1.5 Employment-to-population ratio

Modified on 2012/02/21 09:09 by MDG Wiki Handbook — Categorized as: Goal 1

Contents

GOAL AND TARGET ADDRESSED

Goal 1. Eradicate extreme poverty and hunger. Target 1.B Achieve full and productive employment and decent work for all, including women and young people.

DEFINITION AND METHOD OF COMPUTATION

Definition
The employment-to-population ratio is defined as the proportion of a country’s working-age population that is employed. This indicator is expressed as a percentage.

Concepts
Working-age population is determined on the basis of national circumstances, but in most countries the working-age population is defined as persons aged 15 years and older. The International Labour Organization (ILO) standard for the lower limit of the working-age population is 15.

Employed refers to persons above the nationally defined working-age who performed any work at all, in the reference period, for pay or profit (or pay in kind), or were temporarily absent from a job for such reasons as illness, maternity or parental leave, holiday, training or industrial dispute. Unpaid family workers who work for at least one hour should be included in the count of employment, although many countries use a higher hour limit in their definition. The measure of employment is intended to capture persons working in both the formal and informal sectors.

Method of computation
The employment-to-population ratio is equal to the number of persons employed divided by the working-age population and multiplied by 100.

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RATIONALE AND INTERPRETATION

The employment-to-population ratio provides information on the ability of an economy to provide employment for those who want to work. The ratio typically falls between 50 and 75 per cent with a high ratio indicating that a large proportion of the working-age population is employed. A low ratio indicates that a large share of the population is not involved directly in market-related activities.

Trends in the employment-to-population ratio can be monitored to inform policies aimed at increasing opportunities for decent work. A reduction of employment-to-population ratios for young people can be seen as positive if this is caused by an increase in youth participation in education. Efforts to increase employment-to-population ratios are needed when unemployment is very high in a country (indicating that people are looking for work but not finding it), or when the ratio is low because people have given up hope of finding a job. On the other hand, employment-to-population ratios should not be too high. Ratios above 80 per cent, for instance, often occur in very poor countries and usually indicate an abundance of low quality jobs. During the development process, employment-to-population ratios and poverty rates can both be high because people simply have to work to survive.

The annual employment-to-population ratio and the ratio’s rate of change over time can be viewed in connection with economic growth rates to determine the extent to which economic growth is pro-employment and pro-poor. Reviewing the indicator by sex (male versus female) and age (youth versus total) also provides a picture of the equality of employment opportunities across different population groups.

SOURCES AND DATA COLLECTION

Data are obtained from population censuses, labour force or other household surveys, establishment surveys, administrative records and official estimates based on results from several of these sources. Both components (employment and population) should come from the same source.

Sources differ in scope, coverage, units of measurement and methods of data collection. Each source has advantages and limitations in terms of the cost, quality and type of information gained. The ideal geographic coverage is the entire country (no geographic exclusions) and entire populations (no exclusion of population groups), so the source that can best provide this coverage should be used.

Contrary to censuses, surveys may have limited geographical and population coverage. However, household-based labour force surveys offer a unique advantage for obtaining information on the labour market of a country and its structure. Labour force surveys can be designed to cover virtually the entire population of a country, all branches of economic activity, and all sectors of the economy. In addition, labour force surveys can include all categories of workers, including own-account workers, unpaid family workers and persons engaged in casual work or marginal economic activity.

The ILO standard for the lower age limit of employment is 15 years. For many countries, this age corresponds directly to societal standards for education and work eligibility. Some countries impose an upper limit for eligibility, such as 65 or 70 years. However, if possible age groups beyond this upper limit should be included in the employable population.

DISAGGREGATION

Ideally, the data should be disaggregated by sex and age group. When broken down by sex, the ratios for women and men can provide information on gender differences in labour market activity. Disaggregation of the ratio for persons of working age (aged 15 years and over), prime working-age (25 to 54 years), older workers (55 to 64 years or 65 years and over) and youth (15 to 24 years) are useful for revealing relationships between labour force participation and availability of educational facilities, attitudes toward retirement, availability of earning opportunities for different age groups and the existence of social safety nets. Countries might also want to consider disaggregating according to urban/rural residence.

COMMENTS AND LIMITATIONS

The employment-to-population ratio indicator only provides a measure of persons in employment. It says nothing about the quality of employment in which people work posing the question of whether or not an increase of the indicator over time should be interpreted positively. An increase in the ratio has positive implications on poverty reduction only if the jobs obtained are well-paid, productive and secure—in other words, if they are decent jobs. Reviewing this indicator along with the other indicators for Target 1.B will provide a broader picture of the direction and quality of employment growth.

There is no optimal employment-to-population ratio. Developed economies tend to have lower ratios than developing economies because developed countries’ higher productivity and income levels mean that fewer workers are required to meet the needs of the entire population. Also, low ratios for young people can indicate that youth forgo employment to pursue educational opportunities. Very high ratios, on the other hand, indicate that the majority of poor people are working out of necessity regardless of the quality of work.

To some degree, the way in which persons in employment are measured can have an effect on the extent to which individuals are included in the data counts. Unless specific probes are built into the data collection instruments, certain groups of workers may be underestimated—particularly the number of employed persons who: (a) work for only a few hours in the reference period, especially if they do not do so regularly; (b) are in unpaid employment or (c) work near or in their home, thus mixing work and personal activities during the day. Since women, more often than men, are in these situations, it is to be expected that the number of women in employment will tend to be underestimated to a larger extent than the number of men.

GENDER EQUALITY ISSUES

Ratios for women may be lower than those for men as a result of women having fewer job opportunities in the labour markets. Efforts should be made to determine the underlying causes for lower participation of women and/or undercounting of their employment status.

DATA FOR GLOBAL AND REGIONAL MONITORING

The ILO is the agency responsible for compiling and publishing international figures for the employment-to-population ratio. The ILO assembles data using existing compilations maintained by various international organizations. Information compiled by these organizations is normally obtained from national sources or is based on official national publications.

The ILO produces aggregate estimates for regions and groups of countries. Not all countries report data for every year, so it is not possible to derive aggregated estimates of labour market indicators by merely adding country figures. To address this problem, the ILO uses econometric models that are used to produce estimates of labour market indicators in the countries and years for which no real data exist. These models use multivariate regression techniques to impute missing values at the country level.

There are some potential disparities between national and international data. First, the official working age varies from country to country. For ILO calculations, the lower age limit is 15 years. For many countries, this age corresponds to their national standard age for education completion and employment commencement. For others, it is appropriate to include younger workers because “working age” can, and often does, begin earlier. Similarly, some countries have a higher limit for eligibility because youth are expected to complete a higher level of education before working.

Secondly, the population base for employment ratios can vary across countries. In most cases, the resident population of working age is used, excluding members of the armed forces and individuals residing in mental, penal or other types of institution. Many countries, however, consider different population groups.

Thirdly, while national labour force surveys tend to be similar in essential features, data may contain non-comparable elements in terms of scope and coverage or variations in national definitions of the employment concept. Use of different sources can thus lead to distinct results.

Finally, differences can appear due to different definitions of the concept of work. While the international definition calls for inclusion of all persons who worked for at least one hour during the reference period, other definitions are used at the country level. Some countries measure persons employed in paid employment only, while other countries measure paid employees plus working proprietors who receive some remuneration based only on corporate shares.

SUPPLEMENTARY INFORMATION

No information available yet.

EXAMPLES

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REFERENCES

See “REFERENCES” for Indicator 1.4.