Theoretical and empirical implications of the new definition of unemployment in Colombia.

• Author: Guataquí, Juan C.
• Pages: 21(18)

Resumen. En junio de 2000 Colombia adoptó una nueva definición de desempleo siguiendo los estándares de la OIT. Este cambio implicó una reducción de la tasa de desempleo del orden de dos puntos porcentuales. En este documento contrastamos el caso Colombiano con las experiencias de otros países en términos de la transformación metodológica y sus implicaciones empíricas. Posteriormente, evaluamos el soporte empírico del cambio de metodología. Nuestros resultados sugieren implicaciones específicas sobre el desempleo estructural y su relación con el perfil educativo de los desempleados; por lo tanto, cuestionan la aplicación práctica de la definición estándar de desempleo de la OIT al caso colombiano.

Palabras clave: desempleo, clasificación ILO, estados de la fuerza de trabajo, errores de medición.

Clasificación JEL: J64, J21.

Abstract. In June 2000 Colombia adopted a new definition of unemployment following the standards of the International Labour Organisation (ILO). This change implied a reduction of the unemployment rate of about two (percentage) points. In this paper we contrast the Colombian case with other countries' experiences in terms of the methodological transformation and its empirical implications. Afterwards, we test the empirical support of the change of methodology. Our results suggest specific implications on structural unemployment and its relationship to unemployed people's educational profile; therefore, they challenge the practical application of the ILO's standard unemployment definition to the Colombian case.

Key words: unemployment, ILO classification, labour force states, measurement errors.

JEL classification: J64, J21.

1. Introduction

   Within the methodological foundations of research in social sciences, a conceptual instrument has been defined as a category used in producing a report. Besides, the concept of technical instrument holds for the specific methods to collect the information regarding a conceptual instrument (Scott, 1990). According to this, and in relation to the definition of unemployment, the household surveys here presented include a set of questions addressed to identify the labour status of people. Once the condition of being unemployed is identified, the most standard--first hand--technical instrument related to unemployment is to count the amount of unemployed people belonging to this group and, from the resulting figure, calculate the unemployment rate.

   International Conferences of Labour Statisticians (ICLS) are held with the purpose of providing stable criteria on information collection procedures and standardising concepts. Since its first meeting in 1923, the Conference has underlined the importance of maintaining regular definitions of conceptual instruments given the compromise of providing regular administrative records in order to maintain the quality and reliability of official statistics. On behalf of and even sometimes despite these recommendations, many countries have modified the definitions of the technical or conceptual instruments used as a base of public statistics.

   This document inquires into the empirical support of the amendment of the definition of unemployment from the labour market point of view. It deals with the specific theoretical and empirical considerations regarding the modification of the definition of unemployment as a conceptual instrument, specially the one developed in the Colombian Household Survey from year 2000 onwards. We will contrast this case study with others applied on the cases of Italy, England and Spain. Specific regard will be placed on the quantitative consequences of the qualitative definitions involved and the theoretical considerations of these qualitative definitions.

   The structure of the document goes as follows. In section 2 we review the process of standardisation of labour statistics developed by ILO with the advice of the International Conference of Labour Statisticians and present four country cases: England, Spain, Italy and Trinidad and Tobago. In section 3 we present the main features of the change of methodology in the Colombian Household Survey regarding the definition of unemployment and quantify the monthly impact of these modifications for the year 2000. Finally, from section 4 onwards, we present our quantitative exercise addressed to evaluate the empirical evidence supporting the change of the definition of unemployment in the Colombian labour market.

2. Changes of the definition of unemployment as a conceptual instrument: some international experiences

   The International Labour Organisation (ILO) has promoted the adoption of international standards on labour statistics, in particular, by following many of the resolutions adopted by the International Conference of Labour Statisticians (ICLS) since its Eight Conference Resolution I in 1954.

   Resolutions adopted by the ICLS, unlike the ones issued by the ILO, do not require ratification; consequently, they are not binding upon states and, in case of being accepted, they do not require supervision. According to Bolle (1999), abiding by the Conference's resolutions is unnecessary given the fact that the interaction between the ILO's statistical work, the participation of statisticians in the ICLS, and the national statistical services is an ongoing process. Despite this interaction, technical sovereignty of countries on these matters has led to very interesting situations.

   2.1. Change of unemployment definition in the United Kingdom: claimant count

   In 1983 the British government changed its definition of unemployment. An unemployed person became one who was 18 years old and over and was claiming unemployment-related benefits. For Vournas (1999) this is the consequence of a common practice developed by governments all through the 80's and 90's: to identify conceptual instruments with technical ones. Registration of the unemployed in a particular assistance program became the definition of unemployment and the instrument used to count jobless people.

   Some consequences of this policy have been identified: first, time series based on the previous definition became discontinuous; second, the official unemployment rate, defined as the ratio between people aged 18 and over claiming unemployment-related benefits and the total workforce, (1) actually fell. Those excluded from the new definition and who in definitions of other sort would be considered unemployed became invisible (Vournas 1999: 2). The author estimates that the reduction was from 170 000 to 190 000 unemployed people, a political strategy from the British government recognised on a report from the Bank of England:

   "although unemployment is falling because there are more jobs, it is also true that much of the decline in the claimant count which has occurred since mid-1986 has been due to a shift in the unemployment/employment relationship resulting from changes in the Government's range of Special Employment Measures--specially the introduction of more rigorous availability for work tests and the rapid growth of the Restart programme (quoted in SSAC 1991: 59)."

   Taken from Vournas (1999).

   This change of the definition of unemployment generated a very interesting wave of research reports, some of them with technical comments and estimations, and some others with ideological or political criticism. The work of Levitas (1996) combines all the previous considerations. Maintaining the reflections regarding the political role...