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Nonstandard forms and measures of employment and unemployment in transition: a comparative study of Estonia, Romania, and Russia.

This paper looks behind the standard, publicly available tabor force statistics retied upon in most studies of transition economy tabor markets. We analyse microdata on detailed labor force survey (LFS) responses in Russia, Romania, and Estonia to measure nonstandard, boundary forms and alternative definitions of employment and unemployment. Our calculations show that measured rates are quite sensitive to definition, particularly in the treatment of household production (subsistence agriculture), unpaid family helpers, and discouraged workers, white the categories of part-time work and other forms of marginal attachment are stilt relatively unimportant. We find that tweaking the official definitions in apparently minor ways can produce alternative employment rates that are sharply higher in Russia but much lower in Romania and slightly lower in Estonia, and alternative unemployment rates that are sharply higher in Romania and moderately higher in Estonia and Russia. Comparative Economic Studies (2006) 48, 435-457. doi:10.1057/palgrave.ces.8100181

Keywords: Measures of unemployment, Estonia, Russia, Romania

JEL Classifications: J21, P2

INTRODUCTION

The typical analysis of aggregate labor markets in transition economies focuses on the unemployment rate and the employment-population ratio, which are standard concepts based on international conventions and published in nearly all countries around the world (eg, ILO, 2001). An extensive literature has examined the differences across East European countries and the changes over time in these official statistics, using them to derive conclusions on such issues as the flexibility of adjustments, the effectiveness of passive and active labor market policies, and the social costs of transition. (1) However, little consideration has been given to the possibility that statistical agencies in different countries may have adopted somewhat different definitions, even if they all conform to the international conventions, because the latter permit some flexibility in the classification of several ambiguous categories that are considered--in developed market economies--to be relatively unimportant. If the transition process tends to foster the growth of such nonstandard forms of employment and unemployment, this raises questions about the comparability of the official statistics and about the tendency of the transition literature to rely exclusively on conventional labor force measures. Even if the definitions are comparable, the statistics may be misleading if these nonstandard forms of employment and unemployment are important, as their proportions can differ from country to country.

For example, the standard definition of employment includes a number of categories that differ substantially from the conventional picture of the long-term employee working regular full-time hours for a regular wage and expecting continued, perhaps indefinite, employment. (2) Not only are self-employed entrepreneurs excluded from this picture, but also such groups as part-time workers, temporary contractors, unpaid family helpers, those on temporary leaves, those who work solely for their own (and their families') consumption, and laid-off people who retain a formal attachment to the job. These categories are potentially quite large, and some of them may be treated differently in different countries. Yet little attention has been paid to them in most research by economists studying labor markets in the transition economies. (3)

The definition and measurement of unemployment also involve substantial ambiguities. The statistical treatment of laid-off workers on recall, involuntary part-timers, discouraged workers, and others who are marginally attached to the labor force has in fact been extensively discussed by labor statisticians in the West, particularly in the United States, where the Bureau of Labor Statistics (BLS) regularly publishes 'measures of labor underutilisation' together with the monthly employment report based on the Current Population Survey (Bregger and Haugen, 1995). How important are these categories, and how are they treated by statistical agencies in different transition economies? Again, these issues have attracted little analysis.

The magnitudes of nonstandard types of labor force status have important implications for judging labor market performance and developing policy measures to improve it. If, for example, a country has many discouraged workers, temporary contract workers, involuntary part-time workers, and underemployed workers for economic reasons, while few self-employed entrepreneurs have emerged, the employment situation would be much worse than that captured by the standard employment and unemployment measures. The size of the subsistence agriculture sector affects the accuracy of standard poverty indicators and potentially also the effectiveness of wage subsidies for improving welfare.

A possible explanation why nonstandard types of labor force status in transition have received little attention, despite their potential importance, is lack of information. The data requirements for a careful analysis involve individual-level data from labor force surveys (LFSs), which since the early 1990s have been collected in most East European countries. These data have tended to be jealously guarded by the statistical agencies, however, and access to them has usually been quite limited.

In this paper, we report the results of our analyses of nonstandard types of employment and unemployment using LFS microdata we have collected for three economies: Estonia, Romania, and Russia. Although our choice of countries is partially constrained by data availability, these three economies provide the possibility for an interesting set of comparisons, as they are structurally different and have adopted rather different policies in the transition. The differences can be seen, for instance, in rankings of 'progress in reform' or 'extent of liberalisation' by international agencies such as the World Bank (1996), which placed Estonia in the top group of rapidly reforming post-socialist countries in Eastern Europe, Romania with a group of slower reformers, and Russia among the laggards.

Interestingly, however, such rankings bear little resemblance to the relative magnitudes of the reported rates of unemployment and employment in these countries. Figure 1 displays unemployment rates (ILO definition) for eight transition economies, in order of increasing unemployment. The Romanian rate is the second lowest in the group, close behind Hungary's, while the Russian rate is also among the lowest. The Estonian rate is relatively high, however--almost as high as the rates in Bulgaria, Poland, and Slovakia. Employment-population ratios for the same countries are shown in Figure 2. The employment rates in Romania and Russia are the highest in the group, and Estonia's is also relatively high. These published rates clearly convey only limited information about labor market reforms and developments.

[FIGURES 1-2 OMITTED]

One might expect to see much different rates of nonstandard employment and unemployment across these countries, potentially reshuffling the labor market performance rankings. Agriculture was a much larger share of the socialist economy in Romania, so the possibilities for agricultural self-employment are likely to have been much greater in Romania. Firms were weaned off state subsidies much more quickly and exposed to more international competition in Estonia than in Romania or Russia, possibly providing clearer signals that they had to sever ties with a significant fraction of their workforce in order to survive.

