Highlights of current labour market trends

The KILM serves as a research tool for assessing labour market trends. This page provides some excerpts of noteworthy trends (by theme) that were identified in the KILM 4th Edition. For more information relating to the labour market concepts defined or more detail on the trends identified, see the KILM manuscript identified in parentheses. To place an order for the CD-ROM, click here.

Labour force participation (KILM 1)

• Labour force participation among women in the prime working age (aged 25-54) increased in many countries over the past 20 years, but was most notable among the middle- and high-income countries. Still, at the overall (aged 15 and over) global level, female labour force participation rates were lower in 2004 (52.5 per cent) than in 1994 (53.2 per cent), largely due to the decline in the participation of the youth cohort (aged 15-24) as their educational participation increased.
• The highest gap in the female and male labour force participation rate was in the Middle East and North Africa, where the male labour force participation rate exceeded the female rate by around 48 percentage points in 2004, although this represents a slight improvement in the gap from 1994.

Employment and employment characteristics

• There is a stark contrast between the gap in female and male employment-to-population ratios in developed economies (where the gap was 16 percentage points in 2004) and the regions of the Middle East and North Africa and South Asia (where the difference in the employment ratios between the sexes reached 40 percentage points) and Latin America and the Caribbean (where the difference was almost 30 points). Still, while the national results are mixed, thus making it difficult to draw conclusions, the regional aggregates do provide evidence of increasing, albeit slowly, employment activity of women in some regions where their employment ratios are historically low. (KILM 2)
• The majority of workers in most developed economies are engaged in wage and salaried employment. By contrast, the majority in the developing economies of sub-Saharan Africa and Asia continue to work as self-employed workers and contributing family workers. Falling within these two categories is the bulk of workers in the agricultural sector and the informal economy in low-income, developing countries. A country with a sizeable self-employed workforce typically has low growth levels in formal sector employment and widespread poverty. (KILM 3)
• There is little evidence of increased self-employment in the developed economies. All countries examined showed a long-term decline in the share of the self-employed in total employment between 1980 and 2003, with the exception of Italy where the share remained stable. (KILM 3)
• The agricultural sector accounts for 43 per cent of total employment in the world. Given that the regions where agriculture continues to dominate – East Asia, South-East Asia, South Asia and sub-Saharan Africa – contain more than 60 per cent of the world’s working-age population, it is not surprising that agriculture continues to show primacy in the world trend. All developed economies with data had the largest share of employment in the services sector, followed by industry, and a small proportion, usually less than 10 per cent, in agriculture. The fastest growing sector over the last ten years has been the services sector. (KILM 4)

Poverty and working poor (KILM 20)

• The countries with the highest incidences of poverty, i.e. where more than half of the country’s population subsists on less than US$1 a day, are in Eastern and Western Africa, which confirms the fact that a large part of the population on the continent faces extremely poor living conditions. Many people living in severe poverty work, sometimes long and hard, but very unproductively. They have no choice but to find some way to generate an income because they often have no other means of support for themselves or their families.
• The Asian regions saw a substantial reduction in the number of working persons living on less than US$1 a day; the number of working poor in Asia decreased by as many as 131 million between 1994 and 2004. In contrast, sub-Saharan Africa’s weak economic performance resulted in an increase of 28 million in the number of working poor. When looking at the share of working poor (at US$1 a day) in the working population, however, one finds a slight decline in sub-Saharan Africa due to the fact that the working population grew slightly faster than did the working poor population.
• The regions that showed the largest reduction in the share of working poor in total employment between 1994 and 2004 were Central and Eastern Europe (non-EU) and CIS (with a decrease of more than half – 54 per cent) and East Asia (with a decrease of nearly half – 47 per cent). In the first two regions, however, it would be difficult to equate the reduction in the working poor rate with a genuine improvement in the well-being of the regions’ population; the number of working poor was high at the beginning of the period (1994) due to the initial effects of the dissolution of the planned economy and the collapse of the social safety nets after 1991. Increases in economic growth rates led by productivity growth in the latter half of the decade led to a decrease in the number of working poor, but, at the same time, the number of unemployed increased as did the number of economically inactive. Therefore, a portion of those previously classified as working poor may now be classified as unemployed or inactive, neither of which could be called an improvement in economic status.

