Employment Statistics Based on a System of Periodic Reporting of Establishments : special problems in the field of employment statistics

UNITED NATIONS

ECONOMIC

SOCIAL COUNCIL AND

Dist:r..v LIMITED

21 September 1964///

Originals ENGLISH

ECONOMIC COMMISSION FOR AURIGA . African Seminar on Labour

.Statistics " : . '

Sponsored and Organised "by the Economic Commission for Africa and the International La'bour Organisation

Addis Ababa5 3-12 November 19 64

: EMPLOYMENT STATISTICS BASED ON A SYSTEM OF PERIODIC

REPORTING OF ESTABLISHMENTS ' ' \

' SPECIAL PROBLEMS IN THE FIELD OF EMPLOYMENT STATISTICS

"■■ (Paper prepared "by the International Labour Office)

Introduction ■ . .

1. In:each country statistics of employment are needed to serve various purposes- The data required are (i) benchmark inventory-type

statistics such as census data describing in detail prevailing patterns and levels of employment at widely spaced dates and (ii) current statistics measuring periodically the changes and broad trends in employments preferably

at intervals not exceeding three months. . • . .

2B Countries implementing economic development plans have particular need for regular periodic■statistics. Economic development entails the transformation of the labour force within a country through movements of labour, especially movement from the traditional sector to the modern ■ sector. Labour moves in the course of economic development from rural to urban areas, from low-skilled jobs to relatively high-skilled jobs, from less productive work to more productive work, from agricultural work to industrial service and trade activities. Such movements entail changes in jobs, salary and place of work. Any such changes affect consume!- purchases and levels of personal and national income. These' changes have important social and economic consequences and therefore countries need valid measures of current changes in levels of employment and.in labour

foroe structure„ ■ ■ . ■

64-3537

Page 2

/

■ ■ 3. There -are two main systems in use for collecting data on current changes m employment, namely periodic household surveys

labour force sample surveys) and regular reports of establishments

^payroll statistics). This paper is primarily concerned with the special problems pertaining to the establishment reporting system.

These problems are primarily of two types, those, which'relate to

coverage and representativeness of the statistics -and those■-which

presenting t^emdatOdOlOgiCal protlems of S^ering, processing and

Problems of Coverage and Representativeness

(a) ■ Industry and Establishment Coverage ■ . .■. "

4= Both the virtues and defects of an establishment reporting

system derive from the fact that it depends upon the employer as the source of data. Among its virtues, as dompared to-household surveys is its relative, inexpensiveiiess" and the fact that the employer's Records also usually provide readily accessible and

accurate information on wages and hours of work, ■ Thus, information on literally hundreds or thousands of employees can be obtained

±rom a handful of cLuestionnaires, ■ Obviously, the professional

3? re^irei ?r Sathering ancl processing the data is comparatively

smaller than that required for household surveys, .-;.1- .-:,;-. ■

-In- the household,-surveys, scores of personal. interviews are conducted .with responsible household, members. However, in addition

!^SH i10?°n,the economic activity of the working-age'members

;:Otnej detailed information on their socio-personal characteristics

'?aSvi r^ad:Lly obtained, e.g..:age., sex, ..education, ■ marital . status ,

lamily income, patterns of consumption, attitudes, " aesiresV -etc.- in the establishment reporting system the source of data is the .employer who working- from payroll records provides information on

m£2re^"2 ;ind^iduals, as groups, rather than' for .each individual.

^L^^f^stiius derived are. at .best by-products of a, recording system primarily .compiled by .the establishment for its own purposes

ana administrative use, .■ " ' "

... 5.,.. The household survey data relate .to the entire labour "force

covering all industries and class-of^worker categories.. " On'the

?. ?L-?nv?- .coverage, of the establishment employment statistics

is limited, u.o only a..segment of the total civilian economically

^Zln^f1 t^°n °? la^°Ur -forc-e' ■ The" mi^si^ groups include- the

unemployed, -the, employed.population in industries-.which for various

reasons are not surveyed, and categories" other than wage earners and

^l^nt empl0^s: The data are also ^^y l^itef to establish

ments over a certain minimum size. The labour force surveys

provide information on all these missing segments as well as those covered by -che payroll records. However, for measuring changes in

a^l7tlt f1^ tr?ndsvin employment in the significant industries

during the inter-benchmark periods, such total coverage is not'

nee essary«

Page 3

60 ..Practice varies from country to country .as to which indust ries, are covered "by the establishment employment series. By and.

large, the data refer to the non-agricultural sectors of the

economy1 and frequently are restricted to certain branches of activity such as manufacturing, mining, construction, transportation and trade.

Here again much depends on-the economic characteristics of the country concerned and the industries within it which are considered significant.

7, Some establishments engaged in construction, transportation, trade and service activities may require special treatment due to seasonal variation, the nature of their,activities, the way. their work is organised or relative smallness of size. Professional and

social service agencies, medical and health agencies, private educational institutions, libraries and research agencies pose

similar problems. As a result, these groups are frequently omitted from the initial series and are only added as their employment becomes significant and the collecting agency staff and resources permit.'

-8. In countries where the modern sector is. relatively small, a.

sizeable portion of=the wage and.salary employees may be attached to government or public sector enterprises.- In: most cases, .these data are compiled by special agencies or ministries and obtaining

these data may pose problems or require special reporting arrangements.

If possible, efforts should be made to secure such information for inclusion in the ser-ie.s;: otherwise changes in employment in this sector may well mask changes in over-all employment levels.

9, It is not necessary to cover all establishments within the major industry groups selected for coverageQ A complete canvas of

establishments is only required periodically to provide benchmark data. Moreover to conduct complete canvasses on a monthly or ■

quarterly basis would be a difficult and very expensive task. Thus a sample of the establishments :can be sufficient for certain size categories of firms..

10. Not all size categories of establishments are sampled,

often cut-off.points are utilised to designate various size categories of establishments to be completely counted, sampled .or entirely

excluded. Usually all the very large firms are included in the survey whereas the very small firms, e.g. those employing less than five or- ten persons, are excluded-. Firms in between the very large and very ■small size categories are then: sampledD The designation of cut-off points depends in part ;oir the* number of establishments in each size class for each industry^in-the country.

1In some countries large agricultural establishments (plantations)

are also, surveyed." ..",. .." ■ ■■■:,.■ ■

4

Many countries: rely on such sample surveys of establishments for the.derivation of current-data on employment, the "basic assumption being that changes in employment ■■in the. "sample establishments reflect-"

changes in employment in all the■establishments in the same industrial group.-- ■ In-such'cases, the sample, should have the same general ■- "" ■"

characteristics as the whole universe, of establishments ' it- represents.- . However,.- there'is usually a 'significant" volume .of employment in small '

firms in construction, trades, services, cottage' and handicraft type-industries' and it is-often difficult to obtain a; satisfactory sample, for'these industries. As is often the case, co-operation is'' "

more rapidly .secured, from larger establishments and the:re is-a-'-■■"" v ■ ■ tendency.-to-overload the -sample with them. ■> ' . ' ■.-.■."." ■ ■■

12. .In.designing the ■- series ■ and the sample,-care must also-be.; ■"■

exercised when-selecting establishments, to ensure, proper representation of .the different .geographical areas within/the country/.otherwise ■' data may.be subject to. bias,' Most non-agricultural employment is, : of course, concentrated in the larger towns- Por these and other reasons, the .sample, may not,: In: fact-, have the same characteristics and in the due proportions possessed'by the total universe of ' ■ ' establishments. In any. case--, the selection of the sample is of

critical1 importance -and is: a'-technical task "best, carried out bv

specialists. .;. ■- . ' ■■■:: ■ " ■■ . - ■* ■ '■

13.' Changes..in employment in large establishments" are hot, as: " ■ a rule, paralleled-by those.'of small-establishments. Small businesses frequently change hands: many close down or move from one location to another. It is .therefore very difficult to maintain an accurate

up-to-date list of these firms by name and address. ':

14. Employment series usually are' affected by the "death" or- "

closure of.establishments but- in general they do not automatically reflect changes in employment due to "birth" .of new establishments,,' When allowance is not made for the birth of new firms the series .becomes biased downward and the estimates of employment are too low.

Special studies of new firms are required'in order to correct the

data |"o.r downward bias... A" similar phenomenon and problem occurs with the growth of small firms into firms large enough to be included in the

series, : ..;■■' ■ " ■ ■ ■ " ■ /■ ■

15. Using the results of industrial censuses'or other periodic complete count (benchmark) inquiries, as well as data on new establish ments registered, it is possible to compute an approximate correction factor or a set of factors for each major sector of industry. These may be used to adjust the current data on an empirical basis until

uhe next year when a new set of factors could be computed. In some cases, however, the correction may be too small to make it worth

while applying month by month ' and then an annual revision of the data would be preferable. The bias is reduced if new firms are added"to

the original sample. In any case the sample should be revised annually or from time to time, both on this account and for other .reasons, to ensure that it will continue to be representative.

16. To sum up, in the sample of establishments proper'"

representation should "be given to major industry groups, geographical areas? the size of establishment groups and the sample should be ■■

periodically reviewed and"revised. ■ ■' -r ■ - - _■_■■ "■ ■ ■'■

(b) Class :-of Worker Coverage "■'■

. 17. Practice varies as to.the class of worker or status

categories ■"■covered "in statistics' of -employment. ". Most/commonly wage earners"1 ^ and"salaried employees are covered* In some instances the ■ data include'other groups as well,' i.e. unpaid family helpers,

proprietors. ■.-... '

- 18. In general the series relate to the total number of persons - on the. payroll nearest the middle (or the end) of the month who :

worked" any part" of .the pay period, and employees on paid vacation or ■' paid leave. Sometimes data are requested on the number employed at- a given date or the average number employed during the month.

Employees absent for the entire pay period on •unpaid sick" leave,

unpaid vacations, on strike, or in the armed force's/ as a" rule do" not appear on: the payroll and are not included, in the-employers' returns,' ' Persons .who received pay for any part of the pa^ period usually are "■"

counted. ;■ This can result in:some double counting ■■of persons who ' ■""

appear on;two separate establishment payrolls in the'same period.- In general the longer the■reference period (weeky mon:th, quarter) the more double counting occurs. However,1 if the double counting :' is a fairly constant amount it does not cause any serious bias. ■ If the reference period "is reduced to a specific date, i.e. payroll-day, last workday of the month, first workday of the month, pay-day ": ."■ ■ preceding the 15th of the month, the double-count errors are virtually zero. ■"' ■; ":;. ■ ■ ■ .; - ■ ■■ " . "' '"

■■19'c Many countries collect. separate ''figures for salaried"

employees (or non-manual workers) and wage'earners (or manual or

"production11 workers). Salaried"employees include administrators, managers,1; superintendents, research, experimental, development,

technical:and design staff and the clerical, secretarial staff, The wage earner,group includes most foremen as well as ".operatives" and other workers on the-"payroll1 not mentioned under salaried staff. ■ These data are "used in computations "of average earriifigs, etc. for each group. ■ For purposes of employment ■statistdcs usually the two groups"

are combined. ■""■■' ' " " ■ ;-; ■'■"

20. As for employer and unpaid help categories, as a rule it makes little.■■difference' whether the series includes them or "not since these' groups, "are proportionally small, 'For important handicraft "■•' ' ;' industries it may be desirable "to ■■enumerate such "groups independently.' For most industries the proportion'of salaried workers'will ■■"be • ■'"■■<".-■

relatively small and the short-run movements in'"toiJ:al -employment 'are', mainly, attributable to variations in wage earners, which therefore provide a more, sensitive index of changes in business activity.

However, 'in economically developed countries the "white collar" group tends to show, over a long term, a higher rate of growth.*

N.14/CAS,4/LS/9

21. The international concept of employment refers to persons

"with a 3010'% which is. wider than persons "at work". The. "with a- job" concept gives a tetter ...picture of employment levels, whereas"

the "at work" concept finds greater,use in statistics of man-days or man-hours worked for use in calculations ,-of productivity,, etc. ■ "■'"■ ■ Payroll or establishment statistics however do not provide a complete count of persons "with a job" (see paragraph 13)-, In the first- place s normally they cover only employees and in particular, 'therefore,' own- account workers are excluded? .secondly, persons on temporary lay-off are mostly excluded from .the: payroll if the .lay-off is for more than one pay period... The same may apply to workers on strike or unpaid leave, etc. To .obtain statistics .of all persons "with a 30b" -the A best source of information is a sample of individuals in the'population the method normally applied is to take,a sample survey of households

(labour force sample survey). As noted in paragraph 18, the payroll statistics of employed persons do not correspond either to :persons ■

"at-.work" since persons in paid vacation,.-sick leave, -etc. "are usually -

included. .. . . .... ■ . . ■

22. In most cases- it is-not practical to attempt to obtain .from the administrative records, of establishments detailed data on.the sex"

and age- distribution of workers, A. series showing employment by-sex and by broad-..age categories,. -I.e. under 20 years, 20 to 44 years, and 45 years and:over, is highly desirable for ascertaining the changing- patterns of employment of females,, youth and aged persons- However,- ■ this typeof information-and in greater age detail can best be ■ .'. ; obtained from a sample of household surveys. ■ , ■ _..''.

_ 23.' ■ In general part-time workers are included in employment ■ : series based- on establishment data. However, where possible, separate data should be obtained for part-time workers in the industry. .In some countries if they are numerically significant in the industry employers traditionally distinguish between "regular" or "permanent"

staff and "day labourers" or "casual and temporary workers". These groups should be distinguished in such■circumstances since .the data . would then reveal a great .deal more about the.underlying trends in the-

pattern of employment. . . . .. . . ;

24. Employees on■ an establishment payroll who are utilised ■■as" a' separate :work force.■■for-,new. construction, repair and alterations to the establishment should where possible be reported separately. ■ The . employer^ return for these workers is then treated as relating to a separate establishment and it is classified in the construction ■

industry.

•: 25. -As.a rule it is not advisable to ask firms to■ report, the number of workers employed by subcontractors engaged in carrying out.

construction or other contract work, for the firm. Frequently they cannot provide the information especially where wage data as well as"

employment figures are requested. ■ - .

