Human Capital in Today’s Economy

Highly capable and well-trained human capital is a must if President Nursultan Nazarbayev’s Strategy 2050 development plan for Kazakhstan is to be realised on time. In his state-of-the-nation address, he noted that Kazakhstan’s self-employed are a great well of talent.

db4654bd4faa20e11460d6dd7860ae03“We must give all citizens the opportunity to participate in our country’s industrialisation,” Nazarbayev said.

This topic was the subject of a recent interview with Alikhan Smailov, chairman of the Committee on Statistics of the Ministry of National Economy.

Who is considered self-employed?

The term self-employed came to us from the international classification of employment statuses and is based on United Nations (UN) principles and recommendations regarding the economic characteristics of the population. This classification is used by International Labour Organisation (ILO) specialists in most countries. According to the ILO, those aged 15 and older are included and are classified as either economically active or inactive. The economically active population is divided into the employed and unemployed. The employed section is divided into a recruited category, i.e. working under an employment contract and non-recruited or self-employed. The self-employed category includes employers, members of cooperatives, individual entrepreneurs and country dwellers engaged in home production and cottage industries.

In the second quarter, the population aged 15 years and older included 12.7 million people, 9.1 million of them are considered economically active, and 3.6 million are listed as economically inactive. From among the economically active, 8,650,000 people are employed and 461,000 are unemployed. Approximately 6,040,000 of the employed have an employment contract, while 2.61 million are independently or self-employed; this figure includes employers, which number 166,000 people, members of cooperatives – 11,000, and 1.5 million people are individual entrepreneurs (1.2 million are registered and 258,000 are unregistered), 906,000 are country dwellers engaged in various sorts of cottage industries (both for their own consumption and for sale). It is estimated that 62 percent of all employees engaged in cottage industries profited from selling their product.

The total number of employed young people (aged 15-28 years) was 26 percent (2.3 million, 30.3 percent (682,400) of this demographic are self-employed. Approximately 26.1 percent (2.6 million) of the total self-employed population are youths aged 25-28 years of age. The youth unemployment rate in the second quarter was 4.6 percent (in 2013, it was 5.5 percent).

How do statistics agencies determine that a person is self-employed?

A sample survey of the population is taken quarterly. An employment survey found that ILO standards are met and the law titled “On Employment” is abided by.

A special questionnaire given to the public asks respondents a logical sequence of questions. Based on respondent answers, the population is classified by the level of economic activity; classifications include paid employment or self-employment, unemployed and economically inactive.

About 75,000 people 15 years of age and older are surveyed. The survey covers all regions of the country. Similar approaches are used by most countries in determining self-employment figures.

Why must statisticians differentiate between self-employed who are considered to be productive and those found to be nonproductive?

Not all self-employed generate sufficient income for a decent living. Therefore, it is necessary to determine how much of the self-employed population needs assistance in acquiring basic needs and or finding better paying employment. In order to make progress in helping these people, the President set forth a programme called “The Social Modernisation of Kazakhstan: Twenty Steps to a Society of Universal Labour.” In 2012, we began dividing the self-employed into productive and unproductive categories based on their income.

This approach was met with approval. Those self-employed with a monthly per capita income below a certain level are listed as unproductive. To make this possible, a living wage was calculated. There were 782,000 people engaged in this type of unproductive employment in Kazakhstan during the second quarter and for the past year, totals peaked at slightly over one million people. All of them are part of the unemployed target group established by the Employment Road Map 2020, which defines various support and assistance mechanisms. For example, employment assistance is provided in the form of training and relocation, micro-credit, project management services (namely in marketing, legal advising, accounting and other areas). This category, regardless of monthly income, includes the individually employed (regardless of whether they are inactive or unregistered), those employed in subsistence agriculture and unpaid family workers. Further, regarding those with a monthly income below the living wage are cooperative members, the individually employed (both registered and active) and those employed in private agricultural production with the intent of reselling harvests (exchange).

The current makeup of the unproductive workers category indicates that most people in the category are unregistered individual entrepreneurs working in cottage industries and producing goods for their own consumption, or those whose average monthly income is less than the living wage of the region where they live. The level of involvement of the unproductive self-employed in productive employment will determine the amount of benefits they are allowed to reap from the social security and welfare systems.

The social and economic benefits of these measures are clear.Firstly, on an individual level, improving social protection, reducing risks caused by old age, illness, loss of employment, improving incomes, better living conditions and increasing economic opportunities are important. Secondly, for the state, reducing social tensions also eases the risk of unrest over issues stemming from poverty and low income. Increasing confidence in government policies, establishing more stable social security institutions, such as the pension system and insurance industry, improving the competitiveness of the economy, increasing productivity, improving the quality of the workforce and increasing the tax base are important.

How long has the statistical agency been putting these metrics together?

Employment indicators, including the number of self-employed, have been kept since 2001 based on the results of sample surveys concerning employment in all regions of the country. Survey methodology, questionnaire design, methods of calculation and sampling techniques were developed in conjunction with leading experts from Germany’s statistical office as part of a technical assistance project of the European Union (EU) TACIS.

According to global estimates carried out by experts of the International Monetary Fund (IMF) in 2002 and 2007, Eurostat and UNECE in 2003, the UNFPA in 2005, the UNECE and UNESCAP in 2007 and the World Bank in 2007-2008, “a survey of the work force meets international standards and ensures the provision of objective and comparable information on employment and unemployment in Kazakhstan’s labour market and its regions.” Proof of this is the fact that in 2003, Kazakhstan adopted the Special Data Dissemination Standard (SDDS).

Since 2012, Kazakhstan has implemented the KAZSTAT project to strengthen the nation’s systems of statistics. As a result of projects regarding employment statistics for 2015-2016, the sample will improve as will the procedures used to measure it. A list of indicators including informal employment, employment quality, labour performance and a log of working hours will be compiled.

In what industries are the self-employed generally engaged?

According to second quarter of 2014 findings, the majority of self-employed work in agriculture – 51 percent (in 2009 – 62 percent) and 25 percent in the retail sector; about 24 percent of self-employed work in areas such as education, healthcare, construction and transportation.

Legally, how are the self-employed recognised?

The legal status of the self-employed is defined in Kazakhstan’s Law, “On Employment.” According to Article 1 of this law, the self-employed are individuals, independently engaged in the production (and sale) of goods, works and services for income, including subsistence production, members of producers’ cooperatives, unpaid family workers (households) and employers hiring salaried employees. This was put into law in June 2011.

What is the attitude towards the self-employed population in international practice?

Historically, in Europe and the United States, self-employment has been one of the most effective answers to unemployment. Fostering self-employment has allowed many countries to mitigate unemployment related social issues in times of crisis. Since the early 2000s, in connection with a steady increase in the proportion of self-employed in the labour market, this issue has been more closely studied in the developed world. The share of the self-employed in total employment in developed countries is about 12-14 percent. In France it is 11 percent, in Germany 12 percent, in the UK 15 percent, in the Czech Republic 19 percent, in Italy 25 percent, in South Korea 28 percent, in Turkey 37 percent and in Kazakhstan 30 percent. The survey’s results show that on average, the average self-employed individual works 34 hours a week (in 2009 – 30 hours) in Kazakhstan and only 0.4 percent of all self-employed work five hours or less. This testifies to their significance to the country’s economy.

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