KILM 2. Employment-to-population ratio
The employment-to-population ratio1 is defined as the proportion of a country’s working-age population that is employed. A high ratio means that a large proportion of a country’s population is employed, while a low ratio means that a large share of the population is not involved directly in market-related activities, because they are either unemployed or (more likely) out of the labour force altogether.
Virtually every country in the world that collects information on labour market status should, theoretically, have the requisite information to calculate employment-to-population ratios, specifically, data on the working-age population and total employment. Both components, however, are not always published or it is not always possible to obtain the age breakdown of a population, in which case data are provided for employment only with no accompanying ratio. Table 2 in the printed KILM shows employment-to-population ratios for 189 economies, disaggregated by sex and age groups (total, youth and adult), where possible.
The KILM electronic versions (software and KILMnet) contain an additional table of ILO estimates of employment-to-population ratios. The series (table 2a of the electronic versions) is harmonized to account for differences in national data and scope of coverage, collection and tabulation methodologies as well as for other country-specific factors such as military service requirements.2 It includes both nationally reported and imputed data and includes only estimates that are national, meaning there are no geographic limitations in coverage. It is this series of harmonized estimates that serve as the basis of the ILO’s world and regional aggregates of the employment-to-population ratio reported in the Global Employment Trends series and made available in the KILM 7th Edition software as table R2. Table 2b on the software is based on available national estimates and is the table selected for the print version of the KILM.
The employment-to-population ratio provides information on the ability of an economy to create employment; for many countries the indicator is often more insightful than the unemployment rate. Although a high overall ratio is typically considered as positive, the indicator alone is not sufficient for assessing the level of decent work or decent work deficit.3 Additional indicators are required to assess such issues as earnings, hours of work, informal sector employment, underemployment and working conditions. In fact, the ratio could be high for reasons that are not necessarily positive – for example, where education options are limited, young people tend to take up any work available rather than staying in school to build their human capital. For these reasons, it is strongly advised that indicators should be reviewed collectively in any evaluation of country-specific labour market policies.
The concept that employment – specifically, access to decent work – is central to poverty reduction was firmly acknowledged in the framework of the Millennium Development Goals (MDG) with the adoption of an employment-based target under the goal of halving the share of the world’s population living in extreme poverty. The employment-to-population ratio was adopted as one of four indicators to measure progress towards target 1b on “achieving full and productive employment and decent work for all, including women and young people”.4
Employment-to-population ratios are becoming increasingly common as a basis for labour market comparisons across countries or groups of countries. Employment numbers alone are inadequate for purposes of comparison unless expressed as a share of the population who could be working. One might assume that a country employing 30 million persons is better off than a country employing 3 million persons, whereas the addition of the working-age population component would show another picture; if there are 3 million persons employed in Country A out of a possible 5 million persons (60 per cent employment-to-population ratio) and 30 million persons employed in Country B out of a possible 70 million (43 per cent employment-to-population ratio), then the employment-generating capacity of Country A is superior to that of Country B. The use of a ratio helps determine how much of the population of a country – or group of countries – is contributing to the production of goods and services.
Employment-to-population ratios are of particular interest when broken down by sex, as the ratios for men and women can provide information on gender differences in labour market activity in a given country. However, it should also be emphasized that this indicator has a gender bias in so far as there is a tendency to undercount women who do not consider their work as “employment” or are not perceived by others as “working”. Women are often the primary child caretakers and responsible for various tasks at home, which can prohibit them from seeking paid employment, particularly if they are not supported by socio-cultural attitudes and/or family-friendly policies and programmes that allow them to balance work and family responsibilities.
The employment-to-population ratio is the proportion of a country’s working-age population that is employed. The youth and adult employment-to-population ratios are the proportion of the youth and adult populations – persons aged, typically, 15 to 24 years and 25 years and over – that are employed.
Employment is defined in the resolution adopted by the 13th International Conference of Labour Statisticians (ICLS) as persons above a specified 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.5 (See box 2.) The resolution also states that 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.
For most countries, the working-age population is defined as persons aged 15 years and older, although this may vary slightly from country to country. The ILO standard for the lower age limit is, in fact, 15 years. For many countries, this age corresponds directly to societal standards for education and work eligibility. However, in some countries, particularly developing ones, it is often appropriate to include younger workers because “working age” can, and often does, begin earlier. Some countries in these circumstances use a lower official bound and include younger workers in their measurements. Similarly, some countries have an upper limit for eligibility, such as 65 or 70 years, although this requirement is imposed rather infrequently. The variations on age limits also affect the youth and adult cohorts.
