More and better jobs for an inclusive recovery
The world is still repairing the damage done to employment prospects and social equality by the crisis. Governments are trying to create not just more jobs, but better jobs. A new OECD framework helps them to define what job quality means and to measure whether their policies are succeeding.
The scars of the crisis are still visible on the job market, despite the recovery now under way. The unemployed have borne considerable personal, economic and social costs, particularly those who have endured long spells of joblessness, and young people who have failed to find their first job. But an increasing number of those who kept their job or managed to return to work quickly have also experienced economic hardship as a result of stagnant or even declining earnings, and greater work pressure and growing insecurity.
The crisis has also deepened labour market inequalities. Job creation has disproportionately taken the form of fixed-term or temporary jobs in many advanced economies, while in emerging economies new jobs tend to be in the informal, unregulated economy. These developments are reinforcing pre-crisis trends towards atypical and often precarious work, and further increasing the number of people insufficiently covered by social protection and labour regulations.
Clearly, there is a need to promote the creation of not just more jobs, but also better jobs. This is now the defining challenge for many governments around the world, as also clearly indicated in the G20 Leaders’ Declaration at their summit in Brisbane in November 2014.
The increasing importance of job quality in the policy debate has not yet translated into concrete policy action. Partly, this is because job quality is hard to define and quantify. What aspects of job quality are most important for workers’ well-being and how can they be measured? How does job quality vary across countries and socio-economic groups? What can policy makers do to promote job quality and help to create jobs when the labour market recovery is still fragile?
Job quality framework
To address these questions, the OECD has developed a new framework for measuring and assessing job quality. Following the influential report by the Stiglitz Commission on the Measurement of Economic Performance and Social Progress, and in line with the OECD Better Life Initiative, the OECD job quality framework focuses on individualoutcomes, their distribution across workers, and on mainly objective features of job quality. The framework identifies three complementary dimensions as the most salient for workers’ well-being and amenable to policy interventions.
First is earnings quality, which captures the extent to which the job contributes to workers’ material living standards. Earnings quality covers both the level of earnings and their distribution across the workforce. Average earnings provide a key benchmark for assessing whether having a job ensures good living conditions, while the way earnings are distributed across the workforce matters for well-being and economic performance.
The second dimension is labour market security. For the advanced economies, this focuses on the risk of unemployment and the income support workers are entitled to if unemployed. For the emerging economies where there is widespread informality and weak social insurance, hidden unemployment and under-employment on extremely low pay are taken into account.
Quality of the working environment, the third dimension in our framework, captures non-economic aspects of job quality and is summarised by the incidence of job strain that can impinge on workers’ health and well-being. Job strain occurs when high demands on workers, such as time pressure or unhealthy working conditions, are combined with low resources available to address them, such as a lack of work autonomy or training.
Not mission impossible
Job quality along the three dimensions of our framework can be scored alongside a traditional indicator of job quantity–the employment rate, which is the share of the working-age population in employment–for 35 OECD and emerging economies.
Cross-country differences in earnings quality are primarily driven by gaps in average earnings, although differences in earnings inequality also play a significant role. Earnings quality is highest in Denmark and Norway and lowest in Mexico and South Africa. It is lowest in Mexico and South Africa both because of the low level of earnings and the widespread inequality in these countries. With respect to labour market security, the best performing countries are those where the risk of unemployment is low, such as Norway and Switzerland, or where compensation systems are effective in cushioning unemployment’s negative effect on income, as in France and Germany, for instance. Other countries, such as Spain, South Africa and Greece face the daunting challenge of reducing the risk of unemployment.
With respect to quality of the work environment, the best performing countries are those that succeed in coupling high availability of resources with workers with a low share of overly-demanding jobs. Interestingly, the performance of some countries like Italy, France and Spain is dragged down by low resources, despite a relatively low incidence of very demanding jobs.
Young people and low-skilled workers are the most likely socio-demographic group to combine a high risk of joblessness with low-quality jobs, while highly-skilled workers tend to be more often employed and to have the best-quality jobs along all three dimensions. Women also face some clear disadvantages, with wide gender gaps in employment, earnings quality and labour market security.
An important finding for advanced countries is that there is no apparent trade-off between job quality and job quantity. In fact, job quantity and the different dimensions of job quality tend to be positively related across countries, across population groups, and across individuals over their lifetime. This implies that with the right mix of policies and institutions it is possible for labour markets to perform well across all dimensions. To reduce inequalities in both the quantity and quality of jobs, policies should target those workers, particularly young people and the low-skilled, who tend to do poorly.
By contrast, in emerging economies, job quantity and job quality often do not go hand in hand. The main issue for these countries is generally not unemployment, but the lack of better paid and more protected jobs. This calls for policy actions on job quality, which can and should be a win-win strategy for economic growth, social stability and inclusiveness.