Social indicators for policy-making Daniel Kostzer UMKC, April 2006

Introduction The usefulness of social indicators for the design and definition of social policies The usefulness of social indicators for the design and definition of social policies –Define the problems to address –Define targeted populations –Definition of plans, programs and tools

Methods to meassure poverty Indirect method Indirect method –Household Income –Household Expenditures Direct method Direct method –Unsatisfied basic needs indicators Merging of methods Merging of methods –Katzman matrix

Indirect method Definition of the poverty line Definition of the poverty line Definition of indigence line Definition of indigence line The problem of circularity in the definition of the poverty line The problem of circularity in the definition of the poverty line Using consumption Using consumption –Stable, but does not takes into account savings (future or past consumption) –Food expenditure Using incomes Using incomes –Volatile, defines entitlement, or potential well being

Incomes and expenditure according deciles of income distribution

Food expenditure by deciles of income distribution

Sen’s axioms on poverty indicators Targeting Targeting Monotonicity Monotonicity Transference Transference The index should point out who are the poor The index should point out who are the poor When a poor person looses its income the index should reflect that When a poor person looses its income the index should reflect that When a poor person transfers his income to other less poor but that remains poor When a poor person transfers his income to other less poor but that remains poor

Emerging indicators with the indirect method Incidence of poverty Incidence of poverty Intensity of poverty Intensity of poverty

Combined indirect indicators: Sen’s index

Lorenz curve for Argentina

Gini coefficient The formula The formula Calculate the area below the Lorenz curve L Calculate the area below the Lorenz curve L Simpson integration Simpson integration If Gini=0 perfect equality If Gini=0 perfect equality If Gini=1 absolute inequality If Gini=1 absolute inequality

Direct indicators (UBN) The UBN indicators are direct since they emerge after direct observation of households and individuals The UBN indicators are direct since they emerge after direct observation of households and individuals They do not reflect (necessary) monetary incomes of the households, but the level of satisfaction of certain needs. They do not reflect (necessary) monetary incomes of the households, but the level of satisfaction of certain needs.

Types of direct indicators Result indicators Result indicators Input indicators Input indicators Access indicators Access indicators % of households with more than 3 members in each room % of households with more than 3 members in each room % of houses without sanitation % of houses without sanitation % of HH without running water % of HH without running water % of HH with kids that do not assist to school % of HH with kids that do not assist to school Doctors per 1000 inhabitants Doctors per 1000 inhabitants Teachers per 1000 inhab. Teachers per 1000 inhab. Public expenditure in health Public expenditure in health % of pop. With vaccination % of pop. With vaccination Free hospitals, schools Free hospitals, schools School in X miles School in X miles

Combination of methods: Katzman matrix Income Income UBN UBN Under PL Over PL With UBN Structural Poverty Inertial Poverty Without UBN New Poor No Poor

Targeting and resources allocation There should be a clear cut between the objective population and the eligibility criteria for the design of social policies There should be a clear cut between the objective population and the eligibility criteria for the design of social policies They can be universal They can be universal They can be targeted (a la WB) They can be targeted (a la WB) Or can be combined Or can be combined

Tools for targeting Categorical targeting Categorical targeting –Age groups (kids, old) –Social groups or clusters (unemployed, poor, ethnic groups) –Regional Proxy to means testing Proxy to means testing Self-targeting Self-targeting –Incomes –Waiting lists, lines –Previous registration

Categorical targeting Benefits are provided according to demand to every individual in a certain region, group of people or combination of both Benefits are provided according to demand to every individual in a certain region, group of people or combination of both Requires the categorization of regions according to the intensity of the desired indicator Requires the categorization of regions according to the intensity of the desired indicator It works well when there is high correlation between poverty and localization It works well when there is high correlation between poverty and localization It requires deep knowledge of the demographic composition of the region or groups It requires deep knowledge of the demographic composition of the region or groups Combining the two systems provides the best results Combining the two systems provides the best results

Proxy of means testing Assumes incomes to target, but also that there are registration problems due to under or miss declaration Assumes incomes to target, but also that there are registration problems due to under or miss declaration Uses correlations between HH characteristics (some of them structural) and incomes (water, tv, car, type of house) Uses correlations between HH characteristics (some of them structural) and incomes (water, tv, car, type of house) These models give a probability that a HH would have the income required to be into the program These models give a probability that a HH would have the income required to be into the program The aplicability of the selection model depends on the relationship existing between the income and HH characteristics The aplicability of the selection model depends on the relationship existing between the income and HH characteristics