Unemployment

• The international definition of unemployment for the purpose of collecting statistics is without work of at least one hour in the previous week. This means that many workers in the developing world who have no regular work or income, but in the absence of any other means of support must find a way to generate the means to survive, do not fall within the unemployed category. Bearing in mind this proviso, available information shows a wide dispersion of unemployment rates throughout the world. A review of country-level data showed that all regions were represented in the lowest grouping of unemployment rates (less than 5 per cent). The higher unemployment bands, however, were concentrated in countries in the regions of Central and Eastern Europe (non-EU) and CIS as well as Latin America and the Caribbean. (KILM 8)
• Looking at the ILO-comparable unemployment estimates available in KILM table 8c, results showed that the average unemployment rates available for the new Member States of the European Union (Czech Republic, Estonia, Latvia, Lithuania, Poland, Slovakia and Slovenia) –11.7 per cent for males and 12.5 per cent for females – were higher than the former Member States – 7.0 per cent for males and 7.8 per cent for females – in 2003.(KILM 8)
• Between 2003 and 2004 the unemployment rate decreased for the world as a whole from 6.5 to 6.3 per cent, confirming a downward trend that has been observed over the last three years, during which time the global economy has grown rapidly. (KILM 8)
• One striking characteristic emerging from an examination of country-level information presented is that, invariably, youth unemployment rates are higher than adult unemployment rates. Indeed, youth unemployment rates are typically at least twice as high as adult rates and are sometimes much higher. (KILM 9)
• The distribution of unemployment is more concentrated among the least educated, at least in the developed countries. In 2003, a person in the developed economies (with available data) with only primary education was at least three times as likely to be unemployed as a person with tertiary education. The pattern reflects the increase in demand for more highly educated and skilled workers in developed economies and the declining demand for workers with low education. In seven of the developing economies with available data, it was the labour force with a secondary education that was the most likely to be unemployed, although never to a substantially larger degree than persons with primary education. The demand for workers with higher education was strong in the majority of the countries. (KILM 11)

Wages (Chapter 1, section B and KILM 16)

• Occupations requiring specialized training, high level of skills and education and located primarily in the services sector – such as power distribution and transmission engineer, accountant, computer programmer, first-level education teacher and professional nurse – showed a considerable wage premium in comparison to lesser skilled occupations (labourer, grocery salesperson, room attendant, for example).
• High-skilled occupations not only have higher wages, but also witnessed stronger wage gains in the decade from 1990 to 2000, than the low-skilled occupations. Part of the reason for this may be due to the surplus of labour in developing economies, whereby the initial impact from globalization (and growth) may be to bring previously underemployed or unemployed people into the formal labour market, with no direct effect on wages. Another reason could be due to the growth in complementary industries that demand workers with higher and scarce technical skills.

Employment elasticities (Chapter 1, section A and KILM 19)

• Between 1991 and 2003, the services sector was both the world’s fastest-growing sector in terms of output and the sector with the most job-intensive growth. Indeed, for every 1 percentage point of growth in services sector value added, employment increased by 0.57 percentage points. On the other hand, in the agriculture sector, and especially in the industrial sector, growth of value added was driven more by gains in productivity than by gains in employment.
• From 1999 to 2003 economic growth in North America was less than one-third as employment intensive as during the 1991 to 1995 period, while the rate of economic growth declined sharply. Not surprisingly, unemployment grew by over 3 million between 1999 and 2003. Western Europe, on the other hand, showed a near opposite pattern. Employment intensity in Western Europe in the 1999 to 2003 period was higher than in previous periods and the region’s unemployment rate declined by another 1 percentage point. However, the low economic growth rate in the region between 1999 and 2003 began to impact unfavourably both on employment and productivity growth in the latter half of the period; whereas the higher economic and productivity growth in North America imply that the downturn in employment elasticities is likely to be short-lived there.
• In Central and Eastern Europe, the transition to a market economy led to an increase in productivity but a fall in employment.
• The very rapid growth that took place in agriculture, industry and services sectors in East Asia facilitated both robust employment generation as well as rapid productivity gains. This trend has resulted in a “virtuous cycle” of employment growth, productivity growth and poverty reduction in the region.
• Between 1991 and 2003, the most employment-intensive growth was registered in sub-Saharan Africa and the Middle East. However, with relatively low output and productivity growth in many countries in these regions and continued high incidences of poverty, it is likely that most of the new jobs created offer very low returns.

