Abstract

17.1. The SNA requires a definition of population to express gross domestic product and consumption aggregates in per capita terms. It also requires labour input variables in order to examine productivity.

A. Introduction

  • 17.1. The SNA requires a definition of population to express gross domestic product and consumption aggregates in per capita terms. It also requires labour input variables in order to examine productivity.

  • 17.2. Many of the complications in the concepts described here stem from the existence of national boundaries. To facilitate exposition, consideration of these has been postponed to part C of this chapter, which thus starts off without any reference to them, as if a country without any cross-border movement of persons and with no cross-border ownership of enterprises were being considered.

B. Population and labour concepts without national boundaries

1. Population and employment

  • 17.4. Population is, in principle, an annual average of frequent head counts, each of which relates to a point in time. (Censuses usually ascertain the number of people present on a specified night.) Thus population is the annual average number of people present. It includes the institutional population, though this is not covered by most labour force surveys.

  • 17.5. The division of the number enumerated at a point in time into three categories, i.e., “employed”, “unemployed” and “not in the labour force” depends upon each person’s activity (or lack of it) during a reference period (usually a week) ending with the point in time to which the count relates. Employment has been defined by the International Labour Organisation (ILO) in the “Resolution concerning statistics of the economically active population, employment, unemployment and under-employment”, adopted by the thirteenth International Conference of Labour Statisticians. No definition is required here, but, as figure 1 indicates, provided that the definitions of employment and of jobs match one another, the average annual number of jobs exceeds the annual average number of persons employed by the average annual number of second, third, etc., jobs. Note that the second, third, etc., jobs of a person may either successively follow one another in a reference week or, as when someone has an evening job as well as a daytime job, run in parallel.

  • 17.6. Employed persons who have more than one job during a reference week can only be classified by industry and by status in employment through the application of some essentially arbitrary convention as to which of their jobs is the most important one. On the practical plane, while household surveys can provide data about either or both of employment and jobs, establishment surveys only provide data about jobs, so data on jobs tend to be more plentiful than data on persons employed.

  • 17.7. Employment does not enter into the System, but jobs do; a job is like a transaction, while an employed person is not.

2. Jobs

  • 17.8. In daily speech, a job is used in two senses: first, as a filled post in an institutional unit, e.g., “B has a job as truck driver with XYZ Company”, and, second, to signify the occupation or nature of the activity, e.g., “B’s job is driving an XYZ truck”. The first of these is relevant here. Thus a job is defined as an explicit or implicit contract between a person and an institutional unit to perform work in return for compensation for a defined period or until further notice. The institutional unit may be the proprietor of an unincorporated enterprise; in this case the person is described as being self-employed and earns a mixed income.

  • 17.9. There are a number of points here which require expansion:

    • (a) Both employee jobs and self-employment jobs are covered. The distinction between employee and compensation of employees on the one hand, and self-employment and mixed income on the other hand, is set out in chapter VII. Figure 17.2 summarizes part of that discussion;

    • (b) Work means any activity which contributes to the production of goods or services within the production boundary as defined in chapter VI. The legality of the work and the age of the worker are, in principle, irrelevant;

    • (c) Mixed income and the compensation of employees are defined in chapter VII. Compensation differs from labour cost, as defined by the ILO “Resolution concerning statistics of labour cost”, adopted by the eleventh International Conference of Labour Statisticians, only in including imputed employer contributions to unfunded social insurance schemes, and in excluding any taxes regarded as labour cost, together with the costs of training, welfare, recruitment and the provision of work clothing;

    • (d) The explicit or implicit contract relates to the provision of labour input, not to supplying output of a good or service, which is why it is described as for a defined period or until further notice. A bricklaying job, paid by time or according to the number of bricks laid, is an employee job, while a contract to lay a certain number of bricks for a given payment is not a job; the job is the bricklayer’s notional self-employment contract. Similarly, a self-employment job of window-cleaning is regarded as an implicit contract by a person to hire himself or herself to do cleaning work. Quite separately, the person has contracts with customers to provide the service of window-cleaning;

    • (e) There is one minor difference between a job as defined here and the category of persons “with a job but not at work” who are considered as employed in the ILO resolution adopted by the thirteenth International Conference of Labour Statisticians, referred to above. This is that, on the ILO definition, the employed may include persons who are not being paid but have a “formal attachment to their job” in the form of “an assurance of return to work… or an agreement as to the date of return”. Such an understanding between an employer and a person on layoff or away on training is not counted as a job in the System.

