Trade union training on employment policies ITCILO, Turin, March 2004

Trade union training on employment policies ITCILO, Turin, March 2004 Labour market policies Concepts and definitions Presented by Nicolas Serrière, ITCILO

Key words and concepts F labour F Labour force F Labour market F Labour market information F Labour market analysis F Labour market policy

Labour F Simple dictionary definition ]Labour is very hard work (BBC English Dictionary) F Economists: ]Labour is a production factor F International Labour Organisation ]“labour is not a commodity”

Labour force F all those, above a specified age, and during a specified brief period, who are either working, or available for work and seeking it

The currently active population Labour force The unemployed

Employed (1) Persons engaged in economic activity or production, such as: F Employees ]persons who during the reference period performed some work for wage, salary or family gain in cash or in kind F Contributing family worker ]unpaid persons who engaged in economic activity as defined for at least one hour during the reference period F Own account worker ]Person who operates his or her own enterprise, BUT hires no employee F Employer ]Person who operates his or her own enterprise, and hires one or more employees

Unemployed F Without work ]without paid employment or self-employment during the reference period (one week) F Currently available for work ]or available for employment or self employment during the reference period (four weeks) F Actively seeking work ]through active steps taken during a specified recent period to seek paid employment or self-employment

Under-employed F Time-related ]In relation to an alternative employment situation F Inadequate employment situation ]For those who work but who want to change, for various reasons (insufficient use of skills, inadequate income, excessive hours…) F These are not exclusive F Criteria: during survey, the person must ]be willing and available to work more hours ]want to change for, or have tried to find, better paid employment ]Etc.…

Labour force

Labour force growth, , by region average annual growth rate (%) net growth (millions) Women as percentage of total LF Africa2,62, Latin America 2,31, North America 1,10, Europe0,30, Oceania1,61, Asia1,71, World1,61,

Labour force – stocks and flows stocks 31 December 2002 stocks 31 December 2003 leaving entering staying flows

The labour market

exchange supply demand allocation and price determination

production exchange utilisation The labour market supply demand

The labour market Worker or potential worker Employer, or employment opportunity

The labour market F Virtual space ]In which are matched, in a more or less organised manner… F The supply and demand ]Of all sorts of labour F And in which wages ]Are determined.

industrialised countries The labour market

developping countries The labour market

Structural over-supply The labour market developing countries

Employment in developping countries Wage employment Own-account employment ruralurban Informal economy

Segmentation by, for example: F geographic location F gender F industrial sector F occupation F level of income F level of education F formal or informal sector The labour market

A free market? = No government intervention = in a “free market”, demand and supply (the “market forces”) determine together the price of labour and, hence, how much of it will be employed

It doesn’t exist! F Labour is not a commodity ]Workers have rights ]Workers have preferences F Competition is never perfect ]Contractual relations are biased ]There is a lack of information F Decisions are subject to regulations ]Whether formal or not A free market?

Which regulations? F official (laws and decrees) ]Employment, laying off, security at work ]Minimum wage F Collective negotiation ]Wage and working conditions F Shaped by the market ]Mobility, availability of specific skills

International regulations F 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

Factors affecting labour markets F affecting both supply and demand side ]failing institutions  labour market information ]political instability, conflict ]natural disasters ]health crises

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

factors affecting labour markets F affecting the demand side: ]economic/financial crises ]changes in economic structure ]technological change (ICT!)  process innovation  product innovation ]globalisation

selected labour market issues F gender issues F child labour F youth unemployment F people on the move F HIV/AIDS

two questions: F does your country face serious employment (-related) problems of any sort? F what can the government do about it?

answer: F it is the main business of the government, based on adequate information, to design and implement policies meant to prevent or to correct problems affecting the country and its population

Proportion of people living on less than $1 a day (%) Progress to date Rate of progress needed to meet goal

labour market policies F measures meant to address failure in labour markets, in particular measures that reduce unwanted distortions in the process of supply meeting demand.

labour market policies F for whom are these policies intended? F whom do they actually benefit? F whom do they by-pass?

labour market policies production exchange use supply demand

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

exchange e.g. labour market information labour market policies

use e.g. social protection labour market policies

active labour market policies the primary objectives are… F the placement of the unemployed F the improvement of the productivity and income of the under-employed

active labour market policies 3 main tools to carry out these objectives: F Public employment services F training programmes F direct job creation programmes (wage or self-employment)

active labour market policies for instance… F facilitating the contact between workers and employers (e.g. job search assistance, public employment services, mobility incentives) F increasing the supply of needed skilled workers (e.g. training of the unemployed, specific programmes for the disabled) F increasing the demand for workers (e.g. direct job creation, incentives to employers, self- employment/ SME promotion)

ALMPs: public employment services F keep a record of job seekers’ requests F match as much as possible employers’ needs with job seekers’ requests F register the unemployed for their unemployment benefits

ALMPs: training programmes they have a dual role F improve the productivity of the employed F improve the employability of the unemployed

ALMPs: training programmes they mainly target: F the youth F women F the unemployed, and especially the long term unemployed F the disabled

ALMPs: employment support 4 kinds of employment support programmes F employment creation in the private sector F employment creation in the public sector F self-employment assistance F support for vulnerable or specific groups (disabled, women...)

ALMPs: direct job creation in the private sector F recruitment incentives F subsidies (on social contributions, wages) F tax incentives

ALMPs: direct job creation in the public sector, to reactivate the economy F public services (maintenance of local infrastructure) F public works aim must be to create sustainable employment

ALMPs: providing support for self-employment F by providing credit equal to the total amount of unemployment benefits F promoting funds for enterprise creation

ALMPs On the positive side… F Improve matching between supply and demand F Reduce discouraged-workers effect F Keeps wage pressure low, and therefore pushes supply higher F Improves productivity, profitability and competitiveness of workers

ALMPs The risks… F Deadweight loss ]Paying to help those who would find work anyway! F Substitution effect ]No new jobs creation, if those helped only get someone else’s job F Displacement effect ]Wage subsidies creating unfair competitive advantage and pushing other firms to lay off workers

passive labour market policies F primary objective: income support to the unemployed F relevant particularly in industrialised countries (or those with capacity: Korea)

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

Thank you