Labour market planning revisited

Labour Market Planning Revisited Labour Market Planning Revisited Michael Hopkins © Michael Hopkins 2002 Softcover reprint of the hardcover 1st edition 2002 978-1-4039-0111-8 All rights reserved No reproduction, copy or transmission of this publication may be made without written permission No paragraph of this publication may be reproduced, copied or transmitted save with written permission or in accordance with the provisions of the Copyright, Designs and Patents Act 1988, or under the terms of any licence permitting limited copying issued by the Copyright Licensing Agency, 90 Tottenham Court Road, London W1T 4LP Any person who does any unauthorised act in relation to this publication may be liable to criminal prosecution and civil claims for damages The author has asserted his right to be identified as the author of this work in accordance with the Copyright, Designs and Patents Act 1988 First published 2002 by PALGRAVE MACMILLAN Houndmills, Basingstoke, Hampshire RG21 6XS and 175 Fifth Avenue, New York, N.Y 10010 Companies and representatives throughout the world PALGRAVE MACMILLAN is the global academic imprint of the Palgrave Macmillan division of St Martin’s Press, LLC and of Palgrave Macmillan Ltd Macmillan® is a registered trademark in the United States, United Kingdom and other countries Palagrave is a registered trademark in the European Union and other countries ISBN 978-1-349-50748-1 ISBN 978-1-4039-2026-3 (eBook) DOI 10.1057/9781403920263 This book is printed on paper suitable for recycling and made from fully managed and sustained forest sources A catalogue record for this book is available from the British Library Library of Congress Cataloging-in-Publication Data Hopkins, Michael Labour market planning revisited / Michael Hopkins p cm Includes bibliographical references and index ISBN 978-1-349-50748-1 Labor market—Developing countries Employment forecasting— Developing countries I Title HD5852 H66 2002 331.11′09172′4—dc21 2002024877 10 11 10 09 08 07 06 05 04 03 02 Contents Acknowledgements viii Introduction Employment and Manpower Planning Techniques 1.1 1.2 1.3 1.4 1.5 1.6 1.7 1.8 1.9 ix Introduction The manpower requirements approach 1.2.1 The dominant model 1.2.2 The critics Rate of return approach Labour market information systems Cybernetic and pragmatic approaches Key informants Labour market signalling Labour accounting matrices Concluding remarks 1 3 10 11 13 14 18 21 An Overview of Major Theories of Labour Market Mismatch 25 2.1 2.2 2.3 2.4 2.5 2.6 2.7 2.8 2.9 25 27 31 34 37 42 46 48 51 Introduction Classical economists Neo-classical economists Social reformers Development economists Monetarists and employment Segmentation and empirical theories Recent neo-classical views Concluding remarks The Measurement and Monitoring of Mismatches (Employment and Unemployment) 3.1 3.2 Introduction Concepts of labour force participation and underutilization 3.2.1 Subemployment index 3.2.2 Basic needs approach 3.2.3 Labour efficiency approach v 56 56 58 60 61 61 vi Contents 3.3 3.4 3.5 62 62 63 63 65 65 67 68 70 72 A Description of the MACBETH Model 74 4.1 4.2 74 76 76 77 80 98 4.3 3.2.4 Symptomatic approach 3.2.5 The Hauser approach Employment definitions currently applied 3.3.1 Unemployment 3.3.2 Employment 3.3.3 Further disaggregation 3.3.4 Underemployment 3.3.5 Informal sector employment Occupation and skill Concluding remarks Introduction Methodology of projections 4.2.1 Population projections 4.2.2 Education projections 4.2.3 Employment projections Final remarks An Application of the MACBETH Model to Labour Market and Human Resource Analysis in Sri Lanka 5.1 5.2 5.3 5.4 5.5 5.6 Introduction Calibration of the model Base year data for MACBETH 5.3.1 Population 5.3.2 Education 5.3.3 Employment 5.3.4 The economy Results of the base scenario retained (scenario 1) Alternative scenarios 5.5.1 High growth from increased investment (scenario 2) 5.5.2 An ‘Economist’s’ interpretation of scenario (scenario 3) 5.5.3 A ‘NIC’ scenario – that is scenario plus changed pattern of investment (scenario 4) 5.5.4 Scenario plus increased population growth (scenario 5) 5.5.5 A worst case scenario (scenario 6) Summary and conclusions 5.6.1 On the model 5.6.2 On the economy 107 107 107 110 110 113 119 124 126 129 130 133 135 135 136 138 138 140 Contents vii Labour Market Signalling through Survey Analysis – an Alternative to Manpower Planning? 