We first provide a brief discussion of the characteristics of each country's LFS. Then we use these data to re-compute and examine the definitions of the official employment and unemployment indicators. For the most part, the results here correspond closely to the published official statistics, although in order to ensure age-comparable estimates we restrict the age range to 15-72 (as used in Russia). Next, we consider several types of nonstandard or boundary categories of employment and unemployment: temporary contracts, voluntary and involuntary part-time workers, nonsearching job-losers, unpaid family helpers, discouraged workers, and household producers--particularly those in agriculture who consume all or most of their output. Finally, we re-estimate the employment-population ratios and measures of labor utilization under alternative definitional assumptions. The next section describes the surveys, and penultimate sections report the nonstandard employment and unemployment results, respectively. The last section provides some concluding remarks.

THE DATA

We use 1994 and 2001 data from the three countries' LFSs. Although other years are available, we have chosen these years both because they provide a time dimension (early versus later transition) and because a larger number of the labor force indicators are available in these years than in some other years. (4) We describe each country's LFS in turn below.

Estonia

The 1995 Estonian Labor Force Survey (ELFS) sampled around 10,000 working-age individuals in the first quarter of the year. The 2001 ELFS was conducted in quarterly waves. Although the survey covers workers over the age of 72, we restrict our analysis to persons between the ages of 15 and 72 for comparability with the sample in Russia. We obtain 1994 data using the 1995 survey, which contains a retrospective labor market history section providing details of changes in labor market status and income between January 1989 and December 1994. Unfortunately, these retrospective data do not contain information on the availability of unemployed respondents, although they do contain information about their search activity. To calculate unemployment and nonparticipation in the labor force in 1994, therefore, it was necessary to ignore the ILO availability criterion in calculating unemployment according to the standard definition. The Estonian data also contain no information on job losers who are not searching but expecting recall, an essential category for calculating unemployment according to the 'partially relaxed' ILO definition.

Romania

The Romanian LFS was conducted in March 1994, March 1995, and quarterly thereafter. For comparability with the other countries and in order to avoid seasonal bias, we report only our analysis of the surveys in March 1994 and the first quarter in 2001. (5) Each sample is representative, and weights to produce population estimates are provided for each. (6) The sample size is 31,375 in 1994 and 33,571 in 2001. The analysis was restricted to individuals between the ages of 15 and 72 so as to be comparable to Russia.

Russia

The 1994 Russian Labor Force Survey (RLFS), carried out in October, sampled 618,120 individuals, or about 0.5 per cent of the target population (aged 15-72). The 2001 RLFS was carried out quarterly, with each sample including 72,836 individuals, or about 0.07 per cent of the target population. We report the results from the November survey so as to be consistent with the 1994 data. Major revisions were made to the questionnaire between 1994 and 2001. Weights in 1994 are based on the last pre-reform census of population in 1989, and the 2001 weights are based on the 1994 micro-census. Analysis of the 2002 census of population may result in some corrections in weights, possibly affecting estimates for 2001, but these new weights are still unavailable. (7)

NONSTANDARD TYPES OF EMPLOYMENT

The official definition of employment in each country follows closely the ILO recommendations, but they also differ from each other in several respects. The ILO-recommended definition includes persons who worked at least 1 h during the reference period for pay or profit, in cash or in kind, or had a job but were absent from work for some well-specified reason (mostly vacation or sick leave). (8) Consistent with European conventions, but unlike the United States, the definitions in the countries we study count as employed those working zero hours so long as they evince a 'formal attachment' to their job. A still more substantial difference, in the Romanian case, is that subsistence farmers, who have no commercial sales, are counted as employed. A final comparability issue (in this case, both across countries and over time) results from a revision to the treatment of unpaid family helpers in the Romanian survey in 1996, when the minimum hours of work for such individuals to be considered employed was set at 15 for those working in agriculture. A similar rule is used in the United States for all unpaid family helpers, but it appears to be uncommon elsewhere, and it results in some noncomparability in the official employment time series. (9)

According to the official definitions, the employment-population ratios are slightly above 60 per cent in all countries in 1994, and they tend to fall in the subsequent years. Restrictions of the definitions, which we will consider below, would exclude own-account workers and unpaid family helpers in agriculture, half of involuntary part-timers, and laid-off persons with formal attachment to the job. We also show the extent of temporary work--voluntary and involuntary--and underemployment for economic reasons.

Workers on temporary contracts constitute only a small fraction of each country's workforce, as Table 1 indicates. Such workers typically make up 2-3 per cent of the employed population, except in Russia in 2001, where their proportion is almost 7 per cent. The size of the group appears stable in Romania, while it has more than doubled in Russia, reaching a level similar to that of the United States and some other advanced industrialised economies. The Russian expansion has occurred despite strict legal constraints and prohibitions that the labor legislation still contains (Labor Code, 2002). (10) A sizable proportion of temporary workers have such a contract against their will: involuntary temporary employment, an indicator of labor underutilisation, accounts for about three quarters of the temporary contract category in Estonia and Romania and 44 per cent in Russia.

The ILO definition of underemployment for economic reasons includes persons in paid or self-employment, at work or not at work during the reference period, involuntarily working zero hours or less than the normal duration, and willing and available to work more hours. The 'less than usual duration of a work week' is left to the subjective opinion of the respondent, and cases where this could not be evaluated are treated by applying the 30-h threshold. This category, as shown in Table 2, makes up a small fraction of the workforce, ranging from 2.7 per cent in Estonia to 0.1 per cent in Romania in 2001. This group has become much smaller over time in Russia. Therefore, it does not appear that forced leave or involuntary part-time are widely used adjustment tools in response to negative shocks. (11)

