Definition
Unemployment: the state of people of working age who are able and willing to work and are actively seeking a job but cannot find one.
Who Counts as Unemployed
- A person is counted as unemployed only if they are of working age.
- They must be able and willing to work.
- They must be actively seeking a job, for example by applying for vacancies or attending interviews.
- They must be without work despite meeting these conditions.
Key Idea
- All of these conditions must hold together for a person to be counted.
- Failing any one condition places a person outside the unemployment count.
The Labour Force
- The labour force equals the employed + the unemployed.
- Only members of the labour force can be counted as unemployed.
- People of working age who are neither working nor seeking work sit outside the labour force.
Unemployment Versus Inactivity
- The economically inactive are of working age but neither working nor seeking work.
- This group includes students, carers, the retired and discouraged workers.
- A person who stops actively seeking work moves from unemployment into inactivity.
Example
- A qualified worker sending out job applications each week is counted as unemployed.
- After giving up the search, that same worker becomes economically inactive.
- The measured unemployment total then falls even though no new job was created.
Unemployment Versus Underemployment
- Underemployment is being in work but wanting more hours or work that matches one's skills.
- The underemployed are recorded as employed, not as unemployed.
- So official unemployment can understate the amount of spare capacity in the labour market.
Example
- A part-time worker who wants full-time hours is underemployed, not unemployed.
- A trained engineer driving a delivery van is also underemployed rather than unemployed.
Reading the Unemployment Rate
- A change in the unemployment rate signals the state of the labour market.
- It should be read together with the employment rate and the inactivity rate.
- A falling unemployment rate can reflect people leaving the labour force rather than finding jobs.
Exam technique
- Define unemployment precisely: of working age, able and willing, and actively seeking work.
- When the rate falls, check whether people found work or simply left the labour force.
Common Mistake
- Do not assume a falling unemployment rate always means a healthier labour market.
- It can reflect rising inactivity rather than more people in work.
Self review
- Define unemployment.
- What is the labour force?
- How does underemployment differ from unemployment?
- Why can a falling unemployment rate mislead?