      Figure 17.2.
      Figure 17.2.

      Distinguishing between employment as employee and in self-employment Is B’s job with an enterprise an employee or a self-employment job?

  • 17.10. Jobs may be classified not only as employee or self-employment, but also according to the standard activity classification.

3. Total hours worked

  • 17.11. Output per job would be an excessively crude measure of productivity and total hours worked is the preferred measure of labour inputs for the System. The ILO “Resolution concerning statistics of hours of work”, adopted by the tenth International Conference of Labour Statisticians, defines hours worked as follows:

    Statistics of hours worked should include:

    • (a) Hours actually worked during normal periods of work;

    • (b) Time worked in addition to hours worked during normal periods of work, and generally paid at higher rates than normal rate (overtime);

    • (c) Time spent at the place of work on work such as the preparation of the workplace, repairs and maintenance, preparation and cleaning of tools, and the preparation of receipts, time sheets and reports;

    • (d) Time spent at the place of work waiting or standing-by for such reasons as lack of supply of work, breakdown of machinery, or accidents, or time spent at the place of work during which no work is done but for which payment is made under a guaranteed employment contract;

    • (e) Time corresponding to short periods of rest at the workplace, including tea and coffee breaks.

    Statistics of hours actually worked should exclude:

    • (a) Hours paid for but not worked, such as paid annual leave, paid public holidays, paid sick leave;

    • (b) Meal breaks;

    • (c) Time spent on travel from home to work and vice versa.

  • 17.12. Total hours worked is the aggregate number of hours actually worked during the year in employee and self-employment jobs.

  • 17.13. The truism, for employee jobs, that hours worked equal hours paid less hours paid but not worked, plus hours worked but not paid, is a useful one, since many establishment surveys record hours paid, not hours worked, so that hours worked have to be estimated for each job group, using whatever information is available about paid leave, etc.

4. Full-time equivalence

  • 17.14. An inferior alternative to expressing labour input in terms of total hours worked is to measure it in terms of full-time equivalent work years. Full-time equivalent employment is the number of full-time equivalent jobs, defined as total hours worked divided by average annual hours worked in full-time jobs.

  • 17.15. The definition does not necessarily describes how the concept is estimated. The method sometimes used, of simply counting all part-time jobs as half a full-time job, is the crudest possible way of making an estimate. Since the length of a full-time job has changed through time and differs between industries, more sophisticated methods which establish the average proportion and average hours of less than full-week full-time jobs in each job group separately are preferable.

  • 17.16. Even if the data are good enough to permit an estimation of total hours worked, full-time equivalent employment should nevertheless also appear in the national accounts. One reason is that this facilitates international comparisons with countries which can only estimate full-time equivalent employment. The other reason is that, since the full-time annual hours of a job group vary through time, the two concepts carry a partially different message. If, for example, more sickness or annual leave is taken, both shortening average annual full-time hours and, ceteris paribus, reducing total hours worked, full-time equivalent employment will scarcely change, while total hours worked will fall. So if the former rather than the latter is used as the denominator in calculating productivity changes, productivity will rise less or fall more. A similar point applies to international comparisons. If, however, full-time annual hours did not exclude paid sick leave, but total hours worked continued to do so, more sickness would cause full-time equivalent employment to rise more or fall less than would an equal increase in annual leave, so that productivity would rise less or fall more. This would make good sense—sickness undesirably interferes with production, while annual leave is a desirable alternative to it. But if information on absence from work through sickness is not available for estimating full-time annual hours, it will not be available either for estimating total hours worked.

  • 17.17. In practice, total hours worked and average annual full-time hours may have to be estimated. In many countries, especially for monthly paid employee jobs, only normal or usual hours, any paid overtime, and annual and holiday leave entitlements can be ascertained, and it may be impossible to estimate the subtraction to be made for average sickness leave from either total hours worked or annual full-time hours. This error will not affect full-time equivalent employment if sickness rates in part-time jobs are the same as in full-time jobs, so can be tolerated if it is unavoidable.

  • 17.18. If the reference weeks used in the surveys that provide the data are not fully representative, the best available information on variations throughout the year should be used in estimating data for the year as a whole.

