Employment & Unemployment - How they are measured content slideshow. Designed for the Economic A level qualification. Can be used in revision and in class. Subtopics: Intro to Employment & Unemployment Measures of Unemployment – The Claimant Count Measures of Unemployment – The ILO LFS Quirks of Employment and Unemployment Rates & Immigration

1. Employment &
Unemployment
– How they are
measured
Lower 6th Macro
Macroeconomic Objectives

2. Intro to
Employment &
Unemployment
Employment and Unemployment
Mr O’Grady

3. Introduction to Employment and Unemployment
Employment (E): the part of the labour force that are engaged with a job
Stat: 33.07 million people were in employment in the UK in February 2020 – a record!
Unemployment (U/E): the part of the labour force that are out of work and
actively seeking employment at the current wage rate
Stat: An estimated 1.36 million people were unemployed in the UK in February 2020
The Labour Force (LF): the people who are working or are willing and able to work
in a country. It is everyone who would work if there were limitless jobs. They are
Economically Active
LF = E + U/E
The Population of Working age (PWA): the number of people in the UK aged
between 16 to 64
Economically inactive: those members of the PWA that are not either employed or actively
seeking employment at the current wage rate
Economically inactive = PWA - LF
E.g. students, stay at home parents, people enrolled on training schemes, early retirement,
etc.

4. 2020: 33.07 m
2020: 8.5 m
Total UK pop:
66.65m
Population of
working age
Pop of working
age: 42.93m
Aged
16-64
Labour Force
(Economically active)
UNEMPLOYED
ECONOMICALLY INACTIVE
2020: 1.36 m
EMPLOYED 34.43 m
Labour force breakdown

5. Why do we measure unemployment?
Unemployment represents a waste of scarce resources i.e. labour that is not being used to
produce G&S
So measuring unemployment with care is vital as it informs about spare capacity and helps us
determine whether an economy can cope with excess demand
Under-employment: those workers who are highly skilled but working in low
paying jobs and part-time workers who would prefer to be full time.
They are not as productive as they could potentially be.
Employment and Unemployment rates
Employment rate: the proportion of the Population of working age that is
currently employed ( E ÷ PWA )
Stat: UK employment rate = 77%
Unemployment rate: the proportion of the labour force that is not currently
employed ( U/E ÷ LF )
Stat: UK unemployment rate = 4.0%
Participation rate: the proportion of a Population of working age that is in the
labour force i.e. economically active ( LF ÷ PWA )
Stat: UK participation rate = 80%

6. Measures of
Unemployment –
The Claimant Count
Employment and Unemployment
Mr O’Grady

7. The Claimant Count
Definition: simply records the number of people receiving Jobseeker’s Allowance
(i.e. unemployment benefits)
Workings:
Those claiming JSA must declare that they are out of work, but capable of, available for and
actively seeking work
Only available to those aged between 16 and state pension age
By counting the people on JSA, the government know how many people are unemployed
Stat: 1.20 million people claimed JSA in the UK in Feb 2020
Advantages of the Claimant Count
Includes everyone claiming JSA
Not a survey hence avoids sampling errors
Gives detailed local breakdowns highlighting differences in regional unemployment
Compiled every month
Figures are always up to date
Cheap to produce
All data comes from existing records held by job centres and The Department of Work and Pensions

8. Disadvantages of the Claimant Count
Benefits cheats might still claim JSA
They might claim to be unemployed even if they are employed already in the ‘informal economy’ or if they
are not genuinely seeking work
Some unemployed may be unable to claim
Individuals may be seeking work but unable to claim JSA if their spouse has a high income
Some people might not want to claim JSA
Those with great wealth or very high income may not bother to claim
Social stigma in claiming benefits
Changes to conditions of claiming JSA and definition of CC unemployment have tended to
push the figures downward. 40+ changes since 1979 e.g.
Change from those registered at job centres to those actually claiming JSA
16-18 year olds register for a government training scheme instead of claiming benefits
Those seeking part-time employment can no longer claim JSA
Those seeking full-time employment but who have a part-time job can’t claim JSA, they are classified as
underemployed now
Those in their 50s and 60s who are claiming a pension from previous work are excluded, even if they are
still seeking employment.

