Under-utilization of Labour

First it is worth noting that under-utilization of labour here refers to involuntary lack of work. Many persons, for example housewives, students and sick or elderly people, may not want, or seek, full-time or even part-time work. Voluntary lack of labour activity should not be considered to be a welfare loss. Thus, it is important to investigate whether or not a person's lack of labour activity is of an involuntary nature¹⁷.

Surprisingly, to many observers, the (Israeli) CBS unemployment ratio for the occupied territories has fluctuated between 1% and 5% during the 25 years of Israeli occupation. By comparison, the unemployment ratio in Israel during the same period, has varied between 3% and 9%, on average surpassing the occupied territories by 3%. The unemployment level estimated by the CBS is roughly confirmed in the FAFO living conditions survey, which recorded a 1992 unemployment ratio in the occupied territories of 7%.

What are the reasons for the low level of recorded unemployment in the occupied territories¹⁸? The labour force framework described in the first part of the chapter was originally developed to record any labour activity, as opposed to complete non-activity, in keeping with macro-economic statistical needs. Use of such labour force definitions in a living conditions, however, can easily be misleading. It should be stressed that the concept of "unemployment" in the labour force framework means total lack of work¹⁹. A person classified as "employed" does not necessarily carry out a sufficient amount of labour activity to cover his or his household's economic needs. A major aim of this chapter is thus to show how under-utilization of labour can be found not only among the unemployed, but in all three main groups in the labour force framework. As a reference for the discussion, Figure 7.6 gives a schematic overview of different types of under-utilization of labour, based on the classifications in figure 7.1.

Figure 7.6 Types of labour under-utilization

Unemployed Workers²⁰
This section is concerned with "classical" unemployment, (box 1 in figure 7.6). Figure 7.7 shows regional variations in the FAFO living conditions survey unemployment ratio. The pattern of unemployment seems, perhaps, somewhat perplexing. Otherwise different regions like Gaza and Arab Jerusalem, have in fact about the same level of unemployment, which turns out to be higher than that of the West Bank.

Figure 7.7 Unemployed persons as percentage of the labour force by gender and region

Contrary to what may be expected, unemployment does not decrease with increasing education. A possible explanation of this result is that two different effects may be at work simultaneously:

The first effect (which resembles mechanisms that will be described in the discussion of "discouraged workers" below), may be pinpointed as the "unemployment as luxury" phenomenon. Well educated persons from urban, wealthy households tend to be more selective as to types and places of work. Instead of accepting any low status jobs which may be available to them, these individuals may prefer to stay unemployed for some period of time while looking for an "acceptable" job. It is reasonable to believe that the relatively high unemployment ratios in Arab Jerusalem and among those most highly educated, may, in part, be attributable to the "unemployment as luxury" effect.

Poor persons, on the contrary, cannot afford to be unemployed. In societies without regular unemployment insurance arrangements, as is the case in the occupied territories, such persons must accept almost any kind of work offered to them in order to survive. The high unemployment in Gaza, particularly in the southern parts and among refugees, is most probably related to a high prevalence of part-time work rather than the "unemployment as luxury" effect²¹. Low job stability over time among large groups of the labour force make for relatively high unemployment ratios at specific points in time.

Unemployment in the occupied territories may to some degree be characterized as being more "evenly" distributed than in Western countries, where national unemployment insurance and other benefits may reinforce long-time unemployment among marginal workers. The low unemployment in the West Bank is probably due to the existence of a low-productivity agricultural sector as an attainable and acceptable alternative to unemployment. This hypothesis is supported by lower unemployment rates in rural than in urban West Bank localities.

"Discouraged Workers"²²
To be classified as "unemployed" in the labour force framework, a person must not only have had no labour activity during the determinant week, but also actively have sought work. Originally developed for Western labour market conditions, application of the "seeking work" criteria is less straightforward in developing countries. A few general observations should be sufficient to illustrate this point:

The absence of good and timely information on available jobs, the seasonal nature of much work and the high proportion of self-employment all complicate the meaning of "seeking work" in the context of developing economies. Many unpaid family workers do not seek work outside the family enterprise, even though they would like to work more. "Seeking work" is often understood as seeking paid employment only. It may also be difficult to draw the line between seeking work as self-employed and the activity of actually being self-employed. To cope with these objections, ILO recommends a less strict "seeking work" criterion²³. Persons not seeking work for reasons of lack of hope or similar, may be classified separately as "discouraged workers" in the "not in labour force" category (box 2 in figure 7.6)²⁴.

In our discussion of the supply of labour, variations in labour force participation ratios between regions and groups have been interpreted as indicating that involuntary non-activity is due to economic and political constraints. Keeping this hypothesis in mind, there is, however, a somewhat surprising lack of variation in the share of discouraged workers over regions and socio-economic groups. A possible explanation may be that discouragement sometimes is so great that mechanisms of retrospective rationalization come into play.