6.1 6.2 6.3 6.4 6.5 6.6 Introduction Key informants survey 6.2.1 Procedures 6.2.2 Findings 6.2.3 Summary of main results of key informant survey Tracer survey 6.3.1 Methodology 6.3.2 Findings 6.3.3 Summary of main results of tracer survey Establishment survey 6.4.1 Methodology 6.4.2 Results 6.4.3 Summary of main results of establishment survey Initial identification of key occupations for training 6.5.1 Unemployment data as indicators 6.5.2 The survey results on identifying training needs Conclusions and lessons learned 143 143 144 144 145 151 152 152 153 156 156 156 157 160 161 162 163 164 Conclusions 184 7.1 7.2 7.3 7.4 7.5 7.6 184 186 187 188 189 190 Index Manpower planning Labour market theories Data issues The MACBETH model Labour market signalling Overall conclusion 191 Acknowledgements Discouragement, of the type of work presented here, has been more often received than critical acclaim Thus I have few people to acknowledge, but those I are very special to me Prof Odd Gulbrandsen, of UNCTAD, always saw the utility of forecasting techniques and helped me significantly with the modelling work Prof Jaime de Melo of the University of Geneva, supervised my Ph.D thesis based on much of the material here, was a reluctant recruit but never dissuaded me Prof Emilio Fontella, also of University of Geneva, and Dr Rolph Van Der Hoeven were enthusiastic In the ILO, where this work started now nearly twenty years ago, there was little encouragement except from Dr ScottMoreland and Dr Luis Crouch who acted as consultants when they were both at Research Triangle Institute and worked with me in Ecuador – the first application of MACBETH Thanks to Dr Samir Radwan of ILO who helped me to choose the name MACBETH and also appreciated, peripherally, the work Lothar Richter, the ILO guru on LMIS (Labour Market Information Systems) in the 1980s was also a critical supporter of my modelling work The Vietnam chapter work was greatly helped by Dr Doug Ledgerwood, the team leader of the Asian Development Bank project where the work took place There are also people, too many to mention, from Ecuador, Tunisia, Thailand, Malaysia and Sri Lanka, who worked hard and cheerfully with me in the dozen or so countries where work took place More recently, UNDP (United Nations Development Programme), through the vision of Rima Khalaf Hunaidi ably assisted by Zahir Jamal, Gillman Rebello and Maen Nsour, have supported me to develop new dimensions of this work in several countries in the Arab Region under a ‘Job Futures’ project Last, but not least, to the love of my life, Jawahir, for cheerfully being with me through the long years that this manuscript emerged M ICHAEL HOPKINS viii Introduction The main thrust of this monograph is to re-examine the manpower planning debate in developing countries This debate was vigorous in the 1970s and 1980s but has been relatively quiet since then The debate appeared to end with the notion that all forecasting techniques that purported to assess manpower requirements in the future were dubious and that the future lay with labour market analysis and labour market signalling This monograph disputes the first notion, but agrees that the often over-simplified and non-flexible forecasting models of the past, should be supplemented with better data and improved labour market analysis The monograph begins with a presentation and analysis of the employment and manpower planning controversy The literature is typified by such statements as: The art of manpower planning is certainly in disarray After decades of manpower forecasting practice, it has come under repeated and sustained criticism Those still practicing the art might rightly be confused as to the mandate, methodology and overall usefulness of what they are doing (Psacharopoulos, 1991) In Chapter 1, it is argued that the use of models for manpower planning does still have a role to play Labour market models are useful both for labour market analysis and to help design labour market information systems Normally, the argument goes, models cannot be built without an underlying labour market information system But this is chicken and egg, and both are dependent on each other Chapter overviews, from a historical perspective, some of the main labour market theories of relevance to the manpower planning debate and, in particular, those that have attempted to explain the economic causes of unemployment Most theories not centre on the causes of unemployment; rather they are mainly concerned with what causes, inter alia, accumulation, changes in the profit rate, inflation, growth, or changes in wages Clearly, these causes are interrelated and so the emphasis of theory on a number of problems at once is not altogether surprising The word ‘overview’ is used since it is difficult, if not ix Labour Market Signalling through