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International
Labour
Organization
labour market policies
an introductory elaborated byFred Fluitman
Presented by Mostefa Boudiaf
International Training Centre of the ILOTurin, Italy, 2007
• among sources:– ILO, World Employment Report 1998/99
– Betcherman, G. An Overview of Labor Markets World-Wide: Key Trends and Major Policy Issues, World Bank, 2002
– Freeman, R.B.Labor Market Institutions and Policies: Help or Hindrance to Economic Adjustment?, 1993
labour market policies measures meant to address failure
in labour markets, in particular measures that reduce unwanted distortions in the process of supply meeting demand.
labour• the Oxford Dictionary:
physical or mental work; exertion; toil• economists:
a production factor• the International Labour Organisation:
“labour is not a commodity”
labour force
all those above a specified age, and during a specified brief period, who are either working, or available for work and seeking it
also known as the economically active population
fu ll tim e part tim e
fu lly em ployed
visible invisible
underem ployed
w orking
available and seeking available, not seeking not available
not w orking
w orking age not w orking age
PO PULATI O N
“the currently active population”
labour force
0102030405060708090
100
1995 1996 1997 1998 1999
populationlabourforceemploymentwage-empl.
labour force employed
• wage-employed
• self-employed
unemployed
under-employed• visible
• invisible
labour force: stock and flow
stock
31 december 2001
stock
31 december 2002
leaving entering
staying
flows
the market
the market
the market
supply demand
buy, rent borrow,hire
exchangeexchange
buy, rent borrow,
hire
supply demand
allocation and price fixing
the vegetable market
production exchange consumptionsell &buyrice or potatoes
supply demand
the housing market
production exchange usesell&buy or renta house
supply demand
the money market
production exchange uselend & borrowmoney
supply demand
the labour market
worker, orpotentialworker
employer, oremploymentopportunity
the labour market
production exchange useoffer&hire of labourpotential
supply demand
the labour market
production exchange useallocation and price fixing
supply demand
the virtual space where,
in a more or less organised manner,
the demand for and the supply of
all sorts of labour will meet
and where wages are determined
labour market
in free (labour) markets the forces of supply and demand are allowed to operate unhampered by government regulation or other interference; decisions by individual “buyers” and “sellers”are coordinated by movement in prices.
free? market?
in reality, free labour markets don’t exist:• labour is not a commodity
– people have rights
• competition is far from perfect– contractual relationship inherently unbalanced
– considerable information problems
• decisions are subject to regulation– formal or informal
free? market?
regulation
different mixes of three modes of regulation:
– statutory, i.e. through laws and decrees• hiring, firing, job security• minimum wages
– “voice”, i.e. through collective bargaining• wages and other working conditions
– market-based
regulation
• opposing views on its employment outcomes:
Freeman(1993):• the “institutionalist” view• the “distortionist” view
regulation
• the “institutionalist” view:
regulation ensures social protection seen as instrumental in productivity growth (training, accumulating firm-specific skills) and as a means of moderating the effects of downswings in aggregate demand
regulation
• the “distortionist” view:
institutional forms of regulation impede adjustment to economic shocks, discourage hiring, and favour “insiders” (regular workers, mostly prime-age males) over “outsiders” (e.g.women and young workers)
regulation at the international level• 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
0
10
20
30
40
50
60
1996 1997 1998 1999
demandsupply
industrialised country
labour market
0
10
20
30
40
50
60
1996 1997 1998 1999
demandsupply
developing country
labour market
structural over-supply
employment in developing countries
wage-employment
self-employment
rural urban
agriculture non-agric.
informal sector
factors affecting labour markets
• affecting both supply and demand side
– failing institutions• labour market information
– political instability, conflict
– natural disasters
– health crises
factors affecting labour markets
• 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
• affecting the demand side:
– economic/financial crises
– changes in economic structure
– technological change (ICT!)• proces innovation• product innovation
– globalisation
labour markets of developing countries
• structural over-supply of labour• generally low levels of education and training• significant un- and underemployment• more self-employment than wage-employment• large informal sector of the economy• institutional forms of regulation remain modest
labour market policies
production exchange use
supply demand
labour market policies
production
e.g. investing in human resources
labour market policies
exchange
e.g. labour market information
labour market policies
use
e.g. social protection
active labour market programmes
• primary objectives: (re-) integration of the unemployed; productivity/income growth of under-employed– to increase the supply of needed skilled workers (e.g. training
employed and unemployed, programmes for the disabled)
– to increase the demand for workers (e.g. direct jobcreation, incentives to employers, self-employment/ SME promotion)
– to improve matching workers and jobs (e.g.job search assistance, public employment services, mobility incentives)
passive labour market programmes
• primary objective: income support to the unemployed– early retirement– severance pay– unemployment insurance– unemployment assistance– public works programmes
globalisation
• trade liberalisation and export growth • increase in direct foreign investment• globalisation of financial markets• rapid technological change• information revolution
• increasing competitiveness• more flexible production systems• labour market flexibilisation• structural change• privatisation
globalisation
world-wide liberalisation of trade, investment and capital flows– exports world-wide are rising as a proportion of GDP
– foreign direct investment flows have also risen sharply
– growth of global production systems, incl. intra-firm trade in intermediate products, subcontracting, licensing, franchising, and out-sourcing arrangements across national frontiers
– huge growth in volume of international trading in foreign exchange, bonds and equities, and new financial instruments
globalisation
With a view to maintaining competitiveness in international markets and to safeguard their balance of payments, Governments are under pressure to get their macro-economic policies “right” , to minimise “market distortions”, and to improve “allocative efficiency”.
