EUROSTAT
Directorate F: Social statistics
Unit F-4: Quality of Life
2014/2/8/EN
document for point 8of the agenda
Labour Transition by type of contract
6th meeting of the expert group on quality of life indicators
Luxembourg, 20/21 november 2014
Bech – Room A3/045
At the previous meeting in October 2014, the Expert Group on Quality of Life Indicators decided to develop an indicator related to job securitybased on transition matrix, to be included in the dimension of Economic and physical safety. It has been agreed to include an indicator measuring the rate of occurrence for an employed person to become unemployed (yearly transitions) or else, based on EU-SILC data. The motivation for the inclusion of the respective indicator stems from the Stiglitz, Sen and Fitoussi Report (2009: 53) where the job insecurity has been mentioned as one of the indicators used for the measuring of economic insecurity. The job insecurity is believed to have an impact on the quality of life of workers, their families, firms (motivation of workers and their productivity, poor identification with the firms' objectives) and also the society in its entirety.
The purpose of this paper is to describe an indicator already computed and disseminated by Eurostat which is calledLabour transitions by type of contract - Changes in employment security (transition within the past 12 months). It is more broad that the previously agreed indicators, and therefore may reflect better the issue at stake. The transition can occur in two directions, i.e. to the job/position with either same or higher, or lower employment security. Relevant data will be presented, together with considerations about the meaning of the respective indicators and their quality. The inclusion of this indicator into the framework of Quality of Life would deepen our understanding of the security that is present at the labour markets of the member states by the explanation of the nature of available jobs in the economy.
This respective indicator and four other related indicators have been requested by Employment Committee (EMCO) for the purposes of their Joint Assessment Framework (JAF) that is an indicator-based assessment system with commonly-agreed indicators. It aims to show the good and bad performances of Member states in regards to the targets of Europe 2020. It is both quantitative and qualitative assessment tool for evidence based policy-making, based on a set of commonly agreed indicators in 11 policy areas.
JAF covers general and specific policy areas under the Employment Guidelines in order to identify key challenges in these areas and support the establishment of priorities by the member states. These respective transition indicators were added to the framework because they develop the analysis of the flexicurity components (specifically 'Contractual arrangements' and 'Lifelong learning systems'). The knowledge about the change in job security is a core issue of the flexicurity studies. It is prepared jointly by EMCO, the Social Protection Committee (SPC) and the Commission.
Available indicators
The indicator Labour transitions by type of contract(ilc_lvhl32) is based on EU-SILC data and summarizes the percentages of people, which according to the difference between their current and former labour market statuses, have been transitioning between different labour statuses (for example having employment or not, being inactive, or on the other hand, having either a permanent or a temporary contract of employment), in the course of one year. Prior to 2001, the transition indicators were calculated from the ECHP that was then discontinued. In coordination with DG EMPL, it was decided to follow as far as possible the methodology used for calculation of these measures from the ECHP for the EU-SILC data. After March and June 2009 discussions of EMCO and Eurostat, first provisional results with some methodological adjustments were presented (October 2008). A more detailed description on the production is provided below.
The data refers to the same individuals, and it is calculated using the longitudinal component of EU-SILC. The following categories are available under ilc_lvhl32:
- Transition to employed person except employee
- Transition to unemployment
- Transition to inactivity
- Transition to employee with a permanent job
- Transition to employee with a temporary job
Subsequently, the information for more, less or equally secure type of contract has been gathered under an indicator Employment security transition level (W_SEC). In order to construct the above mentioned variables, the last and current year working status was provided by the derived variable 'adjusted self–defined current economic status' (PL31 – 9 categories derived from variable PL031 with 11 categories). The nine categories are the following: Employee / Self-employed working full time (including family worker); Employee / Self-employed working part time (including family worker); Unemployed; Pupil, student further training, unpaid work experience; Permanently disabled or/and unfit to work; In compulsory military community or service; Fulfilling domestic tasks and care responsibilities; and Other inactive person.
In order to be able to do further classification, variable Self-defined working status was created via combination of three auxiliary variables: PL31 (above), PL040 Status in employment, PL140 Type of contract. Further details and graphical descriptions can be seen in the ‘Working paper with the description of the 'Income and living conditions dataset' (Eurostat, March 2014: 70-73). The following working statuses have been created:
- Employees with a permanent job
- Employees with a temporary job
- Employed persons except employees
- Unemployed persons
- Students
- Retired persons
- Other inactive persons
The following table describes the matrix used in the creation of three categories of the transition: upwards, downwards and neutral.
