Behind and Beyond the (Head Count) Employment Rate

Abstract

The paper argues that we need more general statistical indices for the analysis of the European labour markets. First, the paper discusses some normative aspects that are implicit in the current definition of the employment rate, which is a fundamental policy target in the new strategy Europe 2020. Second, it proposes a class of generalized indices based on work intensity, as approximated by the total annual hours of work relative to a benchmark value. Third, it derives, in a consistent framework, household level employment indices. These indices provide a more nuanced picture of the European labour markets, which better reflects the diversity in the use of part-time and fixed term jobs as well as other factors affecting the allocation of work between and within households.

Timely Indicators for Labour Income Inequality

“…But some caveats are important. First, headcount employment provides only a partial picture of labour market developments (Brandolini and Viviano, 2016): being simply the proportion of working-age people who have been working for at least one hour in the reference week (ILO definition), it does not consider working times and contract duration, as well as important determinants of earnings. Second, employment is measured at individual level, while welfare at family level: labour supply interactions within the household affects family welfare and are not detected by the simple employment rate.…”

Measuring employment and unemployment

“…An experience-weighted index of employment can make these different value judgments explicit by assigning each employed person a weight proportional to his/her work intensity-a measure of the time worked with respect to a benchmark working time. A 2016 study derives a generalized employment rate that averages work intensity across all working-age individuals, where work intensity is total hours worked in a year divided by total hours worked in a full-time, full-year job [4]. As in inequality measurements, raising the weights to the power of a parameter, between 0 and 1, may capture different value judgments on the role of work intensity [5].…”

“…In the EU15 (excluding Ireland because of a lack of data) these alternative employment rates differ in levels and dynamics between 2005 and 2014 (see Figure 2). For reasons discussed in [4], the generalized employment rates are calculated from data drawn from the EU Statistics on Income and Living Conditions (EU-SILC). Due to differences in data sets and definitions, the official employment rate from the EU-LFS is consistently lower than the corresponding rate from the EU-SILC, but patterns are similar: a peak in 2008 is followed by a sharp fall in 2009 and then a steady decline until 2013.…”

“…Relative to looking at employment rates and mean hours of work separately, the generalized employment rate is sensitive to the distribution of hours among workers and makes explicit the value judgment implicit in the measurement. Moreover, a continuous variable such as work intensity can be easily aggregated across individuals to derive household-level (non) employment indicators [4], which is a topic of growing policy concern, especially in relation to poverty and social exclusion [6].…”

“…They also thank Alfonso Rosolia. Previous work of the authors contains a larger number of background references for the material presented here and has been used intensively in all major parts of this article [4], [9]. The analysis and conclusions expressed in this article are those of the authors and not necessarily those of the Bank of Italy or the Eurosystem.…”