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The Financial Express

Unemployment is underestimated


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Who is not happy when real unemployment rate shrinks continually? This is popularly recognised as one of the prime indicators of good macroeconomic performance in a market economy. The formula for calculating unemployment rate is identical across the globe. Do the unemployment rates measured home and abroad touch the reality? We hardly question the validity of long established criteria or rules which have been practised for ages globally. Measurements are guided by labour statistics standards set by ILO. Bangladesh also follows the same ILO standards. Proposition is that unemployment is significantly underestimated in our country like elsewhere in the globe. Bases for calculating employment and unemployment ought to be reconsidered in order to produce more reliable labour statistics and scenario to frame suitable employment policy and strategies.

Resolution 19 of the 19th International Conference of Labour Statisticians (ICLS) states that persons in employment are defined in terms of two main status in employment categories, i.e., paid employment and self-employment, distinguishing between two main groups: persons at work, and persons with a job or an enterprise but not at work. The employed thus comprise all persons above a specified age who during a specified brief period, either one week or one day, were in the following categories:

(a) "paid employment": (a1) "at work": persons who during the reference period performed some work for wage  or salary, in cash or in kind; (a2) "with a job but not at work": persons who, having already worked in their present job, were temporarily not at work during the reference period and had a formal attachment to their job.

(b) "self-employment": (b1) "at work": persons who during the reference period performed some work for profit or family gain, in cash or in kind; (b2) "with an enterprise but not at work": persons with an enterprise, which may be a business enterprise, a farm or a service undertaking, who were temporarily not at work during the reference period for any specific reason.

Labour Force Survey (2016-17) report did not furnish any break-up of employment based on each person's tenure. A person might have worked during the reference period (a week or even a day) but how long he or she already worked remains unknown. This data gap fails to give actual scenario. Besides this, family helpers working for family gain may also want jobs outside the family for wages or salaries, but categorised as employed while their work is neither paid for nor accounted for in GDP. Women employment has been on the rise and they manage to contribute to family and at the time work outside for pay. Family helpers do not get any pay and hence should not be counted as employed, rather they are unemployed. Such data as shown in the Table 1 thereby overstate employment situation, and indirectly underestimate  the unemployment rate to some extent.

As per labour statistics, working age population comprises the aggregate of the employed, the unemployed and the persons not in labour force. Employment rate is 55.78 per cent, unemployment rate is 2.48 per cent and persons not in labour force 41.74 per cent. The proportion of  persons  not  included in labour force is highly  significant  and this  admits of  insightful analysis along with  unbiased classification. NLF is the biggest source of underestimation of unemployment. All persons belonging to housework/family work (included in NLF) should have been  distributed based on age-group. Young persons under NEET category (1.2280 crore) are not explicitly mentioned in NLF but they are, of course, included in NLF.

According to BBS Labour Force Survey 2016-1, the international standard definition of unemployment is based on the following three criteria, which should be satisfied simultaneously: "without work", "currently available for work" and "seeking work". The "unemployed" comprise all persons older than a specified age who during the reference period were: (a) without work - not in paid employment nor self-employed; (b) currently available for work - available for paid employment or self-employment during the reference period (one week); and (c) seeking work - had taken specific steps in a specified reference period (one month) to seek paid employment or self-employment.

In view of the comments inserted in Table 3, it is  quite illogical  not to classify persons in serial numbers 2,3,5,7,8 and 9 as unemployed  because of the fact that persons showing  reasons of 'No jobs available', 'Off season', 'Inadequate  work',  and  ' No desired work' are without work, ready to work if they get jobs now and to their choice and  'seeking work' criterion stays implied and its  rigidity is relaxable.

Resolution 28 of the 13th ICLS introduced a provision which allows for relaxing criterion of " seeking work" in certain instances. The provision is confined to situations where "the conventional means of seeking work are of limited relevance, where the labour market is largely unorganized or of limited scope, where labour absorption is at the time inadequate, or where the labour force is largely self-employed". In our country, own account workers and employers together constituting about 49 per cent in addition to family members engaged in housework or family work are self-employed. Our labour market is also unorganised. Consequently, 'seeking work criterion' relaxation is applicable to our labour market according to ICLS resolution (2013).

Persons showing "Illness and injury"   are currently  unable to work. Persons except those who  are not permanently disabled can work  in future but their status  is now unemployed. Can we say for certainty that people engaged in housework or family work  are really reluctant to work outside home? Presumably, two-thirds of them may prefer to work off the family if encouraging environment is created. Do we not observe women working in offices or at enterprises as self-employed and at the same time, managing household  affairs. Cooking and eating related activities in modern times  are not  largely performed at home and eating out behaviour has been increasing. After all, they are unpaid and should be counted as unemployed. We can usually exclude from labour force  only those  who are permanently disabled, retirees, students and trainees, home-workers rigidly reluctant to work for pay , aged people who are physically able but  rigidly reluctant to work outside, persons waiting for joining or staring up own business.

The  Labour Force  Survey 2016-17  shows that unemployment ratio is 4.22 percent. BBS has defined the unemployment rate (also known as the level of unemployment) as the number of unemployed persons expressed as a percentage of the total labour force being the sum of total employed  and unemployed persons. A revised calculation may be hypothesised taking the figures in "000'. Given new unemployed persons, total revised labour force stands at 88461 ( i.e.63504 +24957) and  total revised unemployed persons equal 27634 ( i.e. 2677 +24957).Thus revised  unemployment  rate stands at 31.24 percent. Young persons not in employment, education or training  (NEET) should be  considered  to be unemployed, and as such included in total  labour force  as well as in total revised unemployed persons.We should study on unveiling the  extent of  real underestimation.

Resolution 17(a) of the 1th ICLS says that the employed and unemployed together are referred to as the labour force or the currently active population. Persons not in the labour force are also referred to as the population not economically active. It is the duty of the progressive and democratic state to activate the economically inactive people by way of motivational policies and programmes. If we exclude this group of inactive people  from our thoughts, focus, and decisions, we  can, as a follower of  market economy, make  macroeconomic performance look  much stronger in terms of  low unemployment level but in future, we must be ready to fight the fire hidden under ashes.

Unbiased and truthful  research  can detect conceptual  bias, ambiguities and shortcomings in defining the  variables of  both numerator and denominator of unemployment ratio. The Labour Force Survey's classification matrix for persons not in labour force has not been prepared with maximum precision, specificity, and farsightedness. ILO standards and definitions on measures of labour market should be revisited and rethought. Indigenous efforts are required for developing realistic standards of measuring employment situation of our country. This is more crucial now because of COVID-19 impacts on labour market.

Haradhan Sarker, PhD, is ex-Financial Analyst, Sonali Bank & retired Professor of Management.

[email protected]

 

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