Revision Guru

Counting the unemployed

Wednesday, 14 March, 2001, 09:10 GMT

The news that unemployment is moving below one million for the first time since the 1970s should be an occasion for celebration. And there is no doubt that unemployment is coming down as Britain's long economic boom continues. But the milestone of one million is not all that it seems - because it is based on a restrictive definition of unemployment. The claimant count measures the number of people who are out of work and claiming benefit, now called jobseekers allowance.

The Unemployed

Claiming benefit: 1m

On training schemes: 133,000

Involuntary part-time: 666,000

Involuntary temporary: 475,000

Looking for work: 1.5m

Want work but not actively seeking it: 2m

In the 1980s, the Labour Party in opposition attacked these very figures, claiming that the Conservatives had changed the definition of joblessness many times in order to massage the unemployment rate. When Labour came to power, it said it would put more emphasis on the broader international definition of unemployment developed by the International Labour Organisation (ILO). That figure - based on a sample survey of the workforce (the Labour Force Survey) - tries to measure everyone who says they are looking for work, not just those who are eligible for unemployment benefits. And it has generally shown unemployment to be about 50% higher than that based on the claimant count alone - around 1.5m.

Fiddling the figures?

For years, activitists complained about the revisions to the jobless total - 30 major changes in all, most of which reduced the unemployment total. Certain groups who had never worked, such as housewives whose husbands were in work, and people leaving school, are not eligible for benefit and would not be included in the claimant count. And thousands of other people were not counted as unemployed because they were in government-sponsored training schemes. In the most recent period, the unemployment total did not include the 133,000 people who were on training and employment schemes through the New Deal. However, this number has also been falling, from about 167,000 one year ago, and that fall has been faster than the fall in the claimant count alone. But what is not known is how many have been discouraged from applying for unemployment benefit because of the tougher conditions imposed on them through the New Deal, which is now being extended to lone parents and older workers.

In addition, analysts point out that many people who work part-time would prefer full-time jobs. According to the Labour Force Survey, 666,000 part-time workers (the equivalent of 376,000 full time workers) would have liked full-time work, equal to 9.7% of all part-timers. However, that is also on a downward trend since 1997, when 13% of all part-timers wanted a full-time job. And the number of temporary workers who wanted full-time jobs was 475,000.

Other measures of unemployment

Although the Labour Force Survey may be more comprehensive that the claimant count, it suffers from two weaknesses. First, as a sample survey, it is based on a three-month average and is at least one month behind the claimant count. And it has a statistical sampling error of around 50,000 people. Secondly, the Labour Force Survey does not go back far enough to allow a full historical comparison, although government's statistics office is trying to create one retrospectively. So it is not so useful in looking back to the 1975, when claimant unemployment was last below 3%. The Labour Force survey does make it possible to draw a broader picture of the workforce.

Record employment

The broadest measure is the labour force participation rate, which measures the percentage of the population between 16 and retirement age who are working or actively seeking employment. That has gone up to 74.6% of the population, with just under 30m people, including more than 3m self-employed, in the workforce. More people than ever are in work, as more and more women have gone back to part-time work, compared to 25 years ago. But what of the other 25%, who are classified as "economically inactive." Of the 7.73m people in that category, some 2.06m told the government survey that they wanted a job, although they were not actively looking for one. Many of this group are not actively seeking work because they are students, long-term sick, or looking after a family at home. That number who say they do not want a job - 5.46m - has also risen by 169,000 in the last six months. This is a diverse group - but there is no doubt it also contains some of the "hidden unemployed" - especially men who have retired early, in their 50s, under disability provisions. The Labour Force participation rate for men over 50 has been falling steadily for many years. At the other end of the labour market, the rising numbers of young people who go on to further and higher education has also reduced the Labour Force participation rate of the 16-24 year-old age group. That is probably a good thing - and shows that falls in the participation rate have to be carefully interpreted.