Survey Analysis 181 Table What is the minimum time to train a new recruit who has no pre-employment vocational training before making them a regular worker? Weeks 12 24 48 Undefined Frequency Total % 1 – 1 3.2 12.9 3.2 3.2 – 6.5 22.6 12.9 3.2 3.2 32.3 Table 10 What is your opinion regarding training relevant to the work that graduates of public vocational training institutions do? Weeks Frequency Total % 15 – 3.2 48.4 19.4 12.9 16.1 – Very good Good Average Poor Have no recommendation Undefined Table 11 What is your opinion regarding training relevant to the work that graduates of private vocational training institutions do? Value Very good Good Average Poor Frequency Total % – – 16.1 9.7 3.2 182 Labour Market Planning Revisited Table 11 Continued Value Frequency Total % 21 67.7 3.2 Have no recommendation Undefined Table 12 What was the main way in which employees were recruited during 1998? Value Frequency Total % 4 14 12.9 12.9 12.9 45.2 9.7 6.5 Particular training institutions Employment promotion centers Through advertisments Friends, relatives workers from est Others Undefined Table 13 Do you plan to hire more employees in 1999? Value Frequency Yes Do not know/no response Undefined Table 14 % 17 7 54.8 22.6 22.6 How many employees you plan to hire in 1999? Value 6–10 Total Frequency Total % – 1 – 22.6 12.9 – 3.2 3.2 – 6.5 Labour Market Signalling through Survey Analysis 183 11–20 21–50 51–100 101–500 500 + Undefined – 6.5 12.9 – 6.5 3.2 22.6 Table 15 Would you be willing to accept students from vocational training institutes to take on-the-job training? Value Frequency Total % 16 15 51.6 48.4 Yes No Table 16 If not willing to accept students from vocational training institutes to take on-the-job please state reason? Response Small-scale + lack equipment Need highly skilled operators No accommodation for students Affects current working practice Undefined Frequency Total % 17 25.8 6.5 3.2 9.7 54.8 Conclusions 7.1 Manpower planning This monograph has re-examined the manpower planning debate in developing countries, presented a number of theories that have tried to explain the causes of mismatch on the labour market with emphasis on the main mismatch – that of unemployment Next the monograph illustrated how difficult it has been to agree on definitions on exactly what is being measured in the labour market field This was followed by the presentation of a model, the MACBETH model, that seeks to overcome some of the main lacunae in manpower models to date An application of the model to Sri Lanka then illustrated some of the strengths and weaknesses of the model The penultimate chapter presented an alternative methodology that, as suggested in the literature, could provide a powerful alternative to simulation models of manpower forecasting In Chapter 1, it was argued that the use of models for manpower planning still have a role to play Labour market models are useful both for labour market analysis and to help to design labour market information systems Normally, the argument goes, models cannot be built without an underlying labour market information system But this is like the chicken and the egg, and both are dependent on each other How to determine the future training needs of the labour market in developing countries is a question that has confronted manpower analysts and educational planners for decades There is no easy solution simply because no one can forecast the future and, therefore, what labour demands are likely anymore than one can predict stock market movements or future economic growth rates This has not stopped people from trying However, models to perform manpower analyses have been subject to such scathing criticism that manpower practitioners 184 M Hopkins, Labour Market Planning Revisited © Michael Hopkins 2002 Conclusions 185 have shied away from modelling techniques and as such there is a gap to be filled Now a combination of techniques under the general heading of ‘labour market signalling’ has become the accepted method to assess manpower needs However, few countries have created a system to this and there is much theorizing but little action One of the main objections to the manpower forecasting methodology is that the elasticity of substitution between different kinds of labour is equal to (or near) zero This is why the MACBETH model has a system to move labour between different levels of education and occupations Although it is agreed that rigid adherence to manpower plans would be ludicrous, the use of labour market information and labour market analysis to look at alternative scenarios of the labour market should not be dismissed The dominant