Productivity and unit labour costs (Chapter 1, section C and KILM 18)

• The United States continues to show the highest labour productivity levels measured as value added per person employed; however, four countries – Belgium, France, Luxembourg and Norway – showed levels higher than that of the United States when measured as value added per hour worked.
• On average, total economy labour productivity in the European Union grew slightly faster than that of the United States between 1980 and 2003. The faster growth in the European Union was aided by particularly strong growth in the new EU Member States. The highest productivity growth rates were seen in the Asian and Pacific countries, although levels remained well below those of other developed economies. In other regions of the world, total economy productivity gains since the 1980s have been rather poor.
• Despite faster productivity growth rates in some European Union countries, the productivity gap (measured as value added per person employed) between the United States and most developed countries continues to widen. The acceleration of productivity growth in the United States since 2001 has outpaced that of many of the developed economies, increasing the level of value added per person in the United States to just over US$63,000. One exception is Ireland where the productivity gap with the United States has been steadily declining since 1980.
• Levels of productivity and labour compensation of some new EU Member States – the Czech Republic, Hungary and Poland – are much lower than in the United States and the EU-15. Furthermore, as the comparative wage levels are lower than comparative productivity levels, the new Member States show a significant advantage in terms of unit labour cost levels at approximately 70 per cent of the US level. The depreciation of the currencies of these countries relative to the US dollar has further benefited their competitive position, although the latter trend has reversed somewhat since 2000.

Hours of work

• There is a positive relationship between female employment-to-population ratio and part-time employment in the developed economies, implying that an expansion of part-time work opportunities encourages females to join the workforce. In the Latin American and Caribbean countries, on the other hand, the inverse relationship, whereby female part-time employment rates are higher when employment ratios are higher, could indicate that part-time work is not a choice but a sole option in countries with few job opportunities for women. Part-time work in this region, however, is common to both men and women – as demonstrated in the comparatively low female share of part-time employment in Latin American countries. (KILM 5)
• Overall, a quarter of the workforce in Bolivia, El Salvador, Guatemala, Honduras and Nicaragua regularly worked more than 50 hours a week. (KILM 6)
• There was a slight decline in average annual hours worked in European countries with available data, with the exception of Greece where the number of hours worked remained fairly steady over the two decades. The largest decrease in average annual hours between 1994 and 2004 occurred in Ireland with a fall of 10 per cent, followed by Denmark and Portugal where annual hours decreased by 3 per cent. (KILM 6)
• One way of assessing the underutilization of the productive potential of a country’s labour force is by adding the number of persons working part-time who would like to work more hours to the number of unemployed and taking these two groups as a share of the overall labour force. In both France and Italy the rate of underutilized labour reached 21 per cent in 2004, up from 17 per cent in 1994 in France and 12 per cent in Italy. The rates would certainly be higher in developing countries where opportunities for full employment are fewer. However, the limited availability of data in these countries makes the exact rate of underutilized labour impossible to quantify. (KILM 12)

Education and illiteracy (KILM 14)

• There is a clear trend towards an increasingly educated labour force.
• For both sexes, the highest shares of the labour force by educational attainment were those with secondary level education, followed by persons with primary level education, which indicates that in most of the countries the bulk of labour supply is still workers with low- or medium-level skills. The supply element is a likely explanatory variable in the growing wage gap between low-skilled and high-skilled occupations identified in Chapter 1, section B; the demand for workers with tertiary-level education and higher skills, which are in short supply, would push up their wages, and vice versa for workers with lower-level education.
• In the vast majority of the countries with data, the illiteracy rates of adults are higher than those of youth, which suggests a positive trend as young people make advances in literacy and thus gain a higher skills base than their parents.
• The adult female illiteracy rate was more than 25 percentage points higher than that of males in nine countries – Angola, Central African Republic, Chad, the Democratic Republic of Congo, Liberia, Morocco, Mozambique, Togo and Yemen. The trend continues, although to a lesser extent in the younger generation; five countries had a gap in the female-male youth illiteracy rates in excess of 25 percentage points – Benin, Chad, Liberia, Mozambique and Yemen.