Table 3 changes the focus to part-time work considered more broadly and classified by reason for working part-time: voluntarily or involuntarily. Individuals fall into the involuntary category--and thus are considered to be underutilised--if they meet the following criteria: working part-time, actively looking for work, and are available to start working within the next 15 days. Also, the total actual hours of work from all activities should be less than the 30-h threshold. (12) We find that less than 10 per cent of employees work part-time. By contrast, in the United States, part-time work (defined as < 35 h per week) accounts for about 18 per cent of total employment. The incidence is highest in Romania, followed by Estonia. When comparing 2001 to 1994, the level is nearly a quarter higher in Romania, over twice as high in Estonia and nearly 40 per cent lower in Russia. Where we are able to measure the voluntary status of part-time work, it is voluntary over 85 per cent of the time, implying that it does not reflect labor market slack. Within the voluntary category, however, a fairly large and growing fraction of Romanian part timers report an inability to find a full-time job as the reason, although they do not search or are not available for full-time work--which is why they are officially categorised as voluntary. This group might be considered a kind of 'partly discouraged worker,' analogous to the usual category we might call 'fully discouraged.' Adding this group together with the involuntary part-timers yields a total of about 3.5 per cent of all Romanian employment in 2001, an economically significant size. (13) 'Partly discouraged' workers are also a significant group in Estonia (and Russia in 1994), where much of the voluntary part-time work is due to a change in schedule initiated by the employer. Even though these workers may not be searching for full-time work, the choice to work part-time was not theirs.

Tables 4 and 5 turn attention to two closely related, nonstandard categories of employment: own-account workers and unpaid family helpers. (14) In Romania, the one country where we are able to measure these categories satisfactorily, both are very important. Taken together, they account for 32 per cent of total employment in 1994 and 38 per cent in 2001; more than 90 per cent work in agriculture, mostly as subsistence farmers. Unfortunately, the Estonian numbers and the Russian 1994 numbers do not include subsistence farmers, since those LFSs do not include household production questions. The Russian subsistence farmers in 2001 are all classified as own-account workers by the Russian Goskomstat (GKS). Both the own-account worker and unpaid family helper categories are much larger in Romania than in Estonia or Russia. Commercial family farming is a much more common activity in Romania than in Estonia or Russia, accounting for 6.5 per cent of employment in Romania but only 1.7 per cent in Estonia and 2.1 per cent in Russia (15) This reflects the fact that most of Russian agriculture continues to be organised as large-scale farms, while such farms were broken up at the beginning of the Romanian transition.

Nonagricultural self-employment is a tiny fraction of employment in all three countries. Assuming that a better business environment fosters the growth of self-employment, one would expect Estonia to have the largest proportion of such workers, followed by Romania, with Russia lagging behind. (16) In 2001, however, the nonagricultural self-employment rate is 2.6 per cent in both Romania and Russia, while Estonia is far behind, at only 0.5 per cent.

Based on this analysis of nonstandard forms of employment, we have computed alternative measures of the employment-population ratio. Alternative ratios are provided in Table 6, ordered from broadest to narrowest definition. Since subsistence farmers are not measured in 1994 in Russia or in either 1994 or 2001 in Estonia, we are unable to calculate a ratio including them in those countries and years. We are also unable to calculate a ratio excluding only subsistence farmers in 1994 in Romania, because subsistence farmers cannot be distinguished from other own-account workers and unpaid family helpers in the LFS. In the countries and years where we can isolate subsistence farmers, the employment-population ratio is quite sensitive to how subsistence farmers are treated: the rates drop by 12 percentage points in Romania and 4 percentage points in Russia in 2001. When excluding subsistence farmers, Romania's rate is 11-12 percentage points smaller than Estonia's and Russia's rates. The similarity in the Estonian and Russian rates in both 1994 and 2001 is striking considering their quite different reform strategies.

Excluding other own-account workers and unpaid family helpers in agriculture also has a large effect in Romania (a drop of 6.2 percentage points in 2001, the year for which we can measure this), though not in Estonia or Russia in either 1994 or 2001, reflecting a much larger commercial family farming sector in Romania. (17) This further widens the gap between the Romanian and Estonian and Russian employment-population ratios. The exclusion of half of involuntary part-timers has little effect anywhere; the largest effect is a reduction of just 0.7 percentage points in Estonia in both 1994 and 2001. Excluding laid-off persons has a similar negligible effect, the largest being 0.7 percentage points in Russia in 1994.

FORMS OF LABOUR UNDERUTILISATION

The definition of unemployment also varies across the countries we study. The Estonian and Russian unemployment rates are computed on the basis of the standard ILO definition, while in Romania the ILO's 'partially relaxed' unemployment definition is used. (18) The sole difference between the two definitions is that the 'partially relaxed' definition does not require searching for laid-off workers expecting recall. Using the partially relaxed definition would not affect the Russian unemployment rate, as Table 7 shows. On the other hand, the Romanian unemployment rate would be 0.7 percentage points lower in 1994 if the standard definition was applied.

This section analyses how taking account of various forms of labour underutilisation may alter the measured unemployment rate. First, we look at laid-off persons, job losers, who retain no formal attachment to their job. This category of unemployed may experience particular hardship; in the US, there is much evidence that displaced workers suffer large losses in income in both the short run and the long run (Kletzer, 1998). (19) The definitional differences between the countries we study concern some of the laid-off workers. Second, we present evidence on discouraged workers and show how the inclusion of tiffs nonstandard form of unemployment changes the unemployment rates in the countries.

Table 8 shows measures of laid-off workers who retain no formal attachment to the job. Following the 'partially relaxed' ILO definition (used in Romania but not in Estonia and Russia), laid-off persons are also considered unemployed (even if not searching) if they report that they expect recall to the former job. Overall, laid-off workers (job losers) account for most unemployed individuals in Estonia (59.0 per cent of standard unemployment in 2001), but only 43 per cent (of partially relaxed unemployment) in Romania and 31 per cent (of standard unemployment) in Russia, both in 2001. Unfortunately, information on expecting recall is unavailable for Russia in 2001 and for Estonia in any year, but this category makes up only 7.2 per cent of the laid-off in Romania in 1994, and its proportion decreases to a mere 2 per cent in 2001. In Russia, this category makes up only 1.7 per cent in 1994.