idea that no planning for human resources is warranted and that, instead of planning, all that needs to be done is to monitor the reactions and trends of the labour market, is rejected in the monograph This is because to give guidance for present decisions, one needs what is not available: information on future earnings associated with different types of education Data from the past are the best we can do, and reliable estimates of lifetime income streams are only available for those educated many years ago The problem is that labour markets and the supply of educated persons to those markets can change so as to make past income streams poor predictors of future ones Take the example of primary education; rate of return analysis is used as a rationale for giving priority to it, for the rate of primary education is said to be typically higher than for secondary or higher education But the calculation of rates is based on data for cohorts who received their schooling many years ago, when primary education was much less scarce than it is today The concern with manpower planning has led some authors to concentrate on the preparation and organization of labour in LMIS as an ‘alternative’ to forecasting Clearly, the mere collection of data sets without the sort of guide provided by a model is ridiculous The publications are potentially useful, in a developing country context, to delineate the main variables of interest for manpower planning and to arrive at consistent definitions Most of them not this Indeed, at best they present a shopping list of items to be collected without providing an analytical framework within which to collect and then to analyze data for planning or policy formulation Manpower forecasting has been largely concerned, to date, with supply side policies and, in particular, implications for education and training This is because the outcomes from the two main approaches to manpower 186 Labour Market Planning Revisited forecasting, the MRA and the ROR method, both concentrate on education and training policies A growing response to the criticism of, particularly, these two methods has evolved into a generalized attack on the validity of any quantitative projections To counteract these criticisms, as far as possible, the MACBETH model presented in the monograph follows a heuristic approach The results are presented in graphical form allowing a dialogue to be maintained with even the most numerically illiterate policy maker The system is easy to use and to develop and relatively inexperienced professionals can be quickly trained to use the system The system is heuristic because it produces results quickly, provokes discussion on the results emanating from the scenarios and leads the inquisitive into the search for new data sources, and better ways of understanding the labour market The system can be used as a simple tool for continually monitoring what is happening in the labour market 7.2 Labour market theories Manpower planning has, at its core, the problem of mismatch between labour supply and demand that is unemployment Consequently, a better understanding of the manpower planning problem can be helped by examining theories about the determination of unemployment Therefore, the monograph set about, briefly, to overview some of the leading strands of thought that have attempted to explain, among other things, the economic causes of unemployment Most theories not centre on the causes of unemployment; rather they are mainly concerned with what causes, inter alia, accumulation, changes in the profit rate, inflation, growth or changes in wages Clearly, these causes are interrelated and so the emphasis of theory on a number of problems at once is not altogether surprising The main conclusions of the chapter on theory were: first, it is inappropriate to examine labour markets in terms of equilibrium economics since there is no reason to presume that the forces that operate within labour markets interact more or less harmoniously and efficiently to grind out equilibrium levels of employment and associated working conditions Second, labour markets are differentiated from one another, giving rise to empirically recognizable labour market segments or structures even though segmentation theory has tended to proceed in terms of divisions across the labour market as a whole and even though these divisions are perceived to be shifting and overlapping Third, these labour market segments can be derived from ‘horizontal’ and ‘vertical’ factors The former refers to determinants that Conclusions 187 prevail across all sectors of an economy, such as differentiation by