There's widespread agreement that a stronger focus on quality jobs — typically thought of as jobs that are well paid, stable, and with reasonable conditions — are perhaps the best way for emerging and developing countries to lift themselves out of poverty and reduce inequality. However, there's little agreement on how to measure and analyze job quality not only because the literature on the topic is quite recent and heterogeneous but also because of a lack of adequate data to measure job quality properly.
Not surprisingly, this was a major topic of interest at the recent November 2012 LACEA (Latin America and Caribbean Economics Association) — LAMES (Latin American Econometric Society) conference in Peru. Today's blog looks at an innovative paper that tries to break new ground in measuring job quality. It focuses on Chile, which in recent decades has enjoyed strong economic growth — yet continues to suffer inequality and poverty. A key question is how the determinants and dynamics of job quality influence the labor market, with much lower productivity growth in the service sectors compared with the capital-intensive ones.
Difficulties in measuring job quality
There are several definitions of job quality (good jobs). Traditionally, the concept has been associated with wages, but increasingly there's a desire to broaden the interpretation to include additional measures such as job satisfaction, stability, and social security. In Europe, other job quality concepts have been developed like family and employment, psychological health related to job quality, and organizational work. Organizations like the International Labour Organization (ILO) launched the concept of "Decent Work," which has further stimulated the debate.
As a result, there are several conceptual frameworks around good jobs (the ILO's, the International Finance Corporation's, the 2013 World Development Report's, the European Union's, and Oxford's). There are even some initiatives in sectors such as apparel trying to collect the right information to adequately measure job quality (including compliance data, work satisfaction, etc.). However, the challenge is to make these concepts fully operational.
A big part of the problem is that there are few empirical studies analyzing job quality. But one recent study by Oscar Landerretche, Professor at the Department of Economics of the University of Chile (with Federico Humeeus and Esteban Puentes) does just that. It is innovative in the sense that it uses the Oxford job quality index (not with all the variables, just a few) and applies it to a panel data of Chilean workers mainly in the formal sector to understand which variables seem to contribute to job quality. Although the study doesn't fully capture all the dimensions of job quality as the strict literature would mandate, the advantage is that it has a nice panel data set that allows the authors to control for heterogeneity to identify which factors (firm and individual) contribute to job quality (as they define it).
Bigger firms and a good labor history matter
What did the study show? As Landerretche tells the JKP, several results stand out.
- The type of contract, job tenure, and other characteristics of the job such as training improve with firm size and the presence of a union.
- All of the characteristics associated with job quality improve when the worker has a history of having high quality contracts. As economist say, there is hysteresis—that is, short-term effects might have long-term persistent effects.
- Other factors, such as gender, public versus private sectors, and specific type of economic sectors don’t appear to matter.
The authors contend that their findings have two major policy implications. First, policy makers might consider acting at the level of the worker's trajectory, which is as important as firm size or unionization. That means promoting high quality labor contracts for young workers and for new entrants into the labor market. The reason is that if these types of workers get high quality jobs, they will probably demand them in the future. Second, given that smaller firms are less likely to provide these high-quality jobs, policy makers might want to adopt a number of measures—like preferential access to credit—to improve the productivity of these firms in order to provide the high-quality jobs.
This post was first published on the Jobs Knowledge Platform.
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