Курсовая работа: Unemployment: reasons and main forms

1.2 How Is unemployment Measured?

The claimant Count. One simple way is to count the number of people who, on any given day, are claiming unemployment benefit payments from the government – the so-called claimant count. Since a government agency is paying out the benefits, it will be easy to gather data on the number of claimants. The government also has a good idea of the total labour force in employment, since it is receiving income tax payments from them. Adding to this the number of unemployment benefit claimants is a measure of the total labour force, and expressing the claimant count as a proportion of the labour force is a measure of the unemployment rate.

Since the government already has all the data necessary to compute the unemployment rate based on the claimant count, is it is relatively cheap and easy to do. Unfortunately, there are a number of important drawbacks with the claimant count method.

One obvious problem is that it is subject to changes in the rules the government applies for eligibility to unemployment benefit. Suppose the government gets tougher and changes the rules so that few people are now entitled to unemployment benefit. The claimant count will go down and so will the measured unemployment rate, even though there has been no change in the number of people with or without work! The opposite would happen if the government became more lenient and relaxed the rules so that more people became eligible.

As it happens, governments do often change the rules on unemployment benefit eligibility. In the UK, for example, there have been about 30 changes to the eligibility rules over the past 25 years, all but one of which have reduced the claimant count and so reduced the measured unemployment rate based on this measure. The following are examples of categories of people who are excluded from the UK claimant count: people over the age of 55 who are without a job; those on government training programmes (largely school-leavers who have not find a job); anyone looking for part-time work; and people who have left the workforce for a while and now wish to return to employment (for example women who have raised a family). Many – if not all – of the people in these categories would be people who do not have a job, are of working age and are able and available for work at current wage rates; yet they would be excluded from measured unemployment in the UK using the claimant count method.

Labour Force Surveys. The second, and probably more reliable method of measuring unemployment is through the use of surveys – in other words, going out and asking people questions – based on an accepted definition of unemployment. Questions then arise as to whom to speak to, how often (since surveys use up resources and are costly) and what definition of unemployment to use. Although the definition of unemployment that we developed earlier seems reasonable enough, the term ’available for work at current wage rates’ may be too loose for this purpose. In the UK and many other countries, the government carries out Labour Force Surveys based on the standardized definition of unemployment from the International Labour Office, or ILO. The ILO definition of an unemployed person is someone who is without a job and who is willing to start work within the next two weeks and either has been looking for work within the past four weeks or was waiting to start a job.

The Labour Force Survey is carried out quarterly in the UK and is based on a sample of about 60,000 households. Based on the answer to survey questions, the government places each adult (aged 16 and older) in each surveyed household into one of three categories:

· employed

· unemployed

· not in the labour force (or ’economically inactive’).

A person is considered employed if he or she spent some of the previous week working at a paid job. A person is unemployed if he or she fits the ILO definition of an unemployed person. A person who fits neither of the first two categories, such as a full-time student, homemaker or retiree, is not in the labour force (or, to use ILO terminology, economically inactive). Figure 1 shows this breakdown for the UK in the autumn of 2004.

Once the government has placed all the individuals covered by the survey in a category, it computes various statistics to summarize the state of the labour market. The labour force is defined as the sum of the employed and the unemployed:

Labour force = Number of employed + Number of unemployed

Then the unemployment rate can be measured as the percentage of the labour force that is unemployed:

Unemployment rate = (Number of unemployed/Labour force) х 100

The government computes unemployment rates for the entire adult population and for more narrowly defined groups – men, women, youths and so on.

The same survey results are used to produce data on labour force participation. The labour force participation rate measures the percentage of the total adult population of the country that is in the labour force:

Labour force participation rate = (Labour force/Adult population) х 100

This statistic tells us the fraction of the population that has chosen to participate in the labour market. The labour force participation rate, like the unemployment rate, is computed both for the entire adult population and for more specific groups.

To see how these data are computed, consider the UK figures for autumn 2004. According to the Labour Force Survey, 28.4 million people were employed and 1.4 million people were unemployed. The labour force was:

Labour force = 28.4 + 1.4 = 29.8 million

The unemployment rate was:

Unemployment rate = (1.4/29.8) х 100 = 4.7 per cent

Because the adult population (the number of people aged 16 and over) was 47.4 million, the labour force participation rate was:

Labour force participation rate = (29.8/47.4) х 100 = 62.9 per cent

Hence, in autumn 2004, nearly two-thirds of the UK adult population were participating in the labor market, and 4.7 per cent of those labour market participants were without work.

Figure 2 shows some statistics on UK unemployment for various groups within the population, broken down by ethnicity and sex, also collected by the ONS. A number of points are worth noting. First – and perhaps most striking – unemployment rates for people from non-white ethnic groups were higher than those for white people, for both men and women. Secondly, unemployment rates among ethnic groups vary widely. In 2001-02, among men, Bangladeshis had a highest unemployment rate in the UK at 20 per cent – four times that for white British men. The unemployment rate among Indian men was only slightly higher than that for white British men, 7 per cent compared with 5 per cent. Unemployment rates for all other non-white men were between two and three times higher than those for white British men.