gender and skill and the latter refers to the structuring within particular sectors of the economy Fourth, with the rejection of equilibrium, it is necessary to demonstrate how labour market structures are socially reproduced, transformed or develop historically This latter point does not mean degeneration into empiricism in which structure becomes identified mainly with large differences in behaviour as long as the structures are shown to incorporate underlying socio-economic factors in an integral fashion Fifth, labour market structures need to be derived from those socio-economic factors that arise out of the division between capital and labour and out of the profit imperative This, in turn, implies a particular analytical and causal structure to labour market analysis, in which labour market structures are the reproduced and complex outcomes of the capital–output relation and its associated tendencies, such as productivity increase, deskilling, monopolization and so on Finally, it does appear that the focus upon growth theory in recent years has led to questions of employment being more of an ‘add-on’ than a focus of economic theory per se, which differs sharply from the focus on the labour market by the classical economists and social reformers such as Keynes 7.3 Data issues Data availability for manpower or human resource planning at the national level are poor in developing countries Further, there is much confusion over the meaning of employment and unemployment – and this is not confined to the developing countries with frequent changes of concepts and terminology occurring mainly to suit the interests of one political party or another The manpower planner is often confronted with data which purport to measure underlying concepts but often have only a nod in the direction of precision Not only are the methods that the manpower planner has to use severely criticized, s(he) is also forced to walk on marshy ground as far as data are concerned Nevertheless, the need for information about the future evolution of the labour force and occupations is there, which is why, despite the poor quality of data and conceptualization in the labour sphere, it is thought that the modelling of the manpower problem is a useful activity It not only reveals alternative, albeit speculative, scenarios of the future, it also reveals the underlying weakness of the data since a model forces data to be consistent and thereby reveals its main weaknesses 188 Labour Market Planning Revisited 7.4 The MACBETH model MACBETH is, essentially, a recursive simulation model of the labour market and the evolution of occupational mismatches The object has been to develop a model that was robust to data inconsistencies while being straightforward enough to be applied quickly in a developing country context To date, data have not been available to calibrate the switching between occupations described in the last section Nevertheless, the model has been used in many contexts and has been used as a pedagogic tool to introduce labour concepts into the manpower planning exercise An example of its application was given for the case of Sri Lanka with the objective of assessing the implications of alternative growth paths on employment and (broad) skill requirements The main conclusion, in Sri Lanka, was that the economic growth rate projections have a major impact on employment projections and, as was seen, the growth in Sri Lanka was less than foreseen at five per cent a year instead of the forecasted 6.8 per cent – undoubtedly due to the ambitiously forecasted GDI rate of 28.4 per cent being higher than the actual of 25.4 per cent The ambitious figure of 28.4 per cent was the target of the Government at the time and was known to be ambitious but was what the Government wished to explore and therefore retained for the base scenario and most of the other scenarios The structure of employment was significantly different (although we are comparing available data in 1996 with the projections for 2000) with less in agriculture and more in services projected by the model – this could well be due to differences in definition of sectors rather than actual differences but again only an in-depth analysis of the data on the ground could tell us that Similarly, there are big differences in the allocation of GDP by sector with GDP in services underestimated in the model, which led to the concomitant underestimation of employment in services Nevertheless, these major structural differences did not show up in the unemployment rate, which was roughly similar with both actual data and the model projection giving an unemployment