Self selection Consist in defining incentives tight enough to avoid tempting other people than the intended to apply for the benefit Low benefit Low benefit Work commitment Work commitment Waiting list and queues Waiting list and queues Difficulties collecting the benefit Difficulties collecting the benefit

Labor market institutions and the concept of Decent Work Daniel Kostzer Kansas City, April 2006

Some figures… open unemployment in the world is about 160 million, of whom some 53 million live in industrialized and transition economies. An additional 310 million do not have enough work; open unemployment in the world is about 160 million, of whom some 53 million live in industrialized and transition economies. An additional 310 million do not have enough work; it is currently estimated that there are some 530 million “working poor” earning less than enough to generate a family income of US$1 per day per capita to support the rest of the 1.2 billion who are living below the poverty line; it is currently estimated that there are some 530 million “working poor” earning less than enough to generate a family income of US$1 per day per capita to support the rest of the 1.2 billion who are living below the poverty line; in recent years, the global economy has been creating about 40 million jobs a year, whereas there are 48 million new jobseekers annually; in recent years, the global economy has been creating about 40 million jobs a year, whereas there are 48 million new jobseekers annually; over the next decade, the world’s labor force is projected to increase by 500 million workers, 97 per cent of whom will be in developing countries. over the next decade, the world’s labor force is projected to increase by 500 million workers, 97 per cent of whom will be in developing countries.

Somavia, 1999 Decent work as productive toil in which rights are respected, security and protection are provided, as well as the possibility to take part in all decisions that may affect workers Decent work as productive toil in which rights are respected, security and protection are provided, as well as the possibility to take part in all decisions that may affect workers Opportunities for women and men to obtain decent and productive work in conditions of freedom, equity, security and human dignity. Opportunities for women and men to obtain decent and productive work in conditions of freedom, equity, security and human dignity.

In simple words… it is productive and secure work it is productive and secure work it ensures respect of labor rights it ensures respect of labor rights it provides an adequate income it provides an adequate income it offers social protection it offers social protection it includes social dialogue, union freedom, collective bargaining and participation it includes social dialogue, union freedom, collective bargaining and participation

Dimensions of decent work ILO 2000 a) Opportunities for work; a) Opportunities for work; b) Work in conditions of freedom; b) Work in conditions of freedom; –Bonded labor, slave, child labor c) Productive work c) Productive work –To ensure livelihoods of workers and families, as well to ensure sustainable development and competitiveness of enterprises and countries d) Equity in work d) Equity in work –Fair and equitable treatment and opportunities, avoidance of discriminations. e) Security at work e) Security at work –Safeguarding health, pensions, livelihood, limits to the insecurity of loosing the job f) Dignity at work f) Dignity at work –Voice and participation in decision making about their own working conditions

Measurement categories of decent work Employment opportunities Employment opportunities Unacceptable work Unacceptable work Adequate earnings and productive work Adequate earnings and productive work Decent hours Decent hours Stability and security of work Stability and security of work Balancing work and family hours Balancing work and family hours Fair treatment in employment Fair treatment in employment Safe work environment Safe work environment Social protection Social protection Social dialogue and workplace relations Social dialogue and workplace relations Economic and social context of decent work Economic and social context of decent work

Employment opportunities Labor force participation rate Labor force participation rate Employment/population ration Employment/population ration Unemployment rate Unemployment rate Youth unemployment rate Youth unemployment rate Time related underemployment rate Time related underemployment rate Share of wage employment in total employment Share of wage employment in total employment

Unacceptable work Children not in school by employment status Children not in school by employment status Children in wage employment or self- employed activities Children in wage employment or self- employed activities Forced labor Forced labor

Adequate earnings and productive work Percentage of employed earning less than one half of median earnings Percentage of employed earning less than one half of median earnings Average earnings Average earnings Excessive hours of work Excessive hours of work Time related underemployment Time related underemployment Employees with recent job training Employees with recent job training

Decent hours Excessive hours of work (over- employment) Excessive hours of work (over- employment) Time related underemployment rate Time related underemployment rate Atypical or asocial work hours (or seasons) Atypical or asocial work hours (or seasons)

Stability and security at work Tenure less than one year Tenure less than one year Temporary work Temporary work Intermittency of employment Intermittency of employment

Balancing work and family life Employment rate for women with children under compulsory school age Employment rate for women with children under compulsory school age Excessive hours of work Excessive hours of work Flexibility of work and accommodation of family needs (sick child leave, birth leave, etc.) Flexibility of work and accommodation of family needs (sick child leave, birth leave, etc.) Availability of child care Availability of child care Workplace issues connected with population ageing Workplace issues connected with population ageing

