Measuring unemployment

Unemployment can be measured in various ways.

Those claiming benefit

One way to measure unemployment is to record those who claim to be unemployed, and seek government welfare benefits, which in the UK includes Job Seeker's Allowance (JSA) and Universal Credit. In the UK, this measure is called the 'claimant count', and most countries track the number of individuals claiming some form of welfare support as a result of being unemployed. However, the majority of countries have switched over to using a more standardised calculation for unemployment.

Those officially measured as unemployed

Most advanced economies use a standardised and internationally recognised measure of unemployment, which is based on a survey (the 'Labour Force Survey', and which takes its definition of unemployment from the Geneva based International Labour Organisation - ILO). Members of the EU are all required to use this standard definition, and most countries either adopt the definition, or modify it in minor ways.

For the Labour Force Survey, the unemployed are defined as:

Those individuals who do not have a job but have been actively looking for one in the four weeks previous to the measurement date, and who are available to work within two weeks of the measurement date.

The rate of unemployment, expressed as a percentage, is:

The proportion of the ‘economically active’ population who are jobless - that is, those who are in work, available for work and actively seeking work. The unemployment rate is NOT the proportion of the whole population, or the population of ‘working age’, who are unemployed.

The survey sample

The Labour Force Survey takes a sample from the whole population, (in the UK, some 40,000 households are included in the sample) who are then surveyed every three months -  20% of the sample is replaced each quarter [1].


Advantages and disadvantages of using the claimant count

Advantages

  1. The data is recorded automatically through the benefits system when individuals make their claim.

  2. Claimant data is relatively easy to access.

  3. The concept is easily understood.

  4. While not 'perfect' it can provide an indication of changing levels of unemployment.

Disadvantages

  1. It may not be a very reliable indicator of unemployment as a result of frequent policy changes in terms of who is eligible for benefits. For example, the introduction of Universal Credit in the UK in 2013 changed the basis upon which claims could be made.

  2. As noted, not all individuals who are looking for work can obtain welfare benefits, and hence are not included as a claimant.

  3. It is not useful for international comparisons as different countries have different claimant requirements.

  4. Individuals may claim, and indicate that they are available for work, but actually work in the 'hidden' economy for cash.

  5. Some unemployed may not bother to register and claim benefit.



Advantages and disadvantages of using the Labour Force Survey

Advantages

  1. Although it is a survey, it is generally regarded as more accurate than the Claimant Count.

  2. International comparisons are more valid as the definition is standardised.

Disadvantages

  1. Like all surveys, the sample chosen might not be fully representative of the population.

  2. Monthly estimates are not as accurate as the full, quarterly result, which means they must be revised when the quarterly figures are known.

  3. Additional administrative resources are required - over and above those related to measuring and administering welfare claims.


Both the Claimant Count and the Labour Force survey provide key information on the amount of slack in the labour market.

Measuring employment

Employment is defined as the number of individuals who are 16 years old and over who are in paid work, together with those who, on a temporary basis, are ‘away’ from their normal work.

The rate of employment is the proportion of these aged between 16 and 64 who are in employment.

In the UK, the employment rate is around 75% of the 16 to 64 year olds. Men have a slightly higher employment rate than women, at 78% and 72% respectively (as of February 2021).

Measuring economic inactivity

Economic inactivity refers to those who are jobless but have not been looking for work, or have been available for work. In short, the economically inactive are those between 16 and 64 who are not currently in the labour market. Examples of those who are inactive include students, carers, the retired, disabled and the long-term sick.



Unemployment

What causes unemployment?

Unemployment
Costs of unemployment

What are the costs of unemployment?

Unemployment costs
Supply-side policy

Can supply-side policy reduce unemployment?

Supply-side policy

[1] https://www.hse.gov.uk/statistics/