Table 9 turns to the second category of nonstandard unemployment that we look at more closely, discouraged workers, defined as persons not working, available but not searching for the following reasons: they believe that there are no available jobs, they do not know how to search, they believe they do not have suitable skills or are too old to find a job, or they sought a job before but did not find one. The standard ILO definition treats these people as nonparticipants in the labour force, although in a 'fully relaxed' definition they are considered unemployed.

Table 9 presents the proportion of discouraged workers as a fraction of both nonparticipant population and of unemployed population (which, unlike the standard definition, includes discouraged workers). The fraction of discouraged workers among nonparticipants varies between 2.3 and 7.6 per cent, depending on the country and period. The fractions are smallest in Russia, where they are 2.3 per cent in 1994 and 3.8 per cent in 2001. In Estonia they are larger by more than 2 percentage points, and in Romania they reach 5.5 per cent in 1994 and 7.6 per cent in 2001. We also present the fraction of the discouraged workers consisting of people who had some work experience before versus newcomers to the labour market. (20) Almost all discouraged Estonian workers had some work experience. In Russia about 75 per cent of them had previous work experience, while in Romania less than two-thirds had a job before.

Alternative measures of labour underutilisation and unemployment rates are shown in Table 10. According to the standard ILO methodology (U-0), unemployment is the lowest in Romania (7.6 and 7.8 per cent of the labour force in 1994 and 2001, respectively). In Russia the unemployment rate is larger by 0.5 per cent in 1994 and by 1.1 per cent in 2001. Estonia has much higher unemployment, at 11.6 and 12.5 per cent in the 2 years studied. Long-duration unemployment (U-1, defined as longer than 15 weeks) accounts for a large share of the total in each country, and its share increases in Romania and Russia (the figure is not available for 1994 in Estonia). In 2001 about three-fourths of the unemployed in Estonia, two-thirds in Russia and half in Romania are long-term unemployed. The job loser category (U-2) is also a large share of the unemployed: 58 per cent in Estonia, 60 per cent in Romania, and 30 per cent in Russia. Including temporarily laid-off persons who lack a formal attachment to a job but who expect recall (U-3) increases the measure only slightly where it can be calculated (Romania in both years and Russia in 1994). Adding discouraged workers to the rate in U-4 increases the unemployment rate relative to U-0 everywhere, but it produces the largest change in Romania, where it rises by 3 percentage points in 1994 and 4 in 2001. In Estonia the increase is more modest, adding 2 percentage points in 1994 and 3 in 2001 to the unemployment rate.

The increase is least in Russia: 1 percentage point in 1994 and 2 in 2001. The share of discouraged workers increases over time in all three countries. Finally, adding half of the persons working part-time for economic reasons contributes the least in Russia in 2001 and in Romania in 1994 (0.2 percentage points) and the most in Russia in 1994 (1 percentage point). The resulting rate, U-5, is in double digits in all countries in both years. In 2001, this unemployment rate measure is higher than the standard ILO rate by 2.1 percentage points in Russia, 5.9 in Estonia, and 4.3 in Romania, showing the importance of considering nonstandard labour underutilisation measures. According to this, the most relaxed measure, Romania and Russia have very similar unemployment rates in 1994 (10.7 and 10.5 per cent), while Estonia has 14.2. In 2001 Russia has the smallest unemployment rate (11.0), Romania's is almost one percentage point larger (12.1), and Estonia's is 16.4 per cent. (21)

CONCLUSION

The standard labour market information available to economic policymakers around the world consists of only two statistics: official employment and unemployment rates. These are also the figures that attract the most attention from the press and popular analysts. Witness, for example, the recent preoccupation with the condition of the American labour market based on the 'loss of jobs' in the early 21st century and the excitement generated by such negligible increases as 57,000 in September 2003. Or, to take another example, consider the magic number of 4 million unemployed in Germany, a reduction below which the German governments have set as a litmus test. In developed market economies such as these, one may certainly question whether the official measurements of employment and unemployment adequately capture the true labour market situation. Such questions as well as related questions about nonstandard types of employment are often reflected in the discussion and the debate about 'good' versus 'bad' jobs. The labour force surveys are designed to capture the standard types of labour force status in these countries, but there is nevertheless significant awareness and discussion of nonstandard forms of employment and unemployment.

The transition economies have adopted the standard LFS questionnaire and definitions without major modifications, but it seems even more likely that exclusive reliance on standard classification schemes might fail to reflect important facts about the labour market. Not only the usually cited types of nonstandard forms of employment, such as temporary contracts and part-time work but also unpaid family helpers, own-account workers engaged in subsistence agriculture, and nonworking individuals with a formal attachment to a job may be quite important in the context of economies adjusting to large shocks. Concerning nonstandard forms of unemployment, categories such as discouraged workers, involuntary part-time employees, laid-off people who are not searching because they expect to be recalled, and other marginally attached workers may be similarly significant.

While it seems plausible that these nonstandard categories are large in the transition economies, however, and again by contrast with developed market economies, there has been only scant attention paid to the nonstandard forms in these countries. Instead, researchers have tended to make quick generalisations from the official aggregate statistics to draw inferences on how flexibly the labour markets are adjusting. And these inferences have often proceeded even in the absence of understanding that the official statistics may vary in meaning from country to country. It has been our purpose in this research to redress this serious gap in economists' understanding of labour market functioning in these countries.

