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LAC Equity Lab: Labor Markets - Job Quality Index (JQI)

Changes in employment and earnings have been one of the main drivers of poverty and inequality reduction in LAC over the last decade. However, the role of jobs in reducing poverty and inequality goes beyond the level of earnings associated with them. Having social insurance coverage associated with employment can be an important tool for preventing the vulnerable from falling into poverty as they grow old or if they become sick. Accordingly, having stable employment helps protect earnings from the ups and downs of the business cycle. Finally, having a job that is empowering and rewarding can be welfare enhancing on its own beyond the associated monetary compensation.


Job Quality Index is based on Brummundi, Mann, and Rodriguez-Castelan (2018), who propose four dimensions for measuring job quality. It is constructed according to the Alkire and Foster (2011) framework for creating a multi-dimensional index. It requires that each indicator for every observation is treated as either a success or a failure. Failures are treated as a 0, while successes are given a 1. These are the dimensions considered in the JQI:

1. Job income: Wage paid above a minimum income of wellbeing. We used as reference the Upper-Middle Income Class poverty line of $6.85 per day (2017 Purchasing Power Parity). This is a necessary condition for the JQI to be greater than 0. Even for an individual that has all the other dimensions, if their wage is below the poverty line, then the JQI is equal to zero.

2. Job benefits: The job provides health insurance or retirement benefits. Some countries provide a minimum level of health and pension coverage; nonetheless, in those countries the worker sometimes receives extra coverage as part of job benefits.

3. Job security: The worker has a contract; the job is permanent, or the worker has kept the job for a long enough period to consider the job secure. We assume a cutoff of three years of tenure to consider the job permanent, in addition to a contract and stable work indicators when available.

4. Job satisfaction: The worker is satisfied with their job. We assume as a proxy of this dimension that the worker does not have a second job.

The SEDLAC (CEDLAS and WB) harmonization is an effort to increase cross-country comparability. However, methodological changes in the underlying surveys may result in non-comparable data that the harmonization process cannot fully solve. It is important that the user know what data is and is not comparable. For more information, visit the comparability dashboard.

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