Quality of Employment in Chile

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1 Quality of Employment in Chile Research Team Kirsten Sehnbruch, Universidad Diego Portales Pablo González, University of Chile Rocío Méndez, Universidad Diego Portales Verónica Arriagada, University of Chile BIESTRA, 20 th October 2017

2 Overview and Policy Context There is an increasing concern about employment opportunities generated by the Chilean labour market: - social mobility quality of employment Even though there is a premium to higher education in terms of wages, other employment conditions must also be considered Initial research suggests that even workers with high levels of education are subject to similar stretches of unemployment (or periods of noncontribution to ui system) if they become unemployed (Sehnbruch, Carranza and Prieto, 2017).

3 Data sources and methodological context CASEN 2015 Employed workers with complete information on the dimensions considered by this indicator This study is part of a larger study on the quality of employment in Latin America that was designed to test different methodologies for measuring the quality of employment At the moment, there is no international consensus on how the QoE should be measured. An example is the OECD job quality framework, but it is not easily transferrable to developing countries with data constraints.

4 We use the Alkire & Foster methodology to measure QoE The QoE Index is composed of three dimensions made up of five indicators(figure 1). Associated with each indicator is a minimum level of employment quality. This minimum level of satisfaction is called a deprivation cut-off. Two steps are then followed to calculate the QoE Index: Step 1: Each person is assessed based on individual employment related achievements to determine if he/she is below the deprivation cut-off in each indicator. People below the cut-off are considered deprived in that indicator. Step 2: The deprivation of each person is weighted by the indicator s weight. If the sum of the weighted deprivations is more than 33 per cent (k>=2 dimensions) of possible deprivations, the person is considered to have a multidimensionally low QoE

5 Quality of Employment in Chile All the conditions considered having QoE (first cut-off) Income Employment Stability Employment Conditions Above or equal to 8 basic food baskets Tenure: 3 or more years Social Security: Affiliation Type of contract: Open ended, fixedterm, self-employed professional and employer Excessive Working Hours: Less than 48 hours

6 Dimensions, indicators and weights Deprived 8 basic food baskets Type Income Weight Binary 33.0% Employment Stability Tenure deprived Binary 17.0% Occupational Status Deprived Social Security Affiliation Deprived Excessive Working Hours Deprived Binary 17.0% Employment Conditions Binary 17.0% Binary 17.0%

7 Alkire & Foster Methodology Second cut-off point (k>=2): Considering the three dimensions we have stated before, we consider that any person that is deprived in at least two or more dimensions should be considered having low QoE H: Multidimensional Headcount ratio, meaning the percentage of those who are deprived regarding our dual deprivation cut-off (k) A: the Average percentage of simultaneous deprivations suffered, which also means the average score of those deprived (which is a value from 0 to 1). This score is created based on the sum of those indicators that are deprived. Which means if a person is deprived only on income, his or her score would be 0.33 but if he or she is deprived on income AND employment stability, that individual s score would be 0.66 (which means this latter individual is deprived in two dimensions (k=2)). M0: The Adjusted Headcount Ratio, which is sensitive to the incidence (H) and the intensity (A) of multidimensional poverty. M0=H x A

8 QoE Measurement for Chile Alkire & Foster Methodology Main results Coef. Std. Err. [95% Conf. Interval] Main H M Additional measure A Note: Adjusted Multidimensional Headcount M0 = H*A 60,5 51,3 31,1 Deprived (%) H A M0

9 So what does this mean It means that 60.5% of the sampled employed population is deprived when it comes to Employment Quality (H) The average score of those deprived is around 0.513, meaning that these individuals are deprived in at least one dimension (33%) plus half a dimension or one extra indicator (17%) (A) M0 which considers the incidence and intensity of those with low QoE is 31.1% of those employed

10 Contribution of each indicator to the QoE Index 100% 6% Employment Conditions - Excessive Woking 90% 6% Hours 80% 13% Employment Conditions - Social Security 70% 17% 60% Employment Stability - Occupational Status 50% 40% 30% 20% 10% 0% 58% Employment Stability - Tenure Income - 8 basic food baskets In Chile s case, the composition shows that the income indicator is the one that contributes much more to the index than all the other indicators. In other countries this composition changes, meaning, for example, in Peru Occupational Status is the indicator that most contributes to the index. NOTE THAT SOCIAL SECURITY IN CHILE REFERS ONLY TO AFFILIATION!

11 Contribution of each dimension to the QoE Index 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% 12% 31% 58% Employment Conditions Employment Stability Income In Chile s case, the composition shows that the income dimension is the one that contributes much more to the index than all the other dimensions.

12 So, we can also decompose the Adjusted Headcound Ratio of QoE in order to see how certain subgroups are affected

13 QoE Index decomposed by education No formal education Incomplete basic or secondary Complete Secondary Incomplete Technical Complete Technical Incomplete University or Higher Complete University or Higher H M Population share We can see that the lower the level of education means that there is a higher percentage of deprived individuals when it comes to Quality of Employment. We also include the population share in order to see the percentage of the population that is deprived.

14 Conclusions These results are designed to illustrate the Alkire/Foster method as it applies to the Quality of Employment Chile should establish a consensus on how to measure of the quality of employment in the same way that it did when it developed a multidimensional poverty measure We must use a combination of administrative and survey data to examine the relationship between education and employment more precisely.