The typical discouraged worker in the FAFO survey is a young educated woman²⁵. The relatively high number of discouraged workers among the highly educated is more likely to be caused by greater expectations and a more discriminating attitude with respect to place and type of job than by inability to find any kind of work at all.

Underemployment
"Underemployment" is, following ILO terminology, a phenonemon which refers to the employed category only. By contrast to the extreme situation defined as "unemployment", "underemployment" refers to situations of partial lack of work. Citing ILO, "underemployment exists when a person's employment is inadequate, in relation to specified norms or alternative employment, taking into account the occupational skills of the person"²⁶. ILO distinguishes between two main types of underemployment, visible and invisible underemployment, corresponding to boxes 3 and 4 in figure 7.6 respectively. Visible underemployment refers to insufficiency in the volume of employment. Invisible underemployment refers to mis-allocation of labour resources, e.g. in the form of low productivity and under-utilization of a worker's skills²⁷.

Visible Underemployment²⁸
Statistical measurement of visible underemployment is highly problematic in developing countries. A visibly underemployed person must both be working less than normal duration, and seeking and being available for additional work. Both normal weekly working hours in a person's usual type of activity, as well as the time actually worked during the week, have to be estimated. The tendency of self-employed and unpaid family workers to structure their work by tasks at hand rather than by fixed work hours, makes the concept of "normal working hours" ambiguous²⁹. The many possible reasons for working less than normal hours also make it difficult to assess the possible involuntary nature of such labour activity.

The FAFO living conditions survey has used the distribution of employed persons by full-time and part-time work as an empirical indicator for visible underemployment³⁰. Some groups, e.g. students and women, voluntarily choose to work part-time. Thus, we cannot conclude that all part-time workers are under-employed. Cultural norms in Palestinian society, however, hold that men from 25 to 59 years of age should work full-time.

Figure 7.8 Full-time/ part-time employment in percent of male labour force 20-59 years of age by region

Figure 7.8 reveals great regional variations in the distribution of employed middle-aged men in respect to full-time and part-time work. Full-time work is rare in Gaza, particularly in the southern part. Within the West Bank, full-time work is much more prevalent in the central areas than elsewhere. The full-time/part-time distribution of the central West Bank resembles that of Arab Jerusalem, which has the highest prevalence of full-time work of all regions. Variations in the prevalence of full-time workers according to refugee status are small both in Gaza and the West Bank as compared to the regional differences.

It would not be reasonable to assume that the low prevalence of full-time work in Gaza is a reflection of less need for such work here than in other regions. Rather than a result of freely taken individual decisions, the low number of full-time workers is probably rooted in the generally difficult labour market situation in Gaza. When lack of full-time work is a result of structural factors outside the control of the individual, it may be deemed visible under-employment. The involuntary character of part-time work may thus validate claims that it represents a deprivation of welfare and living conditions.

The hypothesis of lack of full-time work as a living condition problem, is further supported by the fact that full-time work is more frequent among high status than among low status groups. The well educated, members of wealthy households and professionals usually hold full-time jobs. Figure 7.9 illustrates how the prevalence of full-time employment increases with increasing education.

Figure 7.9 Full-time and part-time employed persons as percentage of male labour force by education

Individuals from poor households and persons doing unskilled or agricultural work, on the other hand, usually work part-time. Part-time workers have not been asked specifically about reasons for working less than full-time. The degree of voluntariness cannot, therefore, be determined exactly. Still, the variational pattern in full-time and part-time work shown above, is a clear indication that many part-time workers actually are under-employed.

Invisible Underemployment
Measuring invisible underemployment in developing countries is even more challenging. Invisible underemployment characterized by low productivity, is probably the most typical form of labour under-utilization found in the occupied territories. Measurement requires, however, information on the economic productivity of individual economic units. Further, such data must be augmented by information on the characteristics of individual workers³¹. Thresholds below which income is considered abnormally low, skills under-utilized, or productivity insufficient, must be established. This is generally so demanding that statisticians, even after several years of experimentation, have been forced to give up their efforts³².

Labour Under-utilization - Concluding Remarks
By way of conclusion, it should be emphasized that unemployment ratios should be supplemented with other statistics for labour under-utilization. In spite of problems of measurement and interpretation, the number of part-time workers - and the labour force participation ratio - are useful indicators of involuntary lack of employment. Particularly variations for adult men over regions and socio-economic groups may provide useful supplementary information. The indicators used in this chapter clearly point to Gaza refugees as being the most deprived socio-economic group in terms of employment in the occupied territories³³. Residents in Arab Jerusalem and the central parts of the West Bank, and especially the well educated, seem to be the groups which face the least severe employment problems.

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