Labor Market Transtons n Peru Javer Herrera* Davd Rosas Shady** *IRD and INEI, E-mal: jherrera@ne.gob.pe ** IADB, E-mal: davdro@adb.org
The Issue U s one of the major ssues n Peru However: - The U rate s only around 10% - The U s characterzed by a weak sensblty to wde macro economc fluctuatons
The Issue Possble explanaton: - The net U rate s a statc ndcator of cross secton net U balance and s compatble wth hgh flows n and out of E states - The U would be essentally a frctonal phenomenon - Most of the people leavng E status, voluntary or nvoluntary, go drectly to I
Purpose of the paper We want to verfy: If labor moblty s hgh n Peru If permanent U really exsts We want to determne: Who are the most mportant labor transtons Factors determnng labor moblty focusng partcularly on ndvdual characterstcs assocated wth labor market transtons
Stylzed facts Durng the 90s: a macro economc stablzaton program and an mportant set of structural reforms Contrasted economc evoluton The performance of the labor market was also affected by the labor lberalzaton reform Labor market flexblty was mproved and the rate of turnover ncreased A fall n the average employment duraton and a large ncrease n labor moblty durng ths perod
Fgure 1: U rates and macroeconomc fluctuatons, Peru 1980-2000 12% 15% 10% 10% 8% 5% U rate (%) 6% 0% GDP g (%) 4% -5% 2% -10% 0% 1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 Unemployment Anos rate GDP grow th -15% Source: INEI Note: Unemployment rates for Metropoltan Lma
Prevous studes of labor moblty n Peru Labor moblty has been rarely analyzed n Peru - There are 3 mportant studes of labor moblty and all use the quarterly panel of 1996: 1. MTPS (1998) 2. Chacaltana (1999) 3. Daz and Maruyama (2001)
Prevous studes of labor moblty n Peru Man results: - The mean duraton of U n Peru s very short - Permanent U seems not to be a very mportant problem - Labor moblty s very mportant n urban Peru - The most mportant labor transtons occur between E and I status, and vce versa - Females and young people are the most affected by transtons
Data and varables used The ENAHO surveys and the 1997-99 panel - To analyze labor moblty we need to conduct a dynamc analyss usng Panel Data - We constructed a panel of workng age ndvduals at the natonal level for the perod 1997-99. - The panel sample s relatvely large: 6006 ndvduals.
Data and varables used The selecton bas ssue - The ndvduals n the panel represents only 38% of ndvduals older than 14 years n 1997 - We checked the qualty of the panel and we observed lttle dfferences Varables used - 2 knds of explanatory varables were used: ndvdual and household characterstcs - Varables were measured n two ways: the ntal characterstcs n 1997 and the change from 1997 to 1998
Labor moblty n Peru Table 2: Flows n the labor market durng the perod 1998-1999 (%) 1998-1999 Total Urban Rural Immoblty Males Females Males Female s Always employed 56.2 60.3 40.6 85.3 54.7 Always unemployed 1.4 1.8 2.1 0.0 0.6 Always nactve 15.7 11.8 24.5 3.6 15.6 Total mmoblty 73.3 73.9 67.2 88.9 70.9 Moblty Ext employment - to unemployment 2.7 3.5 2.8 1.5 2.0 - to nactvty 8.6 8.5 10.8 3.6 8.9 Ext unemployment - to employment 3.8 4.8 4.8 1.1 2.1 - to nactvty 2.1 2.2 2.9 0.4 1.9 Ext nactvty - to employment 7.2 4.8 8.5 4.1 12.6 - to unemployment 2.2 2.3 3.1 0.4 1.6 Total moblty 26.6 26.1 32.9 11.1 29.1 Source: ENAHO Panel 1997-99, buld by the authors
Labor moblty n Peru We also observed - Labor moblty changed between 97-98 and 98-99, especally n the urban sector. The economc recesson ncreased transtons from E to I - Labor market n Peru s very complex. For example n the urban sector we observed:
Fgure 2 : Entry and ext urban labor market flows 1997-1999 1997 1998 1999 Total 1999 not workng 26.4% not workng 20.9% not workng 36.4% workng 5.5% not workng 38.5% not workng 4.4% workng 10.0% workng 5.6% not workng 4.8% not workng 10.8% workng 6.0% workng 63.6% not workng 8.5% workng 61.5% workng 52.9% workng 44.4% Source: ENAHO Panel 1997-99, buld by the authors
The determnants of labor market transtons We consdered the relatve rsks condtonal on the others factors that determne labor market transtons. We estmated the determnng factors of dfferent forms of labor moblty between 98 and 99 usng a multnomal logt model. Values of the dependent varable: - Always Employed (O) - Permanent I or U (I) - Ext out of Employment (S) - Enter nto Employment (E).
