Author: Geoff Riley Last updated: Sunday 23 September, 2012
Who is unemployed?
The unemployed are people able, available and willing to work at the going wage rate but cannot find a job despite an active search for work
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 consequences for an economy causing both economic and social costs
Problems caused by unemployment occur across a country but are often very 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.
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. Because it is a survey - albeit a large one and one that provides a rich source of data on the employment status of thousands of households across the UK - there will always be a sampling error in the data.
The Labour Force Survey uses the internationally agreed definition of unemployment and therefore best allows cross-country comparisons of unemployment levels among developed countries.
Are we measuring unemployment accurately?
1 / Discouraged workers
No measure of unemployment is ever 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 / economically inactive – 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.
There are big differences in unemployment rates across the UK – why do you think some regions suffer from persistently higher jobless problems?
Types and Causes of Unemployment
Frictional unemployment is transitional unemployment as people move between jobs: For example, newly-redundant workers or people joining the labour market for the first time such as university graduates may take time searching to find work they want at wage rates they are prepared to accept.
Imperfect information in the labour market may make frictional unemployment worse if the jobless are unaware of the available jobs.
Incentives problems can also cause frictional unemployment as some people may stay out of work if they believe the tax and benefit system leaves them little or no better off from taking a job
When there are disincentives for people to accept work, this is known as the unemployment trap.
Frictional unemployment happens when it takes time for a country’s labour market to match the available jobs with people seeking work. The chart below shows the monthly level of unfilled vacancies in the UK. For most of the current decade there have been between…