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UK Economy - Are there 3 million hidden unemployed?

Geoff Riley

31st January 2023

Research by the think-tank Centre for Cities suggests that official unemployment figures understate the number of people who are unemployed and a distinct North-South divide in the data.

They estimate that an extra 3 million working age adults might be involuntarily economically inactive as a function of ill health.

This report is covered here in the Guardian

The Centre for Cities is a UK-based independent think tank that focuses on urban policy. It aims to improve the economic performance and competitiveness of UK cities by providing evidence-based research and analysis on key urban issues, such as productivity, skills, housing, and transport.

Hidden unemployment refers to individuals who are willing and able to work but are not officially counted as unemployed because they are not actively seeking employment or are not considered to be part of the labour force.

  1. Discouraged Workers: Discouraged workers are individuals who have given up looking for work because they believe there are no job opportunities available to them.
  2. Underemployed Workers: Underemployed workers are individuals who are employed but not in jobs that match their skills or provide them with full-time work hours.
  3. Informal Workers: Informal workers are individuals who work in the informal sector, such as street vendors or domestic workers, who are not counted as part of the formal labour force.

Hidden unemployment can result in a significant undercount of the true level of unemployment in the economy and can mask the true extent of labour market slack. It is an important concept to consider when evaluating the health of the labour market and the effectiveness of policies aimed at reducing unemployment.

What is labour market slack?

Labour market slack refers to the underutilization of labour resources in an economy. It is the difference between the number of people who are willing and able to work, and the number of people who are actually employed.

Labour market slack can be measured in a number of ways, including the unemployment rate, the number of people who are underemployed, and the number of people who have given up looking for work.

Labour market slack is an important concept in economics as it provides insight into the level of spare capacity in the labor market and can indicate the level of economic growth potential. A high level of labour market slack may indicate that there is significant unused labour resources that could be utilized to boost economic growth. Conversely, a low level of labour market slack may indicate that the labor market is close to full capacity and that additional employment may be difficult to achieve without inflationary pressures.

Geoff Riley

Geoff Riley FRSA has been teaching Economics for over thirty years. He has over twenty years experience as Head of Economics at leading schools. He writes extensively and is a contributor and presenter on CPD conferences in the UK and overseas.

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