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Short Video: Explaining employment, unemployment and economic inactivity

Released: 02 April 2011

Slide 1 – 00:00 (start) to 00:14
This is a podcast from the Office for National Statistics explaining employment, unemployment and inactivity. If you would like a transcript of this podcast email info@ons.gov.uk .

Slide 2 – 00:14 to 00:23
Coming up we will explain the three economic situations an individual can find themselves in, before then showing their relationship, and finally how the numbers are produced.

Slide 3 – 00:23 to 00:31
So looking at those people in the UK aged 16 and over, everyone will either be employed, unemployed or inactive.

Slide 4 – 00:31 to 00:51
ONS independently produces the estimates for each of the three economic situations using information from the Labour Force Survey. Someone is employed if they do more than one hour of paid work, with someone unemployed if they are not employed but looking and available to work. If the person is in neither of these categories then they are inactive.

Slide 5 – 00:51 to 01:25
So what is inactivity? Well this group includes people who are not seeking work for a particular reason and also those seeking work but not available to work, such as a student in the final year of study. Of the many reasons there are those who are studying, some looking after the family or home, there may be a health related reason for being inactive, for example, temporary or long term sick or disabled. There are also those known as discouraged workers in which people believe there are no jobs available. There are people who are retired and some that do not need or want a job.

Slide 6 – 01:25 to 02:00
There are relationships between those employed, unemployed or inactive. So firstly grouping those who are employed and unemployed we get the group of people known as the economically active population. In simple terms this group are all those people actively engaged in the labour market and can be thought of as the pool of people to which employers can look to recruit. If we remove this group and put together those unemployed and inactive we get a group where everyone is workless and this is what normally causes confusion as some people think of this collective group as unemployed. But there are some people who are not in work and not seeking work.

Slide 7 – 02:00 to 02:34
OK, so we have explained the three different economic situations, but how many people are there in each of them. Well there are around 40 million people aged 16 to 64 in the UK. When we bring up this pie chart, we can see how this population is divided up. Firstly we can see around 70 per cent of the population are employed, so that’s around 7 in every 10 people. Around 6 per cent are unemployed and around 24 per cent, or just under 1 in 4 people, are inactive. So looking at just those who are workless, the inactive group is around four times the size of the unemployed group.

Slide 8 – 02:34 to 02:49
So, what numbers do we produce? Well for each of the three categories we have a level, which is the number of people in that group, and also a rate, which puts that level into context with the population. There are different age restrictions when presenting each group, which we will now explain.

Slide 9 – 02:49 to 03:35
To show these age restrictions, let’s draw a time line, starting at the age of 16 right up to 99 (although there is no actual age cut off when producing the estimates), with a key age at 65. Looking at the employment level we include everyone aged 16 and over. That’s because anyone who is working, regardless of their age, is filling a job within the Labour Market. Now, putting up another timeline and looking at the employment rate, here we only look at the population aged 16 to 64, and look at the percentage of this population that are in work. We don’t calculate the measure including those aged 65 and over as most of these are retired and less likely to work, and so including them means the rate will reflect an ageing population over time.

Slide 10 – 03:35 to 04:18
Moving on to unemployment, and look at the level, we again look at everyone aged 16 and over who are looking for and available to work. This is because anyone seeking and available for work is trying to fill a job within the labour market. For the unemployment rate we again look at everyone aged 16 and over, but here the rate is the number unemployed as a percentage of the economically active population. Illustrated as a formula, the rate = the number unemployed divided by the sum of those employed and unemployed. If there are increases in the number of people who are inactive, the rate may increase, even if the number of people unemployed remains the same. This is because the number in the economically active population will decrease, and therefore you are dividing by a smaller number.

Slide 13 – 04:18 to 04:39
Next, looking at the inactivity level, we only count those aged 16 to 64 as again, most of those aged 65 and over are retired and so less likely to engage in the labour market. And finally for the inactivity rate, we again only look at those aged 16 to 64, and look at the percentage of this population that are inactive, for the same reason as the level.

Slide 15 – 04:39 to 05:07 (end)
So to summarise when looking at the levels in the three groups, we count everyone aged 16 and over for those employed and unemployed, but restrict the numbers to just those aged 16 to 64 for those inactive. For the rates of those employed and inactive, we show the levels aged 16 to 64 as a % of the 16 to 64 population. Finally for the unemployment rate, we look at the level unemployed as a percentage of the economically active population. For further information regarding this podcast please e-mail info@ons.gov.uk

 

Source: Office for National Statistics

Background notes

  1. A detailed Guide to Labour Market Statistics is available. There is also an article to help users interpret labour market statistics .

  2. Details of the policy governing the release of new data are available by visiting www.statisticsauthority.gov.uk/assessment/code-of-practice/index.html or from the Media Relations Office email: media.relations@ons.gsi.gov.uk

Content from the Office for National Statistics.
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