Why is inactivity in the labour market a greater problem than unemployment?
19 August 2021
By Džemal Hodžić, Chief Technical Advisor, International Labour Organization in Ukraine
Perhaps, it will be a revelation for most readers to learn than inactivity in the Ukrainian labour market is a considerably greater problem than unemployment.
To begin with, it is worth sorting out the terminology. Not all the people who do not have a job are considered unemployed. Indeed, there is a broad category of people who are not jobseekers, hence they are regarded by the International Labour Organization not as unemployed but exactly inactive. According to the ILO definition a person to be considered unemployed must meet three criteria: a) to be out of work, b) to actively look for a job, and c) to be able to accept an offered job within two weeks upon the offer is made. That said, media and official reports usually appeal exactly to statistics of unemployment whereas a great number of inactive individuals beyond purview of all services is just overlooked, therefore it’s quite likely that you will learn about such a category of persons for the first time.
In Ukraine, more than 10 million people aged between 15 and 70 are inactive at the labour market, according to Labour Force Survey 2019. You must admit it’s an impressive figure, and even if we reduce it by about 4 million people being pensioners, more than 6 million ones of the age group 15-59 are inactive, therefore neither employed nor unemployed. A certain percentage of them are students, and only about 1% do not search for a job because of health. If we take the LFS statistics of unemployed for comparison, there is “only” 1.5 million of them in the country and according to the SES statistics (officially registered with SES there is only about 0.5 million unemployed. Do you see the difference? Usually, inactive people are not on the radar of the public employment service. And, since the inactivity problem does not rise to the surface it is not being addressed as such.
If we compare the statistics of unemployment among men and women in Ukraine, we will have to surprise you again because there will be less women in this category. Why? Because it is women who are more engaged in performing family duties, such as child care and elderly people care. Therefore, they face barriers to enter the labour market. And, as you have already guessed it, it is they who make up a hefty part of the “invisible cohort” of inactive individuals. Just imagine: more than 3.7 million women at age 15-59 are inactive, out of total 6.1 million inactive in the same age group.
Let’s find out now who exactly is harmed by this inactivity – the state, citizens, or, perhaps employers too? The answer is – everyone because the state receives less budget revenue that would be generated by such individuals if employed, in addition to the fact that state actually has to pay some social benefits to some of these groups. Employers in many sectors feel a shortage of labour force, and that niche might indeed be filled by the people from the inactive pool. A huge share of inactive persons would like to work but they cannot do that due to the barriers beyond their control.. Someone’s work skills have become obsolete – for example, of mothers getting back from a 3-years long maternity leave, or of workers having a focused specialization which is no longer demanded in the labour market. Someone has just lost faith in finding a job after years of search. Someone else, for example, has just no transport available to get to a neighboring village to work. Also, a great reason for inactivity is that many families still live with understanding of traditionally dominating social role of the woman as housewife, responsible for domestic work and children’s care. All these people eventually find themselves on the labour market margins.
How can the inactivity problem be tackled? It’s important to understand that there is no one-size-fits-all solution that would solve the problem right away at all levels. However, I believe that there are quite obvious steps that can be made. First of all, it is necessary to have a political will to address this problem. Then, outreach campaigns aimed specifically at a certain group should be launched to inform such individuals that they will be assisted in a job search. Of course, it would be impossible to assist all the groups at the same time, but to decide which specific one to target. It requires multi-stakeholder approach of public employment service, employers in particular, education providers, NGOs, local governments who could altogether design a specific line of measures to help targeted groups of people enter the labour force market. The International Labour Organization has the technical expertise to assist the country to address this issue.
The state could potentially encourage the individuals, having the inactive status, to get registered with the Public employment service , whereas the latter in turn must help a person draft a job placement plan, identify the skills possessed by the person and needing improvement, deliver necessary trainings for skills upgrading, etc.
I will give you an example from my home country, Bosnia and Herzegovina, how the problem of unemployment and inactivity can be successfully tackled. One municipality sold a large empty space which was actually a factory, destroyed during the war in Bosnia to a local employer for only\ euro to arrange a factory there, but with one condition - to employ at least 500 persons from that particular municipality. The local public employment service office realized that there is no labour force with required skills available. Therefore, the the public employment service approached the employer offering its services in finding the needed labour force and developing a training program with the local high school to enable the labour force to acquire the necessary skills. Then, the PES visited all the registered unemployed offering retraining and employment opportunities. As a result the employer hired at the 740 people at the end. Since many families identified a problem of lack of affordable childcare the employer built a kindergarten within the factory and provided enable workers with small children to have an affordable (subsidized by the employer) childcare.
I’ve been working in Ukraine for more than three years, and would like to note that the people’s inactivity problem is not unique to Ukraine. The inactivity problem is rather acute in the European Union and the Balkan countries as well. However, advanced countries do not neglect the inactivity problem, they target the priority groups of inactive people all the time and help them in activation and job placement. Important to note, that employers are often willing to support some activities in assisting the inactive to overcome the barriers to employment as they are also interested in attracting more labour force, particularly in occupations where it is labour shortage identified. It is worth adding that a country does not necessarily be rich to help inactive people find jobs – not at all. The state should merely identify the problem and start making consistent steps towards its solution in partnership among institutions (government/s + public employment service, social and health institutions + education providers + employers + civil society organizations). And the sooner the better.
Originally published in FACTY ICTV:
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