rate of around ten per cent However, the mismatch in the structure of employment would have led (data not available to show this) to significant differences in the demand for types of occupation with agricultural occupations more in demand than expected and service sector less in demand This, in turn, would lead to a lower demand for educated labour and higher for unskilled Thus the comparison between ‘actual’ values of some key variables and the base scenario forecasts for the year 2000 showed mixed results Conclusions 189 The demographic projections were excellent but the economic forecasts were too optimistic in terms of economic growth The results not question the validity of the model as much as its political context – a forecasting exercise is best done by an independent group that is allowed by the Government to have access to available data What can be said about the utility of the model given its mixed forecasting performance? The main conclusion is that the model can be useful if data are both reliable and internally consistent In the absence of such data reliable conclusions must depend on the realism of the scenario chosen The high expectations of investment possibilities anticipated by the Government of Sri Lanka at the time the projections were done should have been tempered with more realism – this was also known at the time but illustrates that ‘independent’ forecasts would have served the Government better than accepting, at the time, too much false optimism about the Sri Lankan economy The work on the model was carried out within the Ministry of Planning in Sri Lanka Thus, the model can provide insights into labour market analysis It goes much further than a traditional ‘manpower requirements’ approach but, in its reduced form (i.e without using the labour flexibility option), can imitate the manpower requirements approach and this is useful in providing baseline projections of manpower 7.5 Labour market signalling Labour market signalling is a useful adjunct to traditional forms of manpower analysis in that it advocates the need for wage and employment trends not only to guide schooling and training decisions but also to evaluate how well labour markets are functioning The objective of signalling is that it can estimate whether there will be upward or downward pressure on the economic returns to investment in specific skills Planners can monitor labour market conditions and evaluate training programs and can also focus upon skills that are of strategic importance to economic development and that take a long time to acquire The manpower planning school stresses labour market research and labour market signalling as ‘the’ alternative to manpower forecasting There is no objection to the need for alternative techniques but, as also argued, there is a need to perform, and perfect, forecasting to provide a future vision to assist in the assessment of training and educational needs The labour market signalling chapter showed that even with relatively detailed surveys, the identification of mismatches on the labour market and future training needs is not straightforward The data 190 Labour Market Planning Revisited collected in the surveys would help to calibrate some, but not all, parts of the MACBETH model 7.6 Overall conclusion The manpower forecasting debate was carried out vigorously in the 1970s and 1980s but appeared to end with the notion that all forecasting techniques that purported to assess manpower requirements in the future were dubious and that the future lay with labour market analysis and labour market signalling In general, the monograph disputes the first notion but agrees that the often oversimplified and inflexible forecasting models of the past should be supplemented with better data and improved labour market analysis Index Addison, T 54 Adelman, I 52 Ahamad, B Alailima, P L 119, 123, 141 Allen, R G D 53 Barnes, T 55 basic needs approach Bennell, P 8, Berry, A 35, 48, 53 Bhatt, V V 53 Blaug, M Bowen, J 54 40–1, 61 capital-output ratio 32 capitalism, critique of 29–31; demise of 30–1, 33; exploitation of labour 30; labour theory of value 30 Central Banks classical school, critique of capitalism 29–31; demand for labour 27–8; free competition/invisible hand 27; reserve army of unemployed 29; production function 29; theory of population 28–9 Colclough, C Computerized General Equilibrium (CGE) models 25 Crouch, L 12 cybernetic approach 11–12 dependency theories 32 developing countries 35–6 development economics 33–4 agriculture/industry model 39; basic needs approach 40–1; capitalist/subsistence model 38–9; distortionist perspective 