9. Measures of
Unemployment –
The ILO LFS
Employment and Unemployment
Mr O’Grady

10. The Labour Force Survey
Definition: The labour force survey (LFS) is undertaken by the International Labour
Organisation (ILO) and is a more direct assessment of unemployment, rather than
those who claim benefit.
Workings: The measure is based on an extrapolation of a quarterly survey of
85,000 individuals. They state whether they are unemployed based on meeting the
following criteria:
Have been out of work for 4 weeks.
Be able to start work in the next 2 weeks, (i.e. readily available for work).
Be able and willing to take on work for at least one hour per week.
So part-time unemployment is included in the measure - though these workers are unlikely to claim
unemployment benefit. This tends to make ILO unemployment higher than the Claimant Count.
Stat: LFS estimated 1.34 million people were unemployed in the UK in Feb 2020

11. Advantages of the ILO LFS
Uses an independently set definition
Prevents government from interfering and artificially manipulating decreases in unemployment figures
Uses the ILO definition
Adopted by many countries
Allows easy comparison between countries and aids clear policy making/comparative analysis
More inclusive measure as no requirement to be claiming benefits
Includes unemployed who may not receive JSA
This could be as they may not want to claim due to social stigma, their household income may be too high,
they may already have a private pension preventing a claim, they might not have made sufficient NI
contributions historically to be eligible.
Disadvantages of the ILO LFS
Additional cost to the ONS
They need to run a survey of 85,000 individuals
Only a sample
There may be sampling errors
It may not be representative

12. Quirks of Employment
and Unemployment
Rates & Immigration
Employment and Unemployment
Mr O’Grady

13. Quirks of Employment and Unemployment
Key Question: Can there be a Simultaneous Increase in both the Employment and
the Unemployment Rate?
Yes! As the unemployment rate is U/E ÷ LF and the employment rate is E ÷ PWA then it is
possible for both rates to rise
This can occur if there is immigration and both the unemployment rate and employment rate
amongst the new members of the population is higher than in the existing population.
Analysis: Consider the following economy:
Population of working age = 100 people
No. of employed = 40, no. of unemployed = 10, no. of economically inactive = 50
U/E rate = 20% (10 ÷ 50), E rate = 40% (40 ÷ 100)
Immigration/Other population changes: Present an exogenous shock to the LF
40 people of working age immigrate into the economy
23 immigrants become employed, whilst 17 become unemployed. None are economically
inactive
New no. of employed = 63, new no. of unemployed = 27, new no. of economically inactive =
50
New U/E rate = 30% (27 ÷ 90), new E rate = 45% (63 ÷ 140)
Economically Inactive (50
people)
Employed (40 people)
Unemployed (10 people)
Economically Inactive (50
people)
Employed (60 people)
Unemployed (30 people)

14. The Significance of Immigration
Net migration: the difference between the number of people immigrating (coming in) to and
emigrating (going out) from of a country.
Stat: Net migration to the UK was estimated to be 258,000 in 2018. This is down from a peak of
336,000 in the year ending June 2016, just before the EU referendum
There is significant debate as to whether these migrant workers add more to our employment rate or to our
unemployment rate (although hypothetically it could be both), as well as the more general economic impact.
Advantages of immigration to the Labour force often missed:
Migrant workers tend to be more flexible than British citizens (e.g. Polish doctor accepting a job
in a pharmacy).
They find jobs quickly and are unlikely to add to unemployment figures themselves.
They often take jobs which other British citizens didn’t want anyway – so migrants are not really forcing UK
workers into unemployment.
Migrant workers themselves are consumers who demand G&S which, in turn, increases the
derived demand for labour in other industries.
Consequently, migrant workers tend to increase the employment figures more than they increase the
unemployment figures.

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