Our results show that the nonstandard forms of employment focused on in Western studies--temporary contracts, part-time work--are still relatively small in the three transition economies we study. Figure 3 summarises our results for alternative calculations of the employment-population ratio. In the Estonian case, we find rather little of any type of nonstandard employment that we can measure. The rates of subsistence family farming are particularly high in Romania and Russia (not measurable in Estonia), however. Interestingly, the treatment of this type of employment in the official statistics is opposite in these two countries: in Romania it is included, while in Russia it is excluded. The figures are large enough to affect the measured employment-population ratios quite substantially. In Russia, including such workers would increase the ratio by 4.3 percentage points in 2001. In Romania, if such workers were excluded from the employment measure, then the employment-population ratio would decline by 12.4 percentage points in 2001. Thus, while the official employment rates are rather similar at 59 per cent in the two countries, this is an artifact of different definitions for subsistence farmers: including them in Russia would raise the rate to about 63 per cent, while excluding them in Romania would reduce it to about 46 per cent.

[FIGURE 3 OMITTED]

Figure 4 summarises our analysis of alternative forms and measures of labour underutilisation. We find much lower rates of involuntary part-time employment in all three countries than, for example, in the United States, where involuntary part-timers typically account for about 3 per cent of the labour force. All three countries, however, exhibit high rates of discouraged workers. If these individuals were included when computing the unemployment rate for 2001, the result would be an increase of about 1 percentage point in Estonia, 2 in Russia, and 4 in Romania. By contrast, including discouraged workers in the US unemployment rate for August 2003 would have raised the measured unemployment rate by only 0.2 percentage points. Given that discouraged workers have typically been long-term unemployed who have given up searching, our results suggest that the long-term unemployment problem in these countries is still much greater than implied by official statistics, and that this problem should be a central focus for policymakers.

[FIGURE 4 OMITTED]

These findings have several additional policy implications. The low rate of part-time work, particularly as compared to the United States, may reflect high payroll taxes instituted in those countries to pay for benefits like health insurance that are not granted to most part-time employees in the US. Thus, it is possible the relative cost of part-time employees is higher in the three countries we study; one policy proposal could be to lower taxes and contributions associated with part-time labour.

Concerning the high rate of subsistence activity in agriculture, our results suggest that the Romanian and Russian employment record is extremely sensitive to the treatment of this borderline category. More research is necessary on the characteristics of these subsistence farmers, including their previous labour market history. (22) But the mere size of the population share in this category suggests that measures of income distribution that focus on money incomes and expenditures alone may be seriously misleading about the magnitude of poverty. It also suggests that social programs designed to improve earnings for individuals in paid employment--for instance, through wage subsidies--may have little or no impact on this group. On the other

hand, if there is a highly elastic response of supply to paid jobs among subsistence farmers, then such policies might in fact help the situation considerably. Most likely, this group is not only large but heterogeneous, and while the problem may be partially handled by incentives to move these workers into standard employment, the issue of how to move them out of long-term poverty will remain. These questions about characteristics and behavior--in particular, labour supply elasticities--should be a high priority for policy-relevant research. For Romania, they are particularly interesting in light of that country's probable accession to the EU in coming years, both because of the consequent rise in foreign investment, trade, and tourism and because the Romanian agricultural sector will then come under the restrictions of the Common Agricultural Policy. The former factor will tend to pull workers out of agriculture, while the latter may serve to push them into agriculture.

Finally, we find that discouraged workers exist in large numbers in the countries we study. These people are usually long-term unemployed who have given up searching, and therefore our results suggest that the long-term unemployment problem is perhaps even more widespread and intractable than would appear from official statistics. Although further research would be useful to verify the characteristics of discouraged workers, the findings suggest that policies should be focused on preventing and treating long-term unemployment.

Acknowledgements

This research was supported by a grant from the US Agency for International Development's SEGIR EP Contract No. PCE-I-00-00-00014-00, reference Russia, task order no. 803, 'Improvement of Economic Policy Through Think Tank Partnership Project.' We thank Randy Filer, Ted Gerber, Tatyana Gorbacheva, Susan Houseman, Jeff Miller, Catalin Pauna, Zinaida Ryzhikova, Nina Vishnevskaya, Valery Yakubovich, and participants at workshops in Bucharest, Kalamazoo, and Moscow for valuable advice, help, and comments. They are particularly grateful to Ben Jones and Joanne Lowery for careful editing and to Joanne also for organizing the Partnership Workshop in August 2003.

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(1) See, for example, Layard and Richter (1995) on employment and wage adjustment, and Boeri and Terrell (2002) on the effects of alternative levels of unemployment benefits.

(2) This definition follows Kalleberg et al. (2000), who discuss the characteristics of standard and nonstandard employment relations in the United States.

(3) Earle and Sakova (2000) study the self-employed in six transition economies, differentiating own-account workers from employers.

(4) Results for other years are available on request,

(5) The methodological issues are discussed at length in CEU Labor Project (2003), which provides a detailed comparison of the Romanian questionnaire design with ILO recommendations and with the labor force survey in the United States, the Current Population Survey.

(6) There is some question whether the sample weights became increasingly biased between the decennial censuses of 1992 and 2002. It is possible that the officially reported labor force figures, as well as the 2001 numbers reported in this paper, will be--or should be - revised on the basis of the 2002 census.

(7) For a description of the RLFS, see Goskomstat (2002).

(8) Persons serving in the military are also included in reported employment, as are persons who performed various kinds of occasional or exceptional work for at least 1 h.

(9) In the United States, the issue is trivial, as unpaid family workers account for only about 0.1 per cent of all employment. In Romania, as we shall show, the share of this group is much larger.

(10) The GKS changed the wording of the relevant RLFS question (see GKS, 2002), which may have contributed to the increase in reported temporary employment. For a thorough analysis of temporary employment in Russia, see Gimpelson (2003).

(11) An additional category that could be considered underemployed consists of workers with wage arrears, which were quite prevalent at least in Russia during the time period we study. See, for instance, Lehmann et al. (1999), Gimpelson and Lippoldt (2001) and Earle and Sabirianova (2002). We cannot measure these with our labor force survey data in the three countries, however.

(12) One problem with this measurement could be seasonal fluctuations. Part-time work is likely to be more common in the summer months, making it difficult to compare first-quarter figures in Romania and fourth-quarter figures in Russia to second-quarter figures in Estonia.