5. Employee labour input at constant compensation

  • 17.19. Total hours worked and full-time equivalent employment are both physical measures of labour input. Output too can usually be measured in physical terms, such as tons or cubic metres, but this is not done in the national accounts, because the basic value per ton or cubic metre varies so much between products that these physical measures lack general economic significance. But compensation per hour or per full-time year of work varies enormously too, so that the physical measures of labour input also lack general economic significance. Their usefulness thus rests either upon the assumption that the mix of different kinds of labour is much the same in the different countries or at the different times examined, or upon their application in a social or political context, where interest centres upon personal welfare rather than upon the economics of production and income generation.

  • 17.20. When output is measured both at current and at constant prices, it is natural to do the same with labour inputs as well as with intermediate inputs. However, mixed income, which is the return to self-employment, cannot be unambiguously divided between the return to labour and the returns to capital and entrepreneurship. For this reason, only the value of employee labour input (and not self-employed labour input) forms part of the System. Note that the measurement of employee labour inputs at current and constant prices is symmetrical with the measurement of output:

    • (a) Market prices and market compensation are assumed to measure the relative economic importance of different goods, services and jobs; the advantages and disadvantages of this assumption are the same for inputs as for outputs;

    • (b) Though the constant price and constant compensation concepts are defined as revaluations of quantities at base period prices or compensation levels, they can be estimated in practice as the sum, over all groups, of values at current price or compensation levels, each divided by an appropriate index;

    • (c) These group indices are estimates, calculated for a representative sample of jobs or of goods or services, with weights reflecting the relative importance of each of the sub-groups represented by a selected and specified job, or by a selected and specified good or service. In other words, a compensation index is constructed like a price index.

  • 17.21. While the value of employee labour input at constant compensation can be estimated by deflation of current values, as mentioned above, the data may also permit the direct approach of multiplying the current number of jobs in each job group by the base-period average annual compensation for jobs in that job group.

C. National boundaries

  • 17.22. The complications that arise from the existence of national boundaries must now be examined. (Similar complications arise for regional accounts from regional boundaries.) Conceptual clarity requires that the everyday concept of a person or firm in a country be replaced by the precise notion of an institutional unit being resident in an economic territory. Residence and economic territory are discussed at length and defined in chapter XIV, in a way which fits together with the concept of gross domestic product.

  • 17.23. Without reproducing these definitions in their entirety, certain major features deserve to be stressed:

    • (a) A country’s military bases and diplomatic premises abroad are part of its economic territory;

    • (b) The residence of an institutional unit is determined according to the location of its “centre of economic interest” which, for an enterprise is an establishment where it produces over a long period of time and, for a household, its principal residence;

    • (c) This means that an enterprise producing for one year or more in another economic territory is treated as having a centre of economic interest there. A quasi-corporation is deemed to exist and be resident in that other economic territory;

    • (d) It also means that persons living and working for one year or more in another economic territory are treated as resident there.

1. Population

  • 17.24. Population is the annual average number of persons present in the economic territory of a country. In this and other definitions, the fact that, by convention, economic territory includes embassies, military bases and ships and aircraft abroad should not be forgotten.

2. Jobs

  • 17.25. Jobs, too, could be looked at in terms of the residence of the employee or self-employed person. For measuring labour input, however, only the residence of the employing or self-employing institutional unit is relevant, because resident producers alone contribute to gross domestic product. Thus the compensation of a person who lives in country C but works in country D is part of the value added of country D although it is part of the national income of country C.

  • 17.26. The principles thus determining the location of jobs apply equally to the territorial scope of total hours worked, of compensation of employees and mixed income, of full-time equivalent employment and of the value of employee labour input at constant compensation. Since these principles are different from those determining the territorial scope of the population, it should be remembered that full-time equivalent employment cannot be compared with population. The jobs held by persons resident in the country’s economic territory, which can be looked at in relation to population, are not quite the same as the jobs with employers in the country’s economic territory which are those that correspond to labour inputs into domestic production.

    Note in particular that:

    • (a) The jobs carried out within a country’s economic territory that are not counted are the jobs performed for institutional units resident in other countries which have not already engaged in transactions for a year or more. Thus the work of foreign short-term consultants and repairmen are not counted;

    • (b) Jobs carried out wholly or partly in another economic territory for a domestic institutional unit are included in the domestic count, unless the nature and duration of that employing institutional unit’s activity in the other territory are such as to warrant treating it as owning a quasi-corporation located there;

    • (c) The jobs of the staff of international organizations and of local staff of foreign embassies are excluded, since these employing units are not resident. Thus their compensation is not in the gross domestic product, though it is part of national income.

