2020). Better employment is not about formality or informality—but rather about the organization of work in a team where employees are paid for their work (rather than working out of familial obligation).<sup>17</sup> This allows a minimum of specialization and organization, which helps to boost productivity and for people to use their skills.

_Other employment_ is all types of employment other than better employment, and is calculated as the difference between total employment and better employment. The main categories usually in other employment are subsistence own-account/family agriculture, non-farm microenterprises, small-scale traders, and landless agricultural laborers, as these employment types are only common in low-income countries—suggesting they are more likely to have lower productivity.<sup>18</sup> The weights of better employment ( ) and other employment ( ) depend on the relative contributions of better employment and other employment in generating GDP (Equation 6). This depends on both ωω 1 −ωω the number of workers in better employment and other employment, but also on their relative productivity. I assume that those in “other employment” are only as productive as raw labor, which has normalized productivity of 1. The human capital of these workers does not affect their productivity: a doctor working as an agricultural laborer will be just as productive as someone with no education doing the same job. In contrast, workers with better employment are as productive as their human capital allows; they are h times as productive as raw labor (where h is human capital per worker).<sup>19</sup> I assume that in each case males and females are equally productive, and have the same human capital h = h = h (which is not a bad approximation based on the World Bank HCI, see Appendix Figure 3). FF MM (6) hLL<sup>B</sup> **3.2 Calculating the full GEGI in the data: Employment ratios and the HCI** ωω= hLL<sup>B</sup> +LL<sup>OOBB</sup>

**3.2 Calculating the full GEGI in the data: Employment ratios and the HCI** Often it is convenient to work with employment variables as shares of the working-age population—rather than in terms of the number of people.  Here I rewrite the building blocks of the full GEGI— G , G and — in terms of ratios. These expressions are equivalent to those in Equations 3, 4 and 6 above, and are used to calculate GG GG BBEE OOEE ωω the full GEGI empirically (see Appendix 3 for derivations). The first ratio is the Better Employment Rate (BER), which is defined better employment as a share of the working age population (Pennings 2020). The second ratio is the Other Employment Rate (OER) as other employment as a share of the working-age population. The other employment rate can be calculated as the employment-to-population ratio ( , less the better employment rate ( ). This allows the Better Employment Gap to be expressed as (equivalent to Equation 3): EE) B −B (7) OOEEOO= EE−BBEEOO G = × 100% B +B RRMM RRFF And the Other Employment Gap becomes (equivalent to Equation 4): BBEE GG RRMM RRFF (8) G = × 100% OOBBRRMM −OOBBRRFF The calculation of the GDP weights OOEE GG OOBBRR requires data on human capital per worker MM+OOBBRRFF h , which requires taking a stand on timing.  Because we are usually interested in evaluating the effect of today’s policy changes in the future ωω (forward looking) we want a measure on human capital of the next generation: which is what the World Bank

> 17 The definition of formal employment varies across countries, but generally refers to the coverage of the worker with respect to benefits like unemployment insurance, pensions, and sick or annual leave.

> 18 The categories here are based on "International Classification by Status in Employment, 1993 (ICSE-93)”, and also exclude workers not classifiable by status.

> 19 For example, if h= 3 then the worker is three times as productive a raw labor.

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