41; and economies of scale 37; high development theory 40; high population/low wage linkage 38; human capital theory 41; imitative capitalism model 39–40; import substitution 40; institutional perspective 41; and structuralist theories 37; Washington consensus 42 Doeringer, P 54 Domar, E 53 dominant model, balancing 4; demand side 3–4; described 3; supply side Dougherty, C R S 8, 11–12 Eckaus, R 52 education 48, 62–3, 185 cost 79–80, 97–8; MACBETH projections 77–80; MACBETH Sri Lanka example 107, 113–18, 127; students 77–9 efficiency wage model 150–1 empirical theories 46–8 employment, definition 65; demand 83–5; economic growth 81–3; education/cost implications 97–8; female 57–8; investment for creating full employment 92–4; labour balance 90–2; labour pool/labour force 85–90; MACBETH projections 80–98; MACBETH Sri Lanka example 108–9, 119–24; occupational mobility 94–7; paid 65; planning 1–2; self-employment 65; some work 65 191 192 Index establishment survey, contact with director/manager 158–9; findings 157–60; main results 160–1; methodology 156–7; private sector involvement 158; selected results 178–83; skills 159–60; trainee recruitment 158; vocational training 157, 160; worker attitude 158 EUROSTAT 56 exogenous variables 101–2 graphs 1056; program menus 102–4 Fine, B 54, 55 Freeman, R B 54 Friedman, M 26, 43, 48, 54 Furtado, C 52 General Theory of Equilibrium 34–5 Gordon report (1962) 60 Grootaert, C 19 Grossman, S J 51, 55 Gulbrandsen, O 99 Hagen, E 39, 52, 54 Hahn, F H 42, 54 Harris, J 26, 55 Harris-Todaro model 47–8 Harrod, H R F 26 Harrod-Domar model 31–2, 81 Hart, K 47, 55 Hart, O D 55 Hauser approach 62–3 Hauser, P 62 Hayek, F 26 Hayter, R 55 heuristic approach 12 Hinchcliffe, K Hirschmann, A 26, 54 Hollister, R G Hopkins, M 52, 54, 55, 165 Hough, J R 11 Human Resource Development Council (HRDC) 16 Hunt, D 40, 54 ICLS 67–8 informal sector 46–7 definition 68; in developing countries 68–9 International Labour Organisation (ILO) 10, 15, 32, 40, 41, 56, 62, 64, 68, 71 International Standard for the Classification of Occupations (ISCO88) 15–16 Jackman, R 55 Jayawardena, L 36, 53 Job Futures 16–18 described 16–17; outputs Jolly, R 17–18 Kenway, P 53 key informants survey 13–14, 21, 144–5 course elimination 148; findings 145–51; main results 151–2; opinions on courses 146; potential employment/wage earning possibilities 149–51; private sector involvement 151; selected results 166–74; training 147–8; training programme improvements 146–7; utility of responses 148–9 Keynes, J M 25, 26, 33–6, 53 Keynesian approach 43–5 aggregate supply function 34; implementation 35; problems concerning 35–6; propensity to consume 34; volume of investment 34; wages 34–5 King, B B 19 Klein, L R 33, 35, 53 Kornai, J 26, 36–7, 52, 53 Krugman, P 34, 36, 48, 53, 54, 55 Labour accounting matrices (LAMs), building up 19–20; described 18–19; developing 20–1 Index 193 labour efficiency approach 61–2 labour force participation, basic needs approach 61; concept of 58–9; economic activity rate 59–60; Hauser approach 62–3; international standards 59; labour efficiency approach 61–2; subemployment index 60; symptomatic approach 62 labour market, absorption 32; classical 27–31; clearing 32–3, 51; definitions 63–70; demand for 27–8; development economists 37–42; equilibrium in 33, 49; going rates 33; monetarists 42–5; neo-classical 31–4, 48–51; no optimal system for 26; resistant 33; segmentation/empirical theories 33, 46–8, 49; social reformers 34–7; socioeconomic factors 50; supply/demand 50; surplus 38–9; theories 25–7, 184, 186–7 labour market information systems (LMIS) 1, 10, 21 labour market signalling (LMS) 1, 21, 143–4, 185, 189–90 definition of training needs in given economy 15–16; establishment survey 156–61; identification of skills 15; initial identification of key occupations for training 161–4; Job Futures 16–18; key informants survey 144–52; lessons learned 164–5; main indicators 15; short term assessment needs 14–15; tracer survey 152–6 labour turnover model 50 Lauglo, J Layard, R 55 Lenin, V I 26, 31 Lewis, A 25, 26, 38–9, 53 Little, I 53 Lucas, R E 49, 55 MACBETH model 5–6, 12, 35, 185, 186, 188–9 application see Sri Lanka MACBETH model application; background 74; education 77–80; employment 80–98; endogenous variables 98–100; main modules 75; normal maximum ranges of selected parameters 100; population 76–7; projections 75–6; as recursive simulation model 98–9; use of 74–5 Malthus, T 26, 28–9 Mangum, G 54 Mangum, S 54 manpower analysis 1–2, 21–2 manpower planning 72, 184–6 additional disaggregation 65–70; core problem 25; data availability 56–8, 187; described 2; forecasting 