Archives for posts with tag: Employment

Last week I wrote a blog post titled “Africa is rising, employment is not” reporting some figures from a new paper by John C. Anyanwu  on the African Statistical Journal. I briefly mentioned in the post that employment stats are not very reliable in Africa because of informality of the labour market. But I kept it a bit vague and some readers put me on the spot: if the data is garbage, why are you blogging about it?

Good question. The reality is that I knew that the data was “not very reliable”, but I didn’t  look in-depth into the issue -so I’ll try to do this now. Look at these national-level definitions taken from the ILO laborista database:

In Kenya, employment data is taken from this question in the national census: 

What was X mainly doing during the last seven days preceding the census night? 1) worked for pay or profit; 2) on leave/sick leave; 3) working on family holding; 4) no work; 5) seeking work; 6) student; 7) retired; 8) disabled; 9) home makers; 10) other

A person is considered employed if over the last week she/he worked “most of the time” for wages, salary, commission, tips, contract or payment in kind

 In Uganda, stats are based on a labour-force survey. You are considered employed if

a) performed “some work” for pay or profit during the reference week; b) were temporarily absent from work during the reference week because of illness or leave, but were definitely going to return; and c) were engaged in production of goods for on use. “Some work” is defined as 1 hour or more during the reference week.

I checked the definitions for a few other countries and they looked rather similar – they tend to include all kinds of casual labour in their employment stats. In Uganda it was quite extreme, if you worked for 1 or 2 hours the week before the interview, you are considered “employed”. When we talk about the importance of “job creation” for development, random casual jobs for one or two hours a week is definitely not what we are talking about. The problem is that when we look at the general graph, it is difficult to make sense of the differences between some countries.

Source: Anyanwu (2013)

Source: Anyanwu (2013)

I’m not an expert of labour markets in each of these countries. But how realistic is it that Burkina Faso, Ethiopia and Central African Republic have relatively high employment rates, while Egypt, Algeria and South Africa are relatively low? Initially I thought that high employment rates could be an indicator of large informal sectors. But that seems like a partial explanation – the reality is that employment statistics are fundamentally unreliable and country-level comparisons cannot be accurate.

A recent paper by Fox and Pimhidzai looks at the problem more in-depth for Africa and particularly for Uganda. Excerpts from the abstract:

 A cursory review of employment data for low-income Sub-Saharan African countries shows both large gaps and improbable variation within countries over time and among countries, suggesting that low quality data are routinely reported by national statistics offices. Unfortunately, policies are formed and projects developed and implemented on the basis of these statistics. Therefore, errors of measurement could be having profound implications on the strategic priorities and policies of a country… [The paper] finds that estimates of employment outcomes are unreliable if the questionnaire did not use screening questions, as labor force participation will be underestimated. Likewise, surveys that use a seven-day recall period underestimate or potentially misrepresent employment outcomes, owing to seasonality and multiple jobs. […] The paper concludes that there is a knowledge gap about employment outcomes in Sub-Saharan Africa that will continue unless collection techniques improve.

So the lesson of the day is “to always be suspicious about employment stats in Africa”, especially cross-country comparisons. Thanks to  @RachelStrohm and @RowanEmslie among others for questioning the issue.

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UNIDO (the UN office for industrial development) just released the International Handbook of Industrial Statistics with very comprehensive data on manufacturing output around the world. Unfortunately the handbook is available only in print and very costly. I wish they prepared an executive summary or a document with the “highlights” of their findings, but I couldn’t find any of that. The press release is quite interesting:

The new publication shows that the world’s industrialized countries experienced particularly low manufacturing value added (MVA) growth, with some dynamism in North America and East Asia was largely negated by the sustained recession in Europe. MVA of industrialized countries grew at an average rate of just 0.3 per cent in 2012.

..the global economic crisis beginning in 2009 has not only forced huge job cuts in the manufacturing sector of industrialized countries but has also pulled labour productivity down. Net manufacturing output in the world’s eight major industrialized economies (G-8) has fallen by a much higher rate than the number of employees, reflecting the fact that many businesses retain a skeleton workforce even during periods when there are no or few orders for their products.

And on the LDCs:

The Yearbook also highlights MVA growth trends in the least developed countries (LDCs), which are facing different constraints related to external trade. In comparison with African LDCs, Asian LDCs have the advantage of closer proximity to fast-growing economies, and this is reflected by an average MVA growth rate over the last decade of 8.7 per cent per annum for Asian LDCs compared to 5.9 per cent for African LDCs.

(A little bit) More here

Interesting new article by MIT professor Yasheng Wang in the Journal of Economic Perspectives (ungated pdf here)

There are two prevailing explanations of what caused China’s rate of economic growth to take off. The first view gives the pride of place to globalization. According to this view, Chinese growth started when Deng Xiaoping liberalized trade and foreign investments by setting up special economic zones in the in the coastal provinces. In this view, China’s export-oriented manufacturing, largely foreign-funded, employed millions of rural migrants, boosted their income, and reduced poverty far and wide. The second perspective emphasizes the importance of internal reforms—especially in rural, interior regions—of the agricultural pricing system, land contracting, and the entry of rural businesses known as township and village enterprises.

Huang argues that township and village enterprises were the key to China’s take-off

 … the economic contributions of foreign investments do not remotely match those of China’s rural industry. At their peak, firms funded by foreign capital employed 18 million people (in 2010). By contrast, at their trough in 1978, township and village enterprises employed 28 million people. Between 1978 and 1988 China’s poverty headcount declined by 154 million, by far the most impressive  record during China’s three decades of reforms.

And he dismantles some “myths” about China’s village enterprises

 Many China scholars believe that township and village enterprises have a distinct ownership structure—that they are owned and operated by local governments rather than by private entrepreneurs. That these firms could be so dynamic and efficient, yet government-owned, is often treated as a paradox in the economics literature.

But my own historical narrative—formulated on the basis of voluminous government and bank documents and data from the 1980s—directly contradicts this heterodox interpretation of Chinese reforms. I will show that township and village enterprises from the inception have been private and that China undertook significant and meaningful financial liberalization at the very start of reforms.

Source (PDF)