globalisation
Hence, the widespread trend towards smaller government, including lower expenditure and taxes, reduced political support for redistributive measures, and deregulation of markets, including labour markets.
globalisation
At the same time, the pace of technological change and product obsolescence has increased, as enterprises try to keep one step ahead of their competitors at home and abroad. The aim is for flexible production systems:
globalisation
• flexible automation,• lean production,• just in time delivery,• total quality management, and• flexible work forces
globalisation
labour market segmentation
demand
supply
demand demand
supply
supply
labour market segmentation
men women
labour market segmentation
urban rural
labour market segmentation
informal formal
labour market segmentation
north east south west
labour market segmentation
mining
agriculture
manufacturing
commerce
services other than commerce
labour market segmentation
professional workers and managers
technicians and other skilled workers
semi-skilled workers
unskilled workers
labour market indicators
• population and labour force growth• labour force participation rates• education levels• per capita income data• income distribution data
labour market indicators
• employment and unemployment data• wages and earnings data• output growth data • labour productivity data• employment elasticities
employment policies
according to the ILO (C122): all measures aimed, directly or indirectly, at promoting full, productive and freely chosen employment for women and men
such as policies which contribute to:– sustainable economic growth– an equitable distribution of income– employment-intensive investment– equal opportunities for all– a healthier labour force– greater employability and adaptability– enhanced entrepreneurship– the better functioning of labour markets– ………………….
• the European Employment Guidelines call for concrete and urgent action along four lines:
– employability
– entrepreneurship
– adaptability
– equal opportunities
e.g. in the European Union:
employability
• making sure that people can develop the right skills to take up job opportunities in a fast changing world– active measures, e.g. training, as soon as
possible after becoming unemployed– special help for groups facing the greatest
difficulties in getting work, e.g.disabled people
– targets for life-long learning opportunities
entrepreneurship
• making it easier to start and run a business and to employ people in it – reforms in tax systems– cutting red tape
– training for small enterprises
adaptability
• developing new flexible ways of working to reconcile security and flexibility– new forms of employment and innovative
ways of work organisation
– making it easier and cheaper for companies to invest in training for their staff
equal opportunities
• equal access to jobs for women and men, equal treatment at work– the same training and support opportunities for
women and men to participate in the labour market on an equal footing
– active policies making it less difficult to combine working life with family responsibilities, and to return to the labour force after a long absence
employment and development
employment and poverty
the problem of poverty in developing countries is largely an employment problem: that of the working poor
no work means
no income, meanspoverty
not enough work means
not enough income, meanspoverty
low productivity means
low income, means
poverty
reducing poverty means:
achieving growth in output,
by increasing both the quantity
and the quality of labour inputs
reducing poverty means:
achieving growth in output,
by creating additional jobs
and raising productivity
O = +O
EE
increasing productive employment for women and men
more output more and better jobs
more productive workers
pertinent policies:
fiscal and monetary reform
removing trade restrictions
broadening access to credit
as well as access to technology
investing in infrastructure
more output
promoting the use of efficient, yet employment-intensive techniques
reallocating investment in favour of labour-absorbing sectors
targeting the disadvantaged
improving conditions for small and micro-enterprises
more and better jobs
education and training
heath and nutrition
appropriate technology
safety at work
more productive workers
the roots of poverty
• lacking sufficient (labour) income • lacking assets (valuable possessions) • inequality, discrimination• lacking a voice, lacking power• adverse shocks• lacking social protection
reducing poverty
as summed up by the ILO:
by promoting decent work:
– productive employment for all
– respect for fundamental rights at work
– social protection
– social dialogue
reducing poverty
creating an appropriate climate – peace and stability– social dialogue
taking pertinent policy decisions– sufficient “homework”– a comprehensive, coherent, integrated approach– political will and implementation capacity
addressing employment and income
– achieving high rates of sustainable growth– ensuring that growth is employment-intensive without
sacrificing productivity and efficiency– providing the poor greater access to employment – doing away with discrimination at work– raising productivity (income) of the working poor in
particular by addressing their (lack of) assets– increasing terms of trade for what the poor produce
reducing poverty
reducing poverty
addressing assets
– addressing asset inequalities, access to assets– boosting human capital: health, education, ...– investing in physical capital, infrastructure, ….– caring for natural assets: land, water, …..– allowing social assets to develop: networks, ...– broadening access to financial assets: credit, ...
reducing poverty
empowering the working poor
– respecting human rights and core labour standards
giving people a voice
– boosting representation and social dialogue
– providing for effective decentralisation
increasing social protection
– extending insurance schemes
– putting safety nets in place
employment policies