    A job in the economic territory of country X is an explicit or implicit contract between a person (who may be resident in another economic territory than that of X) and an institutional unit (which may be itself acting as self-employer) resident in the economic territory of X to perform work in return for compensation (or to earn a mixed income) for a defined period or until further notice.

3. Total hours worked

  • 17.27. Total hours worked in country X is the aggregate number of hours actually worked during the registration period in employee and self-employment jobs within its economic territory,

    including

    • work outside that economic territory for domestic employer institutional units who have no centre of economic interest there,

    excluding

    • work for foreign employer institutional units who have no centre of economic interest within the economic territory of country X.

    Hours actually worked are to be interpreted as set out in the ILO definition quoted above.

4. Full-time equivalent employment

  • 17.28. Full-time equivalent employment in country X, which equals the number of full-time equivalent jobs, is its total hours worked divided by average annual hours worked in full-time jobs within its economic territory. Average annual hours are defined in the same way as hours worked.

5. Employee labour input at constant compensation

  • 17.29. Employee labour input at constant compensation of country X is what the current annual compensation of employee jobs would be if it were calculated using the levels of compensation ruling during a selected base period. Division of employee labour input at constant compensation into compensation of employees will yield an implicit compensation deflator comparable with the implicit expenditure deflators of the national accounts.

D. Classifications

  • 17.30. Labour inputs should be classified in the same way that value-added and compensation of employees are classified. The International Standard Classification of All Industrial Activities (ISIC) is the basic classification for these variables in the System and the ISIC is widely used for studies of employment and labour productivity. Labour inputs should, therefore, be classified according to the ISIC. However, the System also provides other classifications that may be useful for particular types of analysis.

  • 17.31. Figure 20.1 in chapter XX suggests the following breakdown:

    Figure 20.1.
    Figure 20.1.

    An example of a household taxonomy using a tree structure

    1 All households are subdivided into institutional households and non-institutional households (see paragraph 4.137 of chapter IV for a definition of institutional households);2All non-institutional households are split into rural and urban.3 Both rural and urban households are split into (a) recipients of property or transfer income, (b) employees and (c) self-employed (employers and own-account workers).4 Recipients of property or transfer income are split into (a) recipients of property income, (b) recipients of pensions, and (c) recipients of other transfers.5 In rural areas, the employee and the self-employed households are subdivided into agricultural and non-agricultural.6 Agricultural (rural) employees are not further broken down.7 Non-agricultural rural and all urban employee households are grouped according to occupational category of the reference person (three skill categories) and subsequently according to (main) sub-sector of his or her employment: (a) unincorporated enterprise and NPISHs, (b) public corporations and government, (c) national private corporations and (d) foreign-controlled corporations.8 Rural, agricultural self-employed households are further partitioned into three size-classes of land owned.9 Non-agricultural rural and all urban, self-employed households are bisected twice, (a) into own-account workers and employers, and (b) into informal and formal establishments, whereby the former may be defined as, e.g., firms which involve less than five (paid plus unpaid) full-time worker equivalents and which belong to an ISIC-category with low skill- and (other) capital-intensity; the rest of the establishments are then considered as formal.

    • Rural

    • Self-employed

      • Agricultural

        • Small farmers

        • Medium farmers

        • Large farmers

      • Non-agricultural

        • Informal, own-account

        • Informal, employers

        • Formal, own-account

        • Informal, employers

    • Employees

      • Agricultural

      • Non-agricu1tural

        • Unskilled

        • Skilled

        • Highly skilled

    • Urban

    • Self-employed

      • Informal

      • Formal

    • Employees

      • Unskilled

      • Skilled

      • Highly skilled

    For some purposes, it may also be useful to classify employees according to the sectors or subsectors in which they are employed—such as households and non-profit institutions serving households (NPISH); public corporations and government; national private corporations; and foreign corporations.

  • 17.32. Table 20.6 in chapter XX provides an alternative classification for employees. This is by sex and four occupational groups—agricultural workers; manual workers; clerical, sales and service workers; professional, managerial; etc.

Table 20.6.

Detailed value added sub-matrix (table 20.4, cell 3.2)

article image

Based on row and col. codes in table 20.5.

  • View in gallery

    Population and labour concepts

  • View in gallery

    Distinguishing between employment as employee and in self-employment Is B’s job with an enterprise an employee or a self-employment job?

  • View in gallery

    An example of a household taxonomy using a tree structure