Fair treatment in employment Occupational segregation by sex Occupational segregation by sex Female share of employment in managerial and high level occupations Female share of employment in managerial and high level occupations Female share of non-agricultural wage employment Female share of non-agricultural wage employment Female/male earnings ration Female/male earnings ration

Safe work Fatal occupational injury rate Fatal occupational injury rate Labor inspection (number of inspectors) Labor inspection (number of inspectors) Occupational injury insurance coverage Occupational injury insurance coverage Excessive hours of work Excessive hours of work Health insurance coverage Health insurance coverage Occupational stress and injury rate Occupational stress and injury rate

Social Protection Public social security expenditure Public social security expenditure Public expenditure on needs-based cash income support Public expenditure on needs-based cash income support Beneficiaries of cash income support (% of poor) Beneficiaries of cash income support (% of poor) Share of population over 65 years benefiting from pension Share of population over 65 years benefiting from pension Share of EAP contributing to pension fund Share of EAP contributing to pension fund Average monthly pension/wages Average monthly pension/wages

Social dialogue Union density rate Union density rate Collective wage bargaining coverage rate Collective wage bargaining coverage rate Strikes and lockouts Strikes and lockouts

Economic and social context of the decent work Output per employed person Output per employed person Growth of output Growth of output Inflation rate Inflation rate Composition of employment per sector Composition of employment per sector Income inequality Income inequality Poverty Poverty Informal economy employment Informal economy employment

Labor market policies Active and passive interventions in the labor market

Labor market policies Labor market policies (LMPs) are defined here as policies that provide income replacement and labor market integration measures to those seeking work, usually the unemployed, but also the underemployed and the employedwho are looking for better jobs.

Passive labor market policies So-called “passive” policies are concerned with providing replacement income during periods of joblessness or job search They are not conditional upon the integration to the labor market or training – –unemployment insurance, – –Unemployment assistance – –early retirement

Active Labor Market Policies “active” policies refer to labour market integration through demand or supply side measures – –labor market training, – –job creation in the form of public and community work programmes, – –enterprise creation programmes – –hiring subsidies. They are usually targeted at specific groups facing particular labor market integration difficulties – –younger and older people – –women – –disabled

Why ALMPs? They are also an answer to the growing critique that pure income replacement policies might entail disincentives to work once unemployment becomes of longer duration.

Expenditure in LMPs in the EU

Expenditure in LMPs per one percent of unemployment

Expenditure in ALMP increases with economic openness

Perception of insecurity and expenditure in ALPs (% of people worried to loose the job)

Types of ALMPs Training Training Public works, Public works, Temporary work creation Temporary work creation Employment subsidies Employment subsidies Self employment Self employment Small enterprise creation Small enterprise creation

Problems with ALMPs types: training Insufficient levels of qualifications Insufficient levels of qualifications Mismatch between supply and demand Mismatch between supply and demand Bad image of unemployed Bad image of unemployed Unclear knowledge Unclear knowledge Disconnection between training institutions and employers Disconnection between training institutions and employers Overeducated unemployed Overeducated unemployed Gender, age, race bias Gender, age, race bias

Problems: Public works, temporary job creation Bad image of the long term unemployed, stigmatization of participants Bad image of the long term unemployed, stigmatization of participants End of measure equals being again into unemployment and poverty End of measure equals being again into unemployment and poverty Gender, age, race bias Gender, age, race bias Potential displacement from private sector??? Potential displacement from private sector??? Difficulties to enforce the work conditionality Difficulties to enforce the work conditionality

Problems: employment subsidies Uncertain or no effects in the informal sector Uncertain or no effects in the informal sector High dead weight High dead weight Timing of the subsidy Timing of the subsidy Obsolete sectors Obsolete sectors

Problems: Self-employment, small-enterprise creation Problems targeting Problems targeting Access to further credit and expansion Access to further credit and expansion Consultancy and training Consultancy and training Low productivity Low productivity Enlarging the informal sector??? Enlarging the informal sector???

Problems: Employment services Administering rather than serving the unemployed Administering rather than serving the unemployed Difficulties in remote regions Difficulties in remote regions Centralized structures? Centralized structures? Low vacancy reporting Low vacancy reporting Low share in employment Low share in employment Gender bias? Gender bias?

Conclusion There is no silver bullet. One size does not fit all There is no silver bullet. One size does not fit all Employment is the best social and economic policy in the capitalist framework Employment is the best social and economic policy in the capitalist framework Decent work is the best kind of employment Decent work is the best kind of employment