In Defence of Liberty

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Statistics and Lampposts II: Unemployment and Definitions

A major problem when discussing statistics is terms and phrases are endowed with meanings that do not conform to their common usage. This is particularly true for economic statistics.

The Office for National Statistics (ONS), the UK’s official statistics bureau, defines the headline employment rate as the number of people employed between the ages of 16 and 64 divided by the total population in that age range. However, the unemployment rate is defined as the number of unemployed people (aged 16 or over) expressed as a percentage of the economically active population (aged 16 or over). To be considered economically active, a person has to be in work or looking for work. Being ‘unemployed’ is not merely failing to have a job: a parent, at home looking after their children, is not called ‘unemployed’. For completion, the inactivity rate is defined as the number of economically inactive aged between 16 and 64 divided the population in that age range. This age cut-off is due to the state pension age being 65.

Source: ONS.

Here is a link to the Datawrapper visualisation. (Source: ONS)

Due to the differences in the two denominators, the employment rate and unemployment rate can rise, or fall, simultaneously. There are two ways that a person can cease to be unemployed: either they get a job or stop looking. This is contrary to common understanding.

For example, between July-September and October-December 2011, the UK employment rate rose slightly from 70.2% to 70.3%. Over the same period, the unemployment rate crept from 8.3% to 8.4%. This is explained by the slide in the inactivity rate, by 0.2 percentage points. In absolute terms, employment rose by 60,000; unemployment increased by 48,000; and inactivity (between the ages of 16 and 64) declined by 78,000. It’s also possible for employment and unemployment to fall concurrently, due to greater inactivity – as happened in the United States between 2008 and 2010.

Misrepresentation

Economics reporting often suffers from journalists misreading and misrepresenting the data. The Huffington Post UK huffed that:

The employment increase has seen a surge in people working part-time, with the total soaring to 1.45 million – the highest since records began in 1992. The ONS said this figure has doubled over the past five years.

This is plainly incorrect. The ONS published their Labour Market Statistics for September 2013, which shows that 8.049 million people work part-time. This is not a peak: there were 8.123 million part-time employees in May-July 2012. What has soared, and doubled in the past five years, to 1.45 million is the number of part-time workers who ‘could not find a full-time job’. This is stated with the utmost clarity in the ONS’s summary:

Between May to July 2008 and May to July 2013, the number of employees and self-employed people who were working part-time because they could not find a full-time job more than doubled from 689,000 to 1.45 million.

These two concepts are clearly distinct, but have been conflated in the article. Though it may not be particularly fulgid or glamorous, checking the definitions is vital to discussing statistics.

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One comment on “Statistics and Lampposts II: Unemployment and Definitions

  1. Dulcie
    September 20, 2013

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This entry was posted on September 16, 2013 by in Statistics and tagged .
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