185–6; labour force participation 58–65; occupation/skill 70–1 manpower requirements approach, critics 4–7; dominant model 3–4 Marshall, A 26, 31, 66 Marx, K 25, 26, 29–31, 52 Maskin, E S 55 Mason, W 10 Mediterranean Regional project (MRP) Meeting of Experts on Labour Statistics (MELS) 68 Mill, J S 26 Mincer, J 8–9 monetary theory 42–3 definitions of 43; inflation 44–5; invisible hand 43–4 Moura-Castro, C de Myrdal, G 25, 60 194 Index natural rate of unemployment (NRU) 45 neo-classical school, challenges to 33; dependency theories 32; institutional factors 32–3, 51; market equilibrium 31–2; recent views 48–51; regulatory role of prices 31; theory of innovation 33 new growth theory 49 Nickell, S 55 non-accelerating inflation rate of unemployment (NAIRU) 45 occupational classification OECD 56 70–1 Parra-Pena, I 54 Phillips curve 43–4, 45 Pigou, A C 26, 33, 53 Piore, M 54 policy formulation population, MACBETH model 108, 110–13, 126–7, 135–6; projections 76–7; theory 28–9 pragmatic approach 11–12, 21 production 31–2 capitalist/socialist differences 36 Psacharopoulos, G 5, 6, 8, Pyatt, G 19 rate of return approach (RoR) 21, 186 described 7; objections 7–8; third party position 9–10; unpopularity 8–9 Reddaway, W B 53 Ricardo, D 26, 29, 52 Richards, P Richter, L 10, 13, 144 Romer, P 49, 55 Rosenstein-Rodan, P N 54 Russell, B Sabot, R 35, 48, 53 Samuelson, P 27, 52 Sapsford, D 55 Say, J B 26 Schultz, T 41, 53, 54 Schumpeter, J A 26, 53 Scott-Moreland, R 12 segmentation, definition of 46; educational differences 48; horizontal/vertical factors 49, 186–7; labour allocation mechanism 47–8; modern/informal sector 46–7; skills/requirements mismatch 46 Shyrock, H S 99 Siegel, J S 99 skills 15, 46, 70–1, 159–60 Smith, A 26, 27–8, 31, 52 social accounting matrices (SAMs) 19, 20–1 social reformers 34–7 Solow condition 50 Solow, R 26, 32, 53, 54, 55 Squire, L 46, 54 Sri Lanka MACBETH model application, alternative scenarios 129–36; base year data 110–26; calibration of 107–10; comparison of some key variables with actual figures 136–8; economists interpretation 133–5; economy 124–6, 127–8, 140–1; education 107, 113–18, 127; employment 108–9, 119–24; high growth from increased investment 130–2; labour supply 108; model changes 139–40; NIC scenario 135; occupations 107; parameter changes 139; performance of 138–40; population 108, 110–13, 126–7, 135–6; results of base scenario retained 126–9; scenario analysis 140; unemployment 109–10, 128–9; worst case scenario 136 Standing, G 54, 55, 58, 66 Stiglitz, J 34, 53 Index 195 Stockwell, E G 99 subemployment index 60 Sweetland, S 54 Sweezy, P 35, 53 symptomatic approach 62 Thorbecke, E 19 Todaro, M 26, 55 Tokman, V 54 tracer survey, findings 153–6; main results 156; methodology 152–3; selected results 175–7 trade unions 33, 50 training, determining future needs 1; identification of key occupations 161–4; identifiying future needs 184–5; survey results on identifying needs 163–4; unemployment data as indicators 162–3; vocational 157, 160 Tzannatos, A 55 underemployment 67–8 unemployment 60 additional 66; and capitalist inefficiences 36; causes of 25–6; costs of 44; currently available 63, 64; cyclical 66; definition of 63–4; disaggregations of 65–6; discouraged 66; disguised 66; efficiency wage model 50–1; frictional 66; increase in 44–5; inevitability of 32; and inflation 44–5; institutional factors 32–3; international comparisons 56–7; MACBETH Sri Lanka example 109–10, 128–9; price/wage equilibrium 31–2; reduction in 44; reserve army of 29; seeking work 63, 64; simulation model 51; structural 66; and training 162–3; without work 63, 64 UNICEF 40 United Nations Development Programme (UNDP) 40 Urrutia, M 65 Van Der Hoeven, R 54 Vocational Education and Training (VET) Waelbroeck, J 42, 52, 54 wage-fund doctrine 27 wages, asymmetric-information models 51; downward pressure on 38; efficiency wage 50–1; equilibrium 33; fair wage 51; increase/reduction in 34; rigid 47; rise in 38; subsistence 38 Walras, G 26, 43, 52 Walrasian equilibrium 31 Washington consensus 37, 42, 48–9 women 57–8 Wood, A 35, 53 World Bank 8, 32, 40, 41 Youdi, R V ... activity is mainly carried out M Hopkins, Labour Market Planning Revisited © Michael Hopkins 2002 Labour Market Planning Revisited in Ministries of Planning or Economy in developing countries.. .Labour Market Planning Revisited Labour Market Planning Revisited Michael Hopkins © Michael Hopkins 2002 Softcover reprint of... the use of models for manpower planning does still have a role to play Labour market models are useful both for labour market analysis and to help design labour market information systems Normally,