The employment-population (EPOP) ratio reflects demographic changes and trends in employment and activity rates, which provides more context for the recent impacts of the coronavirus (COVID-19) pandemic on the UK labour market.
In the period after the global financial crisis and before the coronavirus pandemic, the EPOP ratio increased to historic highs, driven by higher levels of employment and labour market participation amongst people aged 50 years and over.
The post-pandemic fall in the activity rate of workers aged 50 to 64 years has reduced the EPOP ratio in recent years, although the EPOP ratio and the activity rate of older workers remain relatively high by historical standards.
Recent developments in the EPOP ratio
The EPOP ratio is the proportion of the adult population (POP), people aged 16 years and over, who are in employment (E) at any given time (t). It is an indicator of how well the economy is doing in creating jobs, relative to the total number of adults.
Figure 1 shows how the EPOP ratio in the UK has changed over the last five decades. There is a clear cyclical pattern, with the EPOP ratio falling significantly during recessions as employment falls, but then returning to a longer-term ratio of around 0.6.
The period following the global financial crisis in 2008 and 2009 and leading up to the coronavirus pandemic in 2020 saw a particularly strong recovery in the EPOP ratio, driven by rapid growth in employment. This was despite several major headwinds that otherwise would be expected to lower the EPOP ratio, including:
a large rise in inactivity among younger people, associated with greater participation in education
population ageing resulting in a higher share of the adult population in age categories where labour market activity is lower
a period of historically low productivity growth where the sharp slowdown in productivity growth relative to the pre-global financial crisis trend, commonly described as the productivity puzzle (for more information, see our What is the productivity puzzle? article)
a fall in the public sector headcount of over 1 million between 2009 and 2018
an acceleration in the adult population growth rate, meaning employment also had to grow at a faster rate to maintain the existing EPOP ratio
Figure 2 compares the respective annual rates of change in employment and the adult population across the cyclical peaks in the UK economy. This shows that during the period between the global financial crisis and the onset of the coronavirus pandemic (between the cyclical peaks in Quarter 1 (Jan to Mar) 2008 and Quarter 4 (Oct to Dec) 2019), annual growth in both employment and the adult population accelerated, relative to previous cycles. The annual change in employment was particularly high, resulting in the EPOP ratio rising to its highest recorded level prior to the introduction of coronavirus-related restrictions in March 2020.
Employment fell during the pandemic, although the extent was limited by government-funded job support schemes. As coronavirus restrictions have been lifted, the level of employment has recovered. Despite unemployment falling to its lowest rate since the early 1970s, the EPOP ratio remains lower than the peak before the pandemic. This has been largely attributed to a fall in labour supply and increase in inactivity, as established in our Alternative measures of underutilization in the UK labour market article.
Figure 1 shows that the latest EPOP ratio, pertaining to the three-month period November 2022 to January 2023, is still relatively high compared to historic levels. Figure 2 shows that, even considering the fall in employment since the pandemic, average annual employment growth since Quarter 1 2008 has still been stronger than over the previous three economic cycles.
Using the EPOP ratio in labour market analysis
For most countries, the unemployment rate is the headline labour market statistic, but the EPOP ratio provides several advantages for labour market analysis because it encapsulates both changes in employment rates and activity rates. These advantages are explained in The employment-population ratio: its value in labor force analysis (PDF, 1.5MB). This is particularly relevant in providing context around the recent impacts of the pandemic on employment and inactivity in the UK. The EPOP ratio is better equipped to highlight long-term secular changes in employment patterns, including those caused by demographic changes.
For the purposes of looking at changes in the EPOP ratio over time, the employment rate (ER) is defined as the ratio of employment (E) to the active population (A), or simply one minus the official unemployment rate. Note that this definition differs from the headline employment rate formally used by the Office for National Statistics (ONS), which are based on the entire population. The active population consists of people aged 16 years and over who are either employed or unemployed.
The activity rate (AR), which is also commonly referred to as the participation rate, is the proportion of the adult population (POP) that is active (A).
Therefore, the EPOP ratio is the product of these employment and activity rates.
Figure 3 shows the employment rate for the active UK adult population. There have been strong cyclical movements in the employment rate over the last five decades, and currently the employment rate for the adult population is at its highest since the early 1970s.
Figure 4 shows the activity rate for the UK adult population, and it is clear this has fallen since the start of the coronavirus pandemic. This has been highlighted in our Sickness absence in the UK labour market: 2021 article, which reports increased rates of long-term sickness absences. Moreover, our Movements out of work for those aged over 50 years since the start of the coronavirus pandemic article showed a greater propensity for older workers to leave the labour market.
However, these recent changes have offset rising activity rates in the decade leading up to the pandemic, so the current activity rate is not markedly different from its past average. This is despite significant population ageing effects and higher participation in education. Therefore, our Worker movements and economic inactivity in the UK article shows that analysis examining the rise in inactivity during the pandemic should acknowledge the relatively high activity rates recorded immediately prior to the pandemic.
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Labour market overview
Dataset | Released 14 March 2023
Estimates of employment, unemployment, economic inactivity and other employment-related statistics for the UK.
Employment measures the number of people in paid work or who had a job that they were temporarily away from (for example, because they were on holiday or off sick).
Unemployment measures people without a job who have been actively seeking work within the last four weeks and are available to start work within the next two weeks.
People not in the labour force (also known as economically inactive) are not in employment but do not meet the internationally accepted definition of unemployment. This is either because they have not been seeking work within the last four weeks or they are unable to start work in the next two weeks.
People aged 16 years and over who are either in employment or unemployed. The labour force refers to all economically active individuals.Back to table of contents
For data sources and quality information, please see Sections 6 and 7 of our Labour market overview, UK: March 2023 bulletin.Back to table of contents
Office for National Statistics (ONS), released 28 March 2023, ONS website, article, The employment-population ratio and changes in the UK labour market: 2008 to 2023
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