Apart from issues related to age, the population base for employment ratios can vary across countries. In most cases, the resident non-institutional population of working age living in private households is used, excluding members of the armed forces and individuals residing in mental, penal or other types of institution. Many countries, however, include the armed forces in the population base for their employment ratios even when they do not include them in the employment figures. In general, information for this indicator is derived from household surveys, including labour force surveys. Some countries, however, use “official estimates” or population censuses as the source of their employment figures.
Comparability of employment ratios across countries is affected most significantly by variations in the definitions used for the employment and population figures, as described in the previous section. Perhaps the biggest differences result from age coverage, such as the lower and upper bounds for labour force activity. Estimates of both employment and population are also likely to vary according to whether members of the armed forces are included.
Another area with scope for measurement differences has to do with the national treatment of particular groups of workers. The international definition, as stated above, calls for inclusion of all persons who worked for at least one hour during the reference period.6 The worker could be in paid employment or in self-employment or engaged in less obvious forms of work, each of which is dealt with in detail in the resolution, such as unpaid family work, apprenticeship or non-market production. The majority of exceptions to coverage of all persons employed in a labour force survey have to do with slight national variations to the international recommendation applicable to the alternate employment statuses. For example, some countries measure persons employed in paid employment only and some countries measure only “all persons engaged”, meaning paid employees plus working proprietors who receive some remuneration based on corporate shares. Additional variations that apply to the “norms” pertaining to measurement of total employment include hours limits (beyond one hour) placed on contributing family members before inclusion.7
For most cases, household labour force surveys are used, and they provide estimates that are consistent with ILO definitional and collection standards. A small number of countries use other sources, such as population censuses, official estimates or specialized living standards surveys, which can cause problems of comparability at the international level.
Comparisons of information can also be problematic when the frequency of data collection varies widely, and this applies to all indicators in varying degrees. The range of information collection can run from one month to 12 months in a year. Given the fact that seasonality of various kinds is undoubtedly present in all countries, employment ratios can easily vary for this reason alone. Also, changes in the level of employment can occur throughout the year, but this can be obscured when fewer observations are available. Countries with employment-to-population ratios based on less than full-year survey periods can be expected to have ratios that are not directly comparable with those from full-year, month-by-month collections. For example, an annual average based on 12 months of observations, all other things being equal, is likely to be different from an annual average based on four (quarterly) observations.
Available employment-to-population ratios over the past decade have ranged from 27.7 per cent in Oman (2000) to 91.6 per cent in Nepal (2003). Figure 2a, which presents simple averages of available employment-to-population ratios (since 2000) by region, reflects some notable regional patterns. While most countries in the Developed Economies & European Union region show ratios in the 50 to 60 per cent range, the majority of countries in Eastern Europe, North Africa and the Middle East have ratios below 50 per cent. At the other extreme are countries with ratios greater than 75 per cent. Of the 13 countries with ratios that exceeded 75 per cent in the latest year of data availability, eight were located in sub-Saharan Africa: Burkina Faso, Ethiopia, Malawi, Mozambique, Togo, Uganda, United Republic of Tanzania and Zimbabwe. The other countries with the highest ratios are: Cayman Islands (80.8 per cent, 2008), Kiribati (80.1 per cent, 2000), Nepal (91.6 per cent, 2003), Northern Mariana Islands (78.1 per cent, 2003) and Qatar (84.7 per cent, 2007). It is in many of these countries where large shares of the population continue the battle against poverty, using the only means available to them to eke out a living – their labour. Working is rarely a choice among the poor; it is often a matter of survival. High employment-to-population ratios often are merely a confirmation of this fact and, consequently, high employment-to-population ratios are often found to be correlated with high levels of working poverty.8
Figure 2a. Employment-to-population ratios, regional averages of countries with data since 2000, by sex
Note: Regional averages are unweighted averages of available country estimates.
Among the ten economies with the lowest ratios over the last decade, six are found in the regions of North Africa and the Middle East, namely Iraq, Islamic Republic of Iran, Jordan, Occupied Palestinian Territories, Oman and Yemen. The huge gap that exists between male and female employment in these countries can serve as an explanation for the generally low levels of the ratios. The average female employment-to-population ratio in the region Middle East & North Africa is by far the lowest at 21.3 per cent. Figure 2b further confirms the significant gender differences that accompany low employment ratios in many countries in the Middle East and North Africa. In these countries, economic contribution of women is constrained by social institutions such as laws, norms, codes of conduct and traditions. The same could be said for the situation in Bangladesh, India and Pakistan, where gender differentials in employment were also in excess of 40 percentage points. In contrast, employment-to-population ratios in the sub-Saharan countries (Democratic Republic of Congo, Mozambique and Uganda) demonstrate a near-equal involvement of men and women in the pursuit of income. In some sub-Saharan African countries, the female employment-to-population ratio was even higher for women than men (Benin, Mozambique and Togo).
