take better account of employment impact of major projects at the early stage of the decision making process during the preparation of the project proposal To help member states and/or the managing authorities, by means of an user friendly procedure, estimating and evaluating the composition of the labour demand in a major project financed by the EU.

MOTIVATIONS Lack of information, on the feasibility studies prepared by Italian managing authorities, upon the relation between major projects and job creation Delay in the approval process by the services of the European Commission: request of comments and integrations especially on this topic As a matter of fact, in the Special Issue of the Annual Report 12/2001 of the European Court of Auditors, there is evidence of difficulty in evaluating impact of communitarian programmes on employment

Major Projects Definition Major Projects: Art. 25 of the Council Regulation 1260/1999 of June 21st states: The Structural Funds may finance expenditure in respect of major projects, i.e. those: a) which comprise an economically indivisible series of works fulfilling a precise technical function and which have clearly identified aims; and b) whose total cost taken into account in determining the contribution of the Funds exceeds 50 Million EURO.

Different type of MP Infrastructure investment Productive investment Transport Infrastructure Other Public Infrastructure Private Structure for services and goods production

Major Projects 30 MP presented by MA to EU from part of the Transport National Operational Program 7 part of Regional Operational Program SICILY 6 part of Regional Operational Program CAMPANIA 5 part of Regional Operational Program PUGLIA 2 part of Regional Operational Program CALABRIA 1 part of Regional Operational Program SARDEGNA  At April 2006 only 7 fully approved

Iter of Approval

Comments on the procedural aspect (lack of documentation on specific topics, authorizations, concerning the implementation of the project) Technical Comments: (Demand Analysis, Sensitivity and risk Analysis, Economic Analysis, Financial Analysis, Environmental Impact, Territorial Impact Analysis Employment Impact Analysis)

MP and Employment (2) Impact of Major Projects on employment: Art. 26 ….the member states or the managing authorities shall provide an ex ante evaluation of the contribution to the major project on employment. In particular: a) the direct and indirect effects on the employment situation, as far as possible in the Community; b) The Commission shall appraise the project, consulting the EIB if necessary, in the light of the expected economic and social benefits, particularly in terms of employment, having regard to the financial resources deployed

Employment Data and MP: Theory versus Practice THEORY THEORY: Specific surveys on construction firms: data on demand and supply of labour in each sector of interest Example: Survey on construction firms of public infrastructure: Past employment conditions Individual characteristics of employees (age, sex, education) Average wages received (actual and past) Sector of origin Geographical mobility (on the local, national and European market) Sectoral mobility Recruitment strategy of the firms involved in the project

Employment Data and MP: Theory versus Practice PRACTICE Unavailability of firm data and labour data at the sector level (construction of roads, railways, airports, container terminals, etc…) Italian Institutions who collect data on construction firms do not have data disaggregated on specific public infrastructures Construction sector in Italy encompasses public work and building construction: difficulty to compute the relative contribution to employment.

Employment Data and MP: Proposed Solution In our methodology we use the national quarterly labour force survey (RTFL) carried out by the Istat - the national statistics institute -, RTFL provides population estimates for the main labour market characteristics, such as employment, unemployment, inactivity, hours of work…

RTFL and ILO Active PopulationActive Population 1.Employed persons are all persons who during the reference week worked at least one hour for pay or profit, or were temporarily absent from such work. 2.Unemployed persons are all persons who were not employed during the reference week, had actively sought work during the past four weeks and were ready to begin working immediately or within two weeks Inactive PopulationInactive Population are all persons who are classified neither as employed nor unemployed.

Italian Quarterly Labour Force Survey The matrix reports the entrance, exit, and permanence of the labour force in the labour market. It is therefore possible to compute the probability of transition between employment state. It summarizes the composition of the labour demand (employed at a specific date where previously employed, unemployed or inactive) strongly underline assumptionThe strongly underline assumption is that the project under analysis has only marginal effect on the overall economy, and therefore, the composition of the employment follows the aggregate level of employment

Italian Quarterly Labour Force Survey Final Period t+1 Employed Initial Period t EmployedN1 UnemployedN2 InactiveN3 Total t+1TO t+1

Italian Quarterly Labour Force Survey  N1/TO t+1 = % of employed in t+1 already employed;  N2/TO t+1 = % of employed in t+1 previously unemployed  N3/TO t+1 = % of employed in t+1 previously inactive.

Italian Quarterly Labour Force Survey

Methodology Procedure (1) Based on RTFL we have prepared an excel spreadsheet that MC/MA will complete. User friendly procedure to compute employment composition during the construction and operational phases Common methodology for all MP => advantage of comparability MC/MA have to fill only few cells and comment the results based on territorial, sectoral and labour market context

Methodology Procedure (2) What does the methodology compute: skilledunskilledDirect and Indirect Employment Composition of skilled and unskilled workers based on their previous employment activity (employed, unemployed or inactive) skilled workers employedThe hypothesis is that skilled workers were already employed in other activities. Unskilled workers employed, unemployed and inactiveUnskilled workers are divided into previous employed, unemployed and inactive workers based on the share computed from the RTFL

Methodology Procedure (3) WhatWhereWhat and Where are the data to use: Engineers and technical project analysts will estimate the amount of workers needed divided into skilled and unskilled workers during the construction and the operational period. By filling a few cells of the excel spreadsheet the results are computed automatic

Methodology Procedure Example From RTFL From RTFL Only cells to fill

Potential and Limitations POTENTIALPOTENTIAL 1.User friendly procedure 2.Use the best data available 3.Comparability 4.Discussed with EU LIMITATIONSLIMITATIONS 1.Use national data instead of regional ones 2.Same procedure for direct and indirect job creation

Specific Next Steps Use Input Output Procedure to compute indirect effect At the moment we have the procedure using national input output matrix We are involved in a project for the regionalization of the input output matrix