The Model Ths model predcted the probablty that an ndvdual wth gven characterstcs wll experence one of the four labor market transtons. The multnomal logt s: 1( ) Pr ( y = m x ) = j = O exp( x exp(, I, E, S β x m ) β j ) ( 2) Pr( y = m x ) = exp( x β m ) 1 + exp( x β I, E, S j ) to m O exp( x β m ) ( 3) Pr ( y = m x ) = Pr y = O x ( ) 1 + + j = I, E, S j = I, E, S exp( 1 exp( wth m= I, E, S and β O = 0. 1 x x β β j j ) ) x β, = exp( ) m
Table 5: Urban labor market moblty between 1998 and 1999 by ndvdual characterstcs n 1997 N o m ob lty M ob lty Indvd uals characterstcs O I S E Total Age 36.7 32.3*** 29.5*** 29.9*** 33.5 Age groups (% ) - 14-24 18.8 39.1*** 54.3*** 50.1*** 34.1-25-34 26.2 22.1 12.7*** 16.8*** 21.1-35-44 26.9 16.7*** 10.7*** 13.0*** 19.9-45-54 19.4 13.3** 11.3*** 10.4*** 15.6-55 and m ore 8.6 8.9 11.0* 9.2 9.3 Sex (% ) - m ale 57.5 44.7*** 33.6*** 39.7*** 47.7 - fem ale 42.5 66.4*** 55.3*** 60.3*** 52.3 H ousehold head (% ) 45.6 22.5*** 6.8*** 20.9*** 29.8 +++ Partner (% ) 21.5 24.8 32.2*** 24.4 25.0 ++ Chldren (% ) 25.0 46.9*** 50.1*** 46.8*** 36.7 O thers relatves 7.9 5.8 10.9* 8.0 8.4 Sze of household 5.4 6.0** 5.9** 6.0*** 5.7 M artal Status (% ) - lvng alone 37.2 54.3*** 59.9*** 57.1*** 47.5 - lvng as a couple 62.8 45.7*** 40.1*** 42.9*** 52.5 N um ber of chldren w th less 0.85 0.66*** 0.64*** 0.91 0.78 than 10 years old +++ Educaton (% ) - no educaton 3.0 3.8 5.4** 4.0 3.8 - prm ary educaton 24.4 18.4** 20.1** 20.4 21.8 - secondary educaton 42.5 46.4 56.2*** 55.9 48.1 - unversty and others 30.5 31.4 18.4*** 19.7*** 26.2 Student (% ) 8.6 24.6*** 41.8*** 32.6*** 21.9 ++ 0.51 0.52 0.54*** 0.50 +++ H u m a n c a p ta l o f th e household (rato) Labor m arket stuaton - em ployed 88.8 65.9*** 18.5*** 52.1*** +++ - unem ployed 3.5 7.0** 13.8*** 10.4*** 7.4 - nactve 7.7 27.1*** 67.7*** 37.5*** 29.0 +++ Sectors of actvty (% ) - prm ary 7.7 7.8 6.6 9.8 7.9 - secondary 19.5 17.5 22.2 19.4 19.4 - tertary 72.7 74.6 71.2 70.8 72.7 Insttutonal dvson (% ) - publc 13.7 9.5 4.0*** 4.6*** 11.6 - form al 38.5 42.9 40.1 32.6 38.6 - nform al 47.8 47.6 55.9* 62.9*** 49.8 S k lls (% ) - sklled 29.1 22.5** 15.1*** 18.5*** 26.1 - unsklled 70.9 77.5*** 84.9* 81.5*** 73.9 0.52 63.6
Man results In the urban sector: - Sex and age had mportant effects on labor moblty. - For example: the relatve probablty of beng I relatve to beng O ncreased wth age. - Hgher levels of educaton seemed to protect aganst I.
Man results - Labor market varables had hgh and sgnfcant effects on labor moblty. - For example: work experence and sklls seemed to protect aganst I. Also, the ndvduals wth hgher probabltes of beng I or E were those who had the worst jobs. - Some varables on change had effects. - For example: havng prevously exted from an economc sector apparently decreased the probablty of beng I but ncreased the probablty of S (relatve to beng O).
Man results In the rural sector: - Varables were less sgnfcant but the results and the coeffcents were somewhat dfferent from the varables n the urban sample. - Age affected the probablty of E.
Man results - The effects of sex and of beng a student were stronger. - Sklled ndvduals had relatve hgher probabltes of E. - The effects of been prevously nactve and the effect of the level of household human captal were not as strong. - The dwellng qualty ncreased the probablty of beng n E relatve to O.
Summary Labor moblty n rural and urban sectors s ndeed relatvely very hgh Permanent unemployment does not really exst. Most of the labor market transtons occur between E and I (and vce versa).
Summary Labor market moblty s hgher n the urban sector than n the rural areas and that t does not affect the same people. Some ndvdual characterstcs, labor market characterstcs, household characterstcs, and varables of change seem to be mportant determnants of labor market transtons.