Figure 2b. Male-female differences in employment-to-population ratios, selected economies, latest years
Over the decade ending in2010, two thirds of countries with available data experienced an increase in the overall employment-to-population ratio. In three-quarters of the cases, ratios over time increased more for women than men. The rise in the volume of female employment can be attributed to a multitude of factors, including higher female participation rates, increases in female enrolment in education (with a lagged effect), enactment of laws prohibiting discrimination on the basis of sex and reductions in gender stereotyping in occupations and education. While much of the changes in ratios over time have been driven by changing female ratios, one should not discount the role that changing employment patterns among youth (of both sexes) play as well. Employment-to-population ratios for young people are naturally below those of adults since many of the young are still engaged in school. For the decade ending in 2010, employment ratios of young persons decreased for the majority of economies (with data available).
Figure 2c shows the percentage point change in youth and adult employment-to-population ratios for selected developed economies between 2000 and 2010. There has been a clear reduction in youth employment-to-population ratios in most countries while adult ratios have typically risen (with a few exceptions; see, especially, Romania, where adult ratios fell by more than those of youth). Decreasing employment-to-population ratios among youth can be interpreted as a positive development but only if the change implies more youth are staying in education longer, thus remaining outside of the labour force rather than falling into unemployment.9
Figure 2c. Youth and adult employment-to-population ratios, selected developed economies, percentage point change from 2000 to 2010
Box 2. Resolution concerning statistics of the economically active population, employment, unemployment and underemployment, adopted by the 13th International Conference of Labour Statisticians, October 1982 [relevant paragraphs]
Concepts and definitions
Employment (para. 9)
1. Sometimes referred to as the “employment rate”. In this text, we sometimes shorten the term to “employment ratio”.
2. For further information on the methodology used to harmonize estimates, see Annex 4, “Note on global and regional estimates”, in ILO: Global Employment Trends 2011 (Geneva, 2011); http://www.ilo.org/global/publications/books/WCMS_150440/lang--en/index.htm .
3. Since the publication of the ILO: Decent Work, Report of the Director-General, International Labour Conference, 87th Session, 1999 (Geneva, 1999), the goal of “decent work” has come to represent the central mandate of the ILO, bringing together standards and fundamental principles and rights at work, employment, social protection and social dialogue in the formulation of policies and programmes aimed at “securing decent work for women and men everywhere”. For more information, see: http://www.ilo.org/decentwork.
4. The first Millennium Goal includes three targets and nine indicators, see the official list at: http://mdgs.un.org/unsd/mdg/Host.aspx?Content=Indicators/OfficialList.htm. The remaining indicators under the target on decent work are the growth rate of GDP per person engaged (i.e. labour productivity growth; KILM 17), working poverty (KILM 18) and the vulnerable employment rate (KILM 3).
5. Resolution concerning statistics of the economically active population, employment, unemployment and underemployment, adopted by the 13th International Conference of Labour Statisticians, Geneva, 1982;
6. The application of the one-hour limit for classification of employment in the international labour force framework is not without its detractors. The main argument is that classifying persons who engaged in economic activity for only one hour a week as employed, alongside persons working 50 hours per week, leads to a gross overestimation of labour utility. Readers who are interested to find out more on the topic of measuring labour underutilization may refer to ILO: “Beyond unemployment: Measurement of other forms of labour underutilization”, Room Document 13, 18th International Conference of Labour Statisticians, Working group on Labour underutilization, Geneva, 24 November – 5 December 2008; http://www.ilo.org/global/statistics-and-databases/meetings-and-events/international-conference-of-labour-statisticians/WCMS_100652/lang--en/index.htm.
7. Such exceptions are noted in the “Coverage limitation” field of all KILM tables relating to employment. The higher minimum hours used for contributing family workers is in keeping with an older international standard adopted by the International Conference of Labour Statisticians in 1954. According to the 1954 ICLS, contributing family workers were required to have worked at least one-third of normal working hours to be classified as employed. The special treatment was abandoned at the 1982 ICLS.
8. For more information on the high employment ratio, working poverty and vulnerable employment correlation in the context of sub-Saharan Africa, see T. Sparreboom and A. Albee (eds.): Towards Decent Work in sub-Saharan Africa: Monitoring MDG Employment Indicators (Geneva, ILO, 2011), especially Chapter 3 on employment-to-population ratios and Chapter 5 on working poverty.
9. See KILM 10, youth unemployment, and ILO: Global Employment Trends for Youth: Special issue on the impact of the global economic crisis, August 2010 (Geneva, 2010) for a more in-depth discussion of youth labour market trends.