Problems of - Gathering^^?rj3Ge^sj:ngj^

26.' In many countries reporting is usually not.compulsory and the extent to which questionnaires are completed and returned on

* time depends largely on the attitudes of employers.

; 27, The reasons for late reporting, misreporting and non-

* reporting are many and varied and may call for a-personal visit to the employer by a" representative of the collecting agency. It is important that the respondents understand the questions and are able . and" willing to report the needed data. For this reason close ■

attention should be given to the design of the questionnaire and the accompanying instructions.. The statistical agency .should, treat ■ the returns, as -confidential, and, where possible, in the.published statistics,, data relating, to individual firms should not be

identifiable. Of course/ much depends on the rules applicable in;, each country, on the type of ownership of firms, and on the relative size and number of firms within a given industry in the country,

28o Pretesting the questionnaire, furnishing a booklet

explaining what figures are desired and the definition of the terms and concepts used, perhaps even furnishing post-free envelopes for the return, ands where applicable, assuring the respondent- of

confidentiality of.response, will help avoid some of these difficulties These are small but important measures to take to ensure co-operation

and good response.

29. Responses must be checked to ensure that the reporting firms are furnishing reasonable and consistent statistics. Queries may be dealt with by telephone, letter or.personal visit, ■■ Follow-up

of non-response is necessary to determine whether the firm has gone out of business, changed its name or amalgamated with another,

30* If a substantial proportion of the sample firms do not report it may no longer be valid"to assume that the movement in employment in.the reporting establishments reflects the actual changes in employment in the:industries concerned. The sample should be "sufficiently large to allow for a certain proportion of non-response',

31. Normally one can use the preceding figures for these firms or use; estimates based on past figures, Sometimes only the data, for. tne identical, establishments which replied for both the current period and.the preceding period are used to calculate the relative change in.employment. This procedure is based on.the assumption that the omitted firms had similar experiences to those of the firms responding in, both periods. Provided non-response and late response are not serious for amy size group, industrial branch.or geographic area, j.there ;;is not likely to bn any significant bias in the results*

Usually it"is. desirable to label the data "provisional" pending the issuance of prevised figures based on a more complete coverage, . i.e." taking : account of late returns.

14/CAS.4/LS/9

8

32. It is important, to review periodically the extent of non-reporting and the numbers of workers affected, according to

type of firm, size, industry and geographic area.

33. Classification of establishments is usually made on the basis of predominant activity or chief product manufactured or serviced. To avoid-frequent changes in the classification of ■ establishments the situation should not be reviewed more than once a year with a view to reclassification on account of change'of

product or activity8 In the case where different' lines of activity are carried out by the same establishment one should attempt to ■ secure separate returns for each and assign each its respective

industrial classification. If this is not possible the multi- activity or multi-product establishment must be classified on the basis of the predominant activity or chief product (according to ■ ■ values of products or services or numbers employed).

34. On the other hand when a company operates several establish ments in the same area, all of which are engaged in the same manu facturing activity or similar line of trade or business5 then a combined report suffices.

35. Other problems arising in the classification of establish ments are those resulting from a consolidation of two or more firms.

If firms already in the series combine they should continue as separate reporting units wherever possible. Otherwise the new consolidated ■ firm has to be classified by industry and size group and appropriate adjustments made to permit comparison of the data for the preceding and_the current period. Permanent changes in product or kind of business could be treated as death of an old firm and birth of a new firm if the method in use takes account of births and deaths.

A change in" the name of a reporting establishment, with no other change, need only be noted in the list of establishments.

36. Employment estimates should be presented in the form of U) annual averages for the past few years and (ii) data for at least three time periods - current month (or quarter), preceding month ■" ■

(or quarter)- and the same period a year earlier. Where necessary ' current data can be shown as "provisional" (pending inclusion of late returns) and corrected to "final" figures in the ensuing release.

37. In addition to index numbers showing percentage changes in employment it is preferable to show also absolute estimates which have been obtained by linking the data from the establishment sample with appropriate benchmark figures. In any case the base (scope) of the index should always be indicated.

38. In so-far as the nature and reliability of the information

permits, figures should be published for all significant subcategories,

39. A technical description of the series should be published to assist users in understanding and evaluating the data.

Page 9

Periodically, analyses of trends should "be published utilising all employment data available from the different sources.

Conclusions

40, Establishment statistics should "be developed in accordance with the specific needs of each country in the light of its social and economic structure arid, in so far as possible, in accordance with international standards in order to promote comparability among

countries. Any country which has not established a series on the general level of employment should lay the foundations for such a series "by commencing to collect data relating to persons of each sex employed in establishments, beginning with the manufacturing industry and extending the collection to other branches of economic activity as resources and facilities become available.