2.1.3 Employment & unemployment

The labour force

The labour force consists of all individuals actively working or seeking work. Typically, these individuals are between the ages of 16 and 65. It includes a diverse range of workers across various industries and sectors, contributing to the overall economic productivity.

Non-Labour force

Those not seeking work, such as stay-at-home parents, pensioners, and students, make up the non-labour force. These individuals may still contribute to the economy through other means, such as caregiving or consumption, even though they are not part of the labour market

Economically inactive

People between the ages of 16 and 65 who are not working or seeking work are considered economically inactive. This group includes students, those with disabilities, and individuals who may have chosen to leave the workforce temporarily or permanently.

International Labour Organisation (ILO) Survey

A quarterly survey sent to a sample of about 60,000 UK households. Respondents self-determine unemployment based on readiness to work within two weeks and active job search within the past month. The survey's global standardisation allows for international comparisons and a comprehensive overview of unemployment trends.

Claimant Count

Counts the number of people claiming job seekers allowance (JSA) in the UK. It requires claimants to regularly meet with a 'work coach' and has more stringent criteria than the ILO survey. This method may not capture all unemployed individuals, such as those who do not qualify for benefits or are discouraged from seeking them.

Underemployment

Underemployment occurs when individuals work fewer hours than desired or are employed in positions requiring lower skills than they possess. This situation can lead to frustration and decreased job satisfaction, potentially affecting workers' mental health and economic stability.

Employment rate

The percentage of the working-age population that is employed. Calculated as the number of employed individuals divided by the working-age population, multiplied by 100. A higher employment rate generally indicates a healthy economy and robust labour market.

Unemployment rate

The percentage of the labour force that is unemployed and actively seeking work. Calculated as the number of unemployed individuals divided by the total labour force, multiplied by 100. This rate can be influenced by economic cycles, government policies, and demographic shifts.

Labour Force Participation Rate

Measures the proportion of the total population that is part of the labour force. Calculated as the labour force divided by the total population, multiplied by 100. A higher participation rate suggests a more engaged and active workforce

Inactivity rate

The proportion of the working-age population that is economically inactive. Calculated as the number of economically inactive people divided by the working-age population, multiplied by 100. An increase in inactivity may signal economic challenges or changing social dynamics.

Structural Unemployment

Occurs when there is a mismatch between available jobs and workers' skills. Often happens when an economy undergoes significant changes, leading to a lack of demand for certain job types. Retraining and education programs can help mitigate structural unemployment by aligning workers' skills with available jobs.

Seasonal unemployment

Happens when certain seasons come to an end, and labour is not required until the next season. Examples include fruit pickers and ski instructors. This type of unemployment can be managed through policies such as unemployment benefits during off-seasons and diversification of job opportunities

Frictional unemployment

Short-term unemployment that occurs when workers are between jobs. Workers voluntarily leave previous jobs to search for new opportunities. It is a natural part of a dynamic labour market and can be reduced through improved job matching and information dissemination.

Real Wage Unemployment

Occurs when wages are inflexible and higher than the market equilibrium wage. This can result from minimum wage laws, leading to an excess supply of labour. Policies to address real wage unemployment may include wage flexibility or adjustments to minimum wage laws.

Net migration

The difference between inward migration and outward migration (emigration). It can influence a country's labour market and economic dynamics. Net migration can affect labour supply, demand, and wage levels, impacting employment and unemployment rates.

Impact of Immigration on Employment

Immigrants often fill vacancies in manual, dangerous, or low-skilled jobs that locals may not take. This can increase employment and contribute to economic growth. Immigrants also bring diverse skills and perspectives, enriching the workforce and fostering innovation.

Impact of Immigration on Unemployment

Immigrants may displace local workers, potentially increasing unemployment rates. Dependents of immigrants who can't find work may also register as unemployed. However, immigrants can also create new jobs and contribute to economic expansion.

Long-Term Unemployment Effects

Long-term unemployment can have damaging impacts on individuals, the economy, the government, and firms, including skill erosion and social issues. Persistent unemployment can lead to loss of confidence, lower self-esteem, and a decrease in future job prospects.

Hidden Unemployment

Occurs when individuals stop actively seeking work and become economically inactive. This can improve the unemployment rate, but does not reflect true employment challenges in the economy. Hidden unemployment can mask underlying issues such as discouraged workers or underutilised labour potential.