Readers Question: To what extent do the official UK figures for unemployment accurately reflect economic reality ? (30)
The government publish two statistics – the claimant count and Labour Force Survey. However, there are reasons to suggest that unemployment is often higher than official statistics suggest. This is particularly the case for the Claimant count survey, which only counts those eligible for benefits.
According to government statistics unemployment in the UK, is under 1 million. (sept 2007)
The claimant count for Jobseeker’s Allowance was 835,800 in September 2007
This represents less than 3% of the workforce. This is pretty close to full employment; most economist argue that in a modern economy there will always be some frictional unemployment of perhaps 2-3%. This figure of 3% is calculated using the number of people eligible for Job Seekers Allowance JSA.
However, despite the attractive figures, there are many reasons to suggest that this is an under estimate of unemployment
The JSA excludes many groups of people from claiming unemployment benefit, even though they are actively seeking work. Examples include:
- A husband or wife whose partner is working and earning above a certain amount. i.e. JSA is means tested depending on a partner’s income. After 6 months it is also means tested depending on savings
- People under 18 are not eligible – in theory they should be on training schemes
- People over 55 are often excluded
Therefore, these factors suggest that some people who are actively seeking work are not counted as unemployed. This is because of the government’s methods in calculating unemployment.
This is supported by the ILO Labour Force Survey. This survey is a monthly questionnaire of 60,000. It asks them whether they have been actively seeking work and would be able to take work if offered. The ILO method gives a significantly higher figure ( currently 1.66 million August 2007) It is worth noting that the ILO questions stick close to the common economic definition of unemployment (actively seeking work) Therefore, this would be a better approximation of unemployment levels in the UK. This is despite the potential for sampling errors in a survey of 60,000 people; also people may not tell the truth.
The definition of unemployment becomes blurred in some areas. For example, in recent years there has been a marked increase in the number of people receiving sickness or disability benefits. These people used to be employed, but, for various reