Unemployment - Measuring Unemployment | tutor2u Economics
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Unemployment - Measuring Unemployment

  • Levels: AS, A Level
  • Exam boards: AQA, Edexcel, OCR, IB

What is the official definition of unemployment?

The unemployed are those people able, available and willing to work at the going wage but cannot find a job despite an active search for work

Measuring unemployment - revision video
Unemployment Rate in UK Economy in Recent Years
  • Unemployment means that scarce human resources are not being used to produce goods and services to meet people’s needs and wants
  • Persistently high levels of joblessness have damaging scarring consequences for an economy causing economic and social costs
  • Problems caused by unemployment occur across a country but are often bad and deep-rooted in local and regional communities and within particular groups of society – for example in the UK, more than one in six young people are out of work. The figure is much higher in Greece and Spain. Many younger people may choose to leave their country in search of work.

How is unemployment measured?

The Claimant Count measure includes people who are eligible to claim the Job Seeker's Allowance (JSA). The data is seasonally adjusted to take into account predictable seasonal changes in the demand for labour.

The Labour Force Survey counts those who are without any kind of job including part time work but who have looked for work in the past month and are able to start work immediately. The figure includes those people who have found a job and are waiting to start in the next two weeks.

  • On average, the Labour Force Survey measure has exceeded the Claimant Count by about 500,000 in recent years – equivalent to 2.5% of the labour force.
  • Because the LFS measure is a survey - albeit a large one and one that provides a rich source of data on the employment status of thousands of households - there will always be a sampling error in the data.
  • The Labour Force Survey uses the internationally agreed definition of unemployment and therefore allows more accurate cross-country comparisons of unemployment levels among developed countries. These are summarised in the next table.
Regional unemployment rates in the UK

Are we measuring unemployment accurately?

1 / Discouraged workers

  • No measure of unemployment is completely accurate since there are some people out of work but looking for a job who are not picked up by the official statistics
  • Official unemployment data misses out the “hidden unemployed” - an example are discouraged workers who have been out of work for a long time and who have stopped applying for jobs

2 / The Economically Inactive – these are people who are not actively looking for work – some of the reasons include:

  • The need to look after elderly or infirmed relatives
  • Parents who are full-time carers for their children
  • People who have taken early retirement

3 / Under-employment: In many countries data may ignore the extent of under-employment, for example people who want full-time work but have to settle for a part-time job. In many lower-income countries the quality of the labour market data may be poor causing published figures to be inaccurate.

Under-Employment

Test your knowledge - Measuring Unemployment MCQ

MCQ measuring unemployment - revision video

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