This paper proposes a methodology for measuring the quality of employment from a multidimensional and public policy perspective in Latin American developing countries (Argentina, Bolivia, Brazil, Chile, Colombia, Ecuador, Mexico, Paraguay, Peru, and Uruguay) using household and labour force survey data from 2015. The purpose of this paper is to demonstrate that the QoE can be measured using a multidimensional methodology that can inform policy makers about the state of their labour markets in a way that complements traditional variables such as participation or unemployment rates, which are not always good indicators of labour market performance in developing countries with large informal sectors.
Building on the framework of the capability approach as well as on previous work on multidimensional poverty, we use the Alkire/Foster (AF) method to construct a synthetic indicator of the quality of employment (QoE) at an individual level. We select three dimensions that must be considered as both instrumentally and intrinsically important to workers and the functions and capabilities generated by their employment situation: income, job security and employment conditions. Job security is then divided into two sub-dimensions (occupational status and job tenure), as is employment conditions (social security affiliation and excessive working hours). A threshold is then established within each dimension and sub-dimension to determine whether a person is deprived or not within each dimension, before establishing an overall cut-off line and calculating composite levels of deprivation.The results generated by this indicator are, first, highly relevant to policy makers as they allow for the precise identification of groups of vulnerable workers as well as of dimensions and indicators, which contribute to deprivation in the labour market. Second, they extend the debate about employment in developing countries to variables not commonly considered by the literature as being critical to the well-being of workers and their dependents, such as occupational status and job tenure. Third, this paper highlights important difference between Latin American countries, both in terms of the overall QoE Index result as well as its component dimensions. While Chile presents the best results in the region, Paraguay presents the worst, followed by Mexico, Bolivia and Peru. However, Chile, Peru, Columbia and Brazil, for example, have the biggest problem with job rotation. Finally, the paper highlights that low rates of unemployment are not necessarily related to low rates of deprivation in terms of the QoE. In fact, in some countries analysed (e.g. Mexico) the opposite is true.