Status at t+1Status at t / Perm contract / Temp contract / Self-employment / Unemployment / Studies / Retirement / Other inactivity
Perm. contract / = / - / - / - / - / - / -
Temp. contract / + / = / = / - / - / - / -
Self-employment / + or = / = / = / - / - / - / -
Un-employment / + / + / + / - / + / - / -
Studies / + / + / + / - / = / - / -
Retirement / + / + / + / + / + / = / =
Other inactivity / + / + / + / + / + / - / =
'+' means 'upwards', '-' means 'downwards' and '=' means 'neutral'
As a result, the creation of two final transition categories was enabled. The ‘good transition' classifies as an increase or no change of the employment security compared to the last year. The 'bad transition' reflects a decrease in employment security in comparison to the preceding year. Formally, the finalised state of (ilc_lvhl33) Labour transition by type of contract – Change in employment securityis translated into the following two degrees of employment security:
- Transition to the same or higher employment security as previous year ('good')
- Transition to the lower employment security as previous year ('bad')
Furthermore, the inclusion of this indicator helps us to broaden the understanding of the topic of economic and employment security; similarly as the 'income mobility' aids to develop the framework for measuring income inequality. Income inequality is perceived differently, when 'income mobility' is high and when it is not. Similarly, the employment indicators such as employment/unemployment rate vary in their actual message and implications when the 'labour transitions' are of the 'good' kind rather than of the 'bad'. The inclusion of this indicator is essential for full understanding of labour market dynamics.
Transitional Labour Market (TLM) perspective (Schmidt, Gazier, 2002) supports the idea of emphasizing the studies of the transitions, particularly with the 'good' and 'bad' divisions. This school claims that with the current labour market has gone through the 'erosion of standard employment', i.e. the employment defined as being full-time and permanent, and has moved towards much greater diversity of contracts. Labour transitions (and their direction) are hence an issue of great value-added within the study of quality of employment as they provide us with better outlook than the widely adapted set of indicators in case of this labour market situation.
Transition to the same or higher employment security as previous year
Given the available data (pictured above), the rate of transition to the same or higher level of employment security has decreased from 2008 to 2012, on average, with exception of few countries such as the United Kingdom. The indicator increases in its importance when the other indicatorssuch as the employment or unemployment rate do not manage to provide us with the information on the full picture of the state of the labour market. In order to ilustrate the complementarity of these indicators, wehave highlighted couple of values in the figure below for the change in unemployment rate and rate of transition to the higher security employment between years 2008 and 2012[1]. For example, in Spain, the transition rate to the same or higher employment security as previous year has decreased by 9.8% from 2008 to 2012, whilst in Norway it has increased by 0.5% over the same period of time.This indeed goes well in hand with their performarnce of the indicator of unemployment rate. Unemployment rate has increased in both countries over this period of four years, but it shall be noted that in Spain it has increased by more than 13%, whilst in Norway it only increased by less than one percent.
The period from 2008 to 2012 has been marked by turbulent times in Europe, and hence the increasing unemployment rates are not an unexpected message. Important to remark is that transition rates to same or higher employment security tends to decrease when the unemployments rate increases and that the 'good' transition rate decreases relatively to the extent of the change in these unemployment rates. When the job availability is poorer, people seem to transit to less secure jobs as compared to t-1.
On the other hand, this indicator is not only an indicator to complement other indicators. Itserves a very good purpose on its own as it provides information on over-time performance of the member states in terms of the economic and employment security in our framework for Quality of Life (and in JAF of the Employment Committee).
Suggestions and possible further developments
EMCO has also been making a use of other transition rate variables thatserve to complete their framework of flexicurity indicatorsof JAF. These indicators are already available in the Eurostat's database. The following indicators are available:Labour transitions by employment status, Labour transitions by pay level and Labour transitions by employment status and pay level - Changes in qualifications (with one category less than the already mentioned indicator W_QUAL).
Another indicator available to measure the direction of the transition is Qualification transition level (W_QUAL). It defines the 'good labour market transition' (=1) as transition that changes the employment characteristic from unemployment/inactivity to employment or a transition that involves movements that are described as shifting from low paid to high paid jobs. The good transitions take on value 1, bad value -1, and the rest 0; see the following table for detailed description:
This indicator helps us to describe the transition of the general population, and it helps to broaden the knowledge on the amelioration/diminishment of the economic situation of employed people that the previous indicator does not manage to show. This information is provided by the inclusion of the categories 'better income decile', 'same income decile' and 'worse income decile' within the possible transitions (as can be seen in the third column of the table above). On the other hand, it does not serve such a sound purpose within the framework Economic and physical safety as the indicator Labour transitions by type of contractdoes, but would be more useful as a complementary measure only.
Eurostat’s proposal
Eurostat proposes to adopt the indicator that shows the percentage of the population transitioningto the same or higher ('good') level of employment security. Since the indicator is an outcome of categorization of several other variables, it is possible to create different categorizations or add more categories. Overall, theLabour transition by type of contract – change in employment security seems to fulfilthe purpose ofmeasuring employment security and so it enhances the section related to Economic and physical safety.The Expert Group is invited to comment on this proposal.
References
Agilis, Methodological studies and publications: ’Working paper with the description of the 'Income and living conditions dataset'. DG ESTAT. Luxembourg
Davoine L., Erhel C., and Guergoat-Larivière M. (2008) A Taxonomy of European Labour Markets Using Quality Indicators, DG Employment. Brussels
Schmid, G. and Gazier, B. (2002). The Dynamics of Full Employment. Social Integration
Through Transitional Labour Markets. Cheltenham: Edward Elgar.
1
[1] The indicator itself is available for years 2006 to 2012.