(13) We do not consider this category in our computations of alternative unemployment rates below, but clearly if we did so, for instance adding half of them to the unemployed pool, the rate would rise by about 1.5 percentage points.

(14) These two categories are closely related because of the problem of classifying multiple family members working without pay (ie, not receiving a regular wage) in a family business; one practice would be to designate them all as own-account, and another would be to designate one member of the family as own-account and the rest as unpaid helpers (eg, ILO, 1990, 171). How this is applied in practice depends on specific family situations and interviewers' interpretations.

(15) The relevant Estonian LFS questions are worded in such a way that agricultural own-account workers and unpaid family helper categories are likely to include only those involved in production for sale.

(16) For regulatory quality in 2000, Estonia received a score of 1.33, Romania -0.27 and Russia -1.58. The same order applies for rule of law (0.71, -0.22, and -0.87) and for control of corruption (0.78, -0.45, and -1.02) (Kaufmann et al., 2005).

(17) Indeed, as the ILO database for 2001 documents, agriculture accounted for 6.5 per cent of employment in Estonia, 10.6 per cent in Russia, and 42 per cent in Romania.

(18) The exception to use of ILO criteria is Estonia in 1994, where information on availability was not requested on the retrospective survey in 1995. The 'partially relaxed' measure is not available in Estonia in either year.

(19) The evidence is less clear in Eastern Europe; see Lehmann et al. (2005) for Estonia.

(20) These numbers are not available for Estonia and Russia for 1994.

(21) These figures exclude job losers not searching but expecting recall in Estonia in both years and in Russia in 2001, because this information is unavailable.

(22) See Earle (1997) for an initial analysis of these questions using Romanian data from the mid1990s.

J DAVID BROWN (1,2,3), JOHN S EARLE (4,2,5), VLADIMIR GIMPELSON (6,3), ROSTISLAV KAPELIUSHNIKOV (6), HARTMUT LEHMANN (7,1,8,3), ALMOS TELEGDY (9), IRINA VANTU (2), RUXANDRA VISAN (2) & ALEXANDRU VOICU (10,3)

(1) Heriot-Watt University, UK

(2) CEU Labor Project, Hungary

(3) IZA, Germany

(4) Upjohn Institute for Employment Research, USA

(5) 300 South Westnedge Avenue, Kalamazoo, MI 49007, USA. E-mail: earle@upjohn.org

(6) CLMS, Higher School of Economics, Russia

(7) University of Bologna, Italy

(8) Labor Group EROC, Kiev School of Economics, Ukraine

(9) CEU Labor Project, Institute of Economics of the Hungarian Academy of Sciences, Hungary

(10) City University of New York, Staten Island College, USA
Table 1: Employees on temporary contracts (percentage of employed)

Temporary workers Estonia

 1994 2001

 xx.x

Involuntary NA 2.5
Voluntary or for other reasons NA 0.7
Total percentage NA 3.2
Total number (thousands) NA 19

Temporary workers Romania

 1994 2001

Involuntary 1.3 1.3
Voluntary or for other reasons 0.6 0.5
Total percentage 2.0 1.8
Total number (thousands) 213 180

Temporary workers Russia

 1994 2001

Involuntary 1.1 NA
Voluntary or for other reasons 1.4 NA
Total percentage 2.5 6.8
Total number (thousands) 1,617 4,402

Employees on temporary contracts are classified as involuntary if
they report they could not find a permanent job. NA=not available.

Table 2: Underemployment for economic reasons (percentage of employed)

Underemployed for economic reasons Estonia

 1994 2001

By hours worked
 Working 0 h NA 0.0
 Working more than 0 h NA 1.7

By reasons
 On firm-initiated unpaid leaves NA 1.0
 On firm-initiated part-time work, NA 0.3
 worked 0 or more hours
 Job changes during the reference week NA 0.0

Total percentage NA 1.7
Total number (thousands) NA 10

Underemployed for economic reasons Romania

 1994 2001

By hours worked
 Working 0 h 0.0 0.1
 Working more than 0 h 0.0 0.1

By reasons
 On firm-initiated unpaid leaves NA 0.0
 On firm-initiated part-time work, 0.0 0.2
 worked 0 or more hours
 Job changes during the reference week 0.0 0.0

Total percentage 0.0 0.2
Total number (thousands) 2 20

Underemployed for economic reasons Russia

 1994 2001

By hours worked
 Working 0 h 1.3 0.1
 Working more than 0 h 1.0 0.2

By reasons
 On firm-initiated unpaid leaves 1.1 0.1
 On firm-initiated part-time work, 1.2 0.1
 worked 0 or more hours
 Job changes during the reference week 0.1 0.0

Total percentage 2.3 0.3
Total number (thousands) 1,506 195

Underemployment refers to involuntarily working fewer hours than
'usual: In Romania, cases where the respondent could not estimate
the usual duration of a work week were included if the respondent was
involuntarily working fewer than 30 h; the rates computed for 1994
require job search during the reference week. Estimates for Russia in
this table exclude part-time workers. NA = not available.

Table 3: Part-time workers (percentage of employed)

Employment status Estonia

 1994 2001

Full-time 96.5 92.6

Part-time 3.5 7.4
 Involuntary (searching and available)
 Did not find full-time job NA 0.7
 Temporary change in schedule initiated by NA 0.4
 employer
 Voluntary (not searching or not available)
 Did not find full-time job 0.2 0.7
 Temporary change in schedule initiated by 1.1 1.0
 employer
 Did not want a full-time job 0.3 3.2
 Due to schooling or training 0.7 0.7
 Due to sickness or handicap 0.3 0.3
 Due to family responsibilities 0.5 0.5
 Due to other reasons 0.5 0.0

Total with part-time job (thousands) 22.8 43.0

Employment status Romania

 1994 2001

Full-time 92.6 91.9

Part-time 7.4 9.1
 Involuntary (searching and available)
 Did not find full-time job 0.5 0.9
 Temporary change in schedule initiated by NA 0.0
 employer
 Voluntary (not searching or not available)
 Did not find full-time job 1.1 2.6
 Temporary change in schedule initiated by NA 0.1
 employer
 Did not want a full-time job 0.7 3.3
 Due to schooling or training 0.3 0.1
 Due to sickness or handicap 1.8 0.6
 Due to family responsibilities 2.2 1.3
 Due to other reasons 0.8 0.2

Total with part-time job (thousands) 777 907

Employment status Russia

 1994 2001

Full-time 96.9 98.1

Part-time 3.1 1.9
 Involuntary (searching and available)
 Did not find full-time job 0.1 0.2
 Temporary change in schedule initiated by 0.1 0.1
 employer
 Voluntary (not searching or not available)
 Did not find full-time job 0.2 0.3
 Temporary change in schedule initiated by 1.6 0.3
 employer
 Did not want a full-time job 0.4 0.4
 Due to schooling or training NA 0.1
 Due to sickness or handicap NA 0.1
 Due to family responsibilities NA 0.2
 Due to other reasons NA 0.2

Total with part-time job (thousands) 1,986 1,227

Part-time/full-time status defined according to self-assessment.
NA = not available.

Table 4: Own-account workers (percentage of employed)

Own-account workers Estonia

 1994 2001

Agricultural NA 0.9
 Consuming all NA NA
 Consuming and selling NA NA

Nonagricultural NA 0.5
Total percentage 2.7 1.4
Total number (thousands) 17.5 7.8

Own-account workers Romania

 1994 2001

Agricultural 15.9 18.1
 Consuming all NA 11.6
 Consuming and selling NA 6.5

Nonagricultural 1.5 2.6
Total percentage 17.4 20.7
Total number (thousands) 1,851 2,050

Own-account workers Russia

 1994 2001

Agricultural NA 9.0
 Consuming all NA 6.9
 Consuming and selling 0.0 2.1

Nonagricultural 1.4 2.6
Total percentage 1.5 11.6
Total number (thousands) 953 8,035

Own-account workers are self-employed with no employees.
NA = not available.

Table 5: Unpaid family helpers (percentage of employed)

Unpaid family helpers Estonia

 1994 2001

Agricultural NA 0.8
 By hours of work in reference week
 <15h NA 0.0
 15-29 h NA 0.1
 [greater than or equal to] 30 h NA 0.7

Nonagricultural NA 0.0
Total percentage 0.9 0.8
Total number (thousands) 5.5 4.4

Unpaid family helpers Romania

 1994 2001

Agricultural 14.6 16.5
 By hours of work in reference week
 <15h 1.5 0.0
 15-29 h 4.1 8.3
 [greater than or equal to] 30 h 9.0 8.2

Nonagricultural 0.2 0.5
Total percentage 14.8 17.0
Total number (thousands) 1,580 1,679

Unpaid family helpers Russia

 1994 2001

Agricultural NA NA
 By hours of work in reference week
 <15h NA NA
 15-29 h NA NA
 [greater than or equal to] 30 h NA NA

Nonagricultural NA NA
Total percentage 0.1 0.0
Total number (thousands) 77 25

In Romania since 1996, unpaid family helpers in agriculture working
less than 15 h during the reference week have not been counted as
employed and cannot be identified in the data.

Table 6: Alternative measures of the employment-population ratio
(percentage of population)

Employment ratio Estonia

 1994 2001

E-0 Broadest definition NA NA

E-1 Excluding subsistence farmers 60.6 57.2
 (both own-account workers and
 unpaid family helpers)

E-2 Excluding other own-account 58.5 56.0
 workers and unpaid family helpers
 in agriculture

E-3 Excluding half of involuntary 57.8 55.3
 part-timers

E-4 Excluding laid-off persons with a 57.6 54.3
 formal attachment to the job

Employment ratio Romania

 1994 2001

E-0 Broadest definition 62.4 58.7

E-1 Excluding subsistence farmers NA 46.3
 (both own-account workers and
 unpaid family helpers)

E-2 Excluding other own-account 43.4 40.1
 workers and unpaid family helpers
 in agriculture

E-3 Excluding half of involuntary 43.3 39.9
 part-timers

E-4 Excluding laid-off persons with a 43.0 39.8
 formal attachment to the job

Employment ratio Russia

 1994 2001

E-0 Broadest definition NA 62.9

E-1 Excluding subsistence farmers 60.1 58.6
 (both own-account workers and
 unpaid family helpers)

E-2 Excluding other own-account 60.0 57.3
 workers and unpaid family helpers
 in agriculture

E-3 Excluding half of involuntary 59.9 57.2
 part-timers

E-4 Excluding laid-off persons with a 59.2 57.1
 formal attachment to the job

Official definition is E-0 for Romania and E-1 for Estonia and Russia.
Laid-off persons with a formal attachment to the job are persons who
worked zero hours because of unpaid leave initiated by the employer.
NA = not available.

Table 7: Standard measures of the unemployment rate
(percentage of population, age 15-72)

Labour force status Estonia

 1994 2001

Standard ILO definition (Estonian and Russian official)
Unemployment 7.9 8.2
Not in the labour force population 31.4 34.6

Partially relaxed ILO definition (Romanian official)
Unemployment NA NA
Not in the labour force population NA NA
Population aged 15-72 (thousands) 1,069 1,014

Labour force status Romania

 1994 2001

Standard ILO definition (Estonian and Russian official)
Unemployment 5.0 4.9
Not in the labour force population 32.6 36.4

Partially relaxed ILO definition (Romanian official)
Unemployment 5.7 5.0
Not in the labour force population 31.9 36.3
Population aged 15-72 (thousands) 17,062 16,860

Labour force status Russia

 1994 2001

 x.xxx.x x.xxx.x

Standard ILO definition (Estonian and Russian official)
Unemployment 5.3 5.7
Not in the labour force population 34.6 35.7

Partially relaxed ILO definition (Romanian official)
Unemployment 5.4 NA
Not in the labour force population 34.5 NA
Population aged 15-72 (thousands) 107,839 110,411

Estonian unemployment in 1994 is calculated from retrospective
questions that use the standard ILO criteria of nonworking and
searching, but not the criterion of availability, as this
information is not available retrospectively. The ILO partially
relaxed definition of unemployment does not require searching
for laid-off workers expecting recall; this information is not
available for Estonia in either year.

Table 8: Laid-off workers (percentage of unemployed, partially
relaxed definition)

Laid-off workers with no formal attachment Estonia
to the job
 1994 2001

Searching and available NA 59.0
Not searching, but available and expecting recall NA NA
Total percentage of unemployed (partially relaxed NA NA
 definition)
Total number (thousands) NA 62
NB: Unemployed, not laid off NA 41.0

Laid-off workers with no formal attachment Romania
to the job
 1994 2001

Searching and available 38.2 40.5
Not searching, but available and expecting recall 7.2 2.0
Total percentage of unemployed (partially relaxed 45.4 42.5
 definition)
Total number (thousands) 427 359
NB: Unemployed, not laid off 54.6 57.5

Laid-off workers with no formal attachment Russia
to the job
 1994 2001

Searching and available 33.2 30.7
Not searching, but available and expecting recall 1.7 NA
Total percentage of unemployed (partially relaxed 34.8 NA
 definition)
Total number (thousands) 2,021 1,938
NB: Unemployed, not laid off 65.2 69.3

The ILO 'partially relaxed' definition includes those not searching
but available and expecting recall as unemployed; this is the official
definition in Romania but not in the other two countries. Information
on expectation of recall is unavailable in Estonia for either year and
in Russia for 2001; therefore, the partially relaxed definition cannot
be calculated and figures are shown as a percentage of unemployed
according to the standard definition. NA=not available.

Table 9: Discouraged workers

 Estonia

 1994 2001

Percentage of not in the labour force 4.8 6.5
 (official definition)
 Previous work experience NA 6.1
 No previous work experience NA 0.4

Percentage of unemployed 15.8 21.4
 (fully relaxed definition)
 Previous work experience NA 20.2
 No previous work experience NA 1.2

Total number (thousands) 16 23

 Romania

 1994 2001

Percentage of not in the labour force 5.5 7.6
 (official definition)
 Previous work experience 3.2 4.8
 No previous work experience 2.3 2.8

Percentage of unemployed 27.8 42.9
 (fully relaxed definition)
 Previous work experience 14.2 22.7
 No previous work experience 13.6 20.2

Total number (thousands) 306 467

 Russia

 1994 2001

Percentage of not in the labour force 2.3 3.8
 (official definition)
 Previous work experience NA 2.9
 No previous work experience NA 0.9

Percentage of unemployed 13.1 19.1
 (fully relaxed definition)
 Previous work experience NA 14.7
 No previous work experience NA 4.4

Total number (thousands) 862 1,489

Discouraged workers are defined as persons not working, available for
work yet not searching for a job because they believe no work is
available, or for similar reasons. Discouraged are counted as
unemployed in the ILO's 'fully relaxed' definition, but they are not
unemployed according to the official definition of unemployment in any
of the three countries. NA=not available.

Table 10: Alternative measures of labour underutilisation
(percentage of labour force)

Unemployment rate Estonia

 1994 2001

U-0 Standard ILO 11.6 12.5
U-1 Long-duration unemployment NA 9.4
U-2 Job loser NA 7.2
U-3 BLS (including laid-off workers not NA NA
 searching and expecting recall)
U-4 Adding discouraged workers 13.5 15.4
U-5 Including workers marginally 14.2 16.4
 attached for other reasons and
 half of involuntary part-timers

Unemployment rate Romania

 1994 2001

U-0 Standard ILO 7.6 7.8
U-1 Long-duration unemployment 2.8 4.0
U-2 Job loser 4.5 4.7
U-3 BLS (including laid-off workers not 8.4 7.8
 searching and expecting recall)
U-4 Adding discouraged workers 10.5 11.7
U-5 Including workers marginally 10.7 12.1
 attached for other reasons and
 half of involuntary part-timers

Unemployment rate Russia

 1994 2001

U-0 Standard ILO 8.1 8.9
U-1 Long-duration unemployment 5.8 6.1
U-2 Job loser 3.9 2.7
U-3 BLS (including laid-off workers not 8.2 NA
 searching and expecting recall)
U-4 Adding discouraged workers 9.3 10.8
U-5 Including workers marginally 10.5 11.0
 attached for other reasons and
 half of involuntary part-timers

The official definition is U-0 in Estonia and Russia and U-3 in
Romania. Except for U-0, the figures in this table were calculated
by adapting the US definitions (BLS, 2006). Long-term unemployed is
defined as 15 weeks or longer in Estonia and Romania, but 3 months
or longer in Russia. Marginally attached workers are defined as
individuals who did not look for work either during the reference
week or in the 4 weeks preceding the survey, but indicated that they
want and are available for a job and have looked for work sometime in
the previous 12 months. U-3 is unavailable for Estonia for 1994 and
2001 and in Russia for 2001 because of lack of information on
expectation of recall; U-4 and U-5 for Estonia in both years and
for Russia in 2001 are calculated under the assumption that there are
no job losers expecting recall. NA = not available.
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Author:Brown, J. David; Earle, John S.; Gimpelson, Vladimir; Kapeliushnikov, Rostislav; Lehmann, Hartmut; T
Publication:Comparative Economic Studies
Geographic Code:4EXES
Date:Sep 1, 2006
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