Low pay and working poor

24.1 Low EArnings

The size distribution of earnings is an indicator of income inequality in the country. For many people, the most important characteristic of work is pay and the principle of an ‘adequate living wage’ is mentioned in the Preamble to the ILO Constitution.

In the latest version of the ILO framework of de- cent work indicators, a low pay rate is defined as the percentage of the employed population whose average hourly earnings are below two- thirds of the median of the distribution or an ab- solute minimum, whichever is greater. Formulat- ing the indicator in terms of a percentage of the median makes it independent of the national cur- rencies and facilitates international comparison. The choice of two-thirds, recommended by the Working Group on Decent Work Indicators at the

18th _ICLS,65 _{has the virtue of simplicity and wide}

applicability, including in countries that have ei- ther not adopted minimum wage legislation or which have set the statutory minimum wage far below the prevailing market wage.

In the analysis of low pay, it is important to dis- tinguish between different categories of low earners. The core is the full-time employed with low monthly earnings. For full-time employed, defined as all employed persons who during the reference week, low earnings involve:

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usually working 40–48 hours per week at all jobs; and

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the total monthly earnings at all jobs being less than a specified threshold. The thresh- old is defined as two-thirds of the median monthly earnings of all employed persons during the reference week with 40 to 48 of usual work per week at all jobs, young and adults combined. The threshold of low earn- ings is defined in terms of the distribution of monthly earnings of full-time workers in or- der to accommodate different national norms regarding minimum wage and differences in hours of work among full-time workers in each country. Since the median of the distri- bution determines the relative position of a typical worker in that distribution, it is plau- sible that national norms regarding minimum pay are indeed tied to that median.66

For less than full-time employed persons, low earnings may be defined as all employed persons who during the reference week:

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usually worked less than 40 hours per week at all jobs; and

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Received hourly earnings less than a speci- fied threshold consistent with the monthly threshold of full-time workers specified ear- lier. It can be calculated as the ratio of the threshold of low monthly earnings of full-

time workers to the average hours of work per week of full-time workers*52/12.

For employed persons working more than the typical number of hours for full-time work, low earnings may be defined as all employed persons who during the week:

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usually worked more than 48 hours per week at all jobs; and

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received monthly earnings at all jobs which were less than the threshold of low month- ly earnings of full-time workers or whose hourly earnings at all jobs were less than the threshold of low hourly earnings of less than full-time workers determined earlier.

Table 24 is based on the data for seven countries reported in the ILO document on the measure- ment of labour underutilisation mentioned earlier.67

The data show that low earners are substantial in most countries. Tanzania (2005–6) has the highest percentage of employed persons with low earn- ings (30.4%) followed by Panama (20.5%) and the Philippines (20.5%). It is instructive to note that the principal component of low earnings con- cerns persons working long hours (more than 48 hours per week). This means that, despite long hours of work, the earnings of a large portion of people remain below the threshold.

24.2 working Poor

Labour force surveys that in addition to income from employment or earnings also collect data on total household income can be used to measure and analyse the working poor. The working poor are broadly defined as working persons who are unable to earn enough to maintain the welfare of themselves and their families. More specifically, the working poor are persons who are working

65 See, for example, Tripartite Meeting of Experts on the Measurement of Decent Work, ILO, Geneva, 8–10 September 2008, Chairperson’s report, paragraph 51.

66 Bescond, D., A. Châtaignier and F. Mehran, “Seven indicators to measure decent work: An international comparison,” Interna- tional Labour Review, ILO, Geneva, 2003/2, pp. 179-211.

67 ILO, Beyond Unemployment: Measurement of Other Forms of Labour Underutilization, Room Document 13, 18th ICLS, Geneva, 24 November – 5 December 2008.

and live in households with income below the poverty line, as shown in Figure 28.

The US collects data on the working poor based on a survey conducted as part of an annual survey, called the Annual Social and Economic Supplement to the Current Population Survey (i.e. the US monthly labour force survey).68

The definition of the working poor distin- guishes between two categories of persons: (a) Working persons living as unrelated individu-

68 U.S. Department of Labor, U.S. Bureau of Labor Statistics, A Profile of the Working Poor, 2004, Report 994, May 2006.

Table 24

Low EArnings in sEvEn countriEs

Low Earnings Total

Full time employed (40-48 Hours per week) Less than full time employed (<40 Hours per week) Overly employed (>48 hours per week)

Total Low Monthly Earnings Low Hourly Earnings Tanzania (2005-2006) 30.4% 6.1% 2.9% 21.4% 14.8% 6.6% Panama (2007 Aug) 20.5% 7.1% 7.9% 5.4% 3.3% 2.1% Phillipines (2003 Q4) 20.5% 8.1% 1.0% 11.4% 8.8% 2.6% Mexico (2007 Q2) 11.3% 2.6% 3.2% 5.4% 2.3% 3.1% Moldova (2007) 7.2% 5.0% 0.8% 1.3% 0.6% 0.7% Bosnia & Herzegovina (2006) 6.8% 4.2% 0.0% 2.5% 0.9% 1.7% Turkey (2007) 6.8% 1.8% 0.8% 4.2% 4.2% -

als with income below the poverty level; and (b) Working persons living in families with total income below the poverty level.

Family is defined as a group of two or more persons residing together who are related by birth, marriage, or adoption. The threshold of poverty is defined on the basis of the differ- ent consumption requirements of individuals and families and factors such as family size and number of children younger than 18. A working

Figure 28

dEfinitions of working Poor

In document Analysis of labour force data (Page 52-54)