The working poor in developing countries

Abstract

I n developing countries where effective social insurance systems do not exist, the poor have to work in order to support themselves and their families. In such countries it also appears that the long-term unemployed are mostly not those who would be referred to as the "poor". Very often, however, the conceptualization behind employment and labour market policies (and the use of empirical proxies for this purpose) tends to ignore the importance of these two stylized facts about poverty and long-term unemployment in developing countries. This oversight is illustrated by the possibility of a negative relationship between the unemployment rate and the poverty rate in developing economies, with unemployment rates typically lower than poverty rates. 1 The mistake with respect to these stylized facts has a basis: the general notion of the labour market that policy-makers operate with is often that of a developed market economy. In societies with social insurance systems or effective social floors, 2 which are also wealthier societies, the "problem of employment" is rightly captured in the unemployment rate -the preferred 1 * ILO, Geneva. 1 The relationship between the poverty rate (P ) and the unemployment rate (U ) for the 1990s for a set of developing countries for which both unemployment and poverty rates were available is: P = 17.63 -0.85 U (R-squared = 0.13; N = 25; t-values in parenthesis ) (3.94) (-1.91) The relationship is of course driven by levels of national income, because unemploymen t rates are typically higher in middle-income developing countries and poverty rates typically higher in low-income developing countries. The relationship appears to be counter-intuitive only if the two stylized facts are ignored. The equation given, however, is only illustrative because actual data on unemployment typically include not only the long-term but also the short-term unemployed. Some of the latter can be among the poor. This is discussed in more detail later. However, the assumption made here is that the long-term unemployed are in the majority. In the context of India, for example, the problems thrown up by the gap between the incidence of poverty and the rate of unemploymen t have been commented upon by Ghose (1999).2 An effective social floor can be seen as comprising an effective social insurance system, and a widely applicable minimum wage.

The New Face of Unequal Exchange: Low-Wage Manufacturing, Commodity Chains, and Global Inequality

“…In many cases, production takes place in the informal economy, in unregulated factories, or in homebased work with few, if any, social protections. Indeed, access to paid employment is frequently insufficient to raise a household above a basic dollar-a-day poverty threshold (Majid 2001). As mentioned earlier, a low-productivity, low-wage trap is possible in which the proliferation of poverty-level jobs is only desirable because of the wretchedness of the next-best options.…”

Lucha contra la pobreza y extensión de la cobertura social en Colombia

“…3 5 -5 9 pobreza a nivel rural. Majid (2001) calcula la tasa de pobreza en empleo para países de ingresos bajos y medios. Para ello considera la población económicamente activa bajo la línea de pobreza y la divide por la población ocupada total.…”

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“…De acuerdo con Majid (2001), esta relación depende del nivel de desarrollo y de las características del sistema de seguridad social. En los países en desarrollo donde no hay un sistema de seguridad social establecido, el salario mínimo y la organización de los trabajadores no funcionan o no incluyen amplios sectores de trabajadores, hay formas híbridas de inserción laboral (no asalariadas, sin remuneración, relaciones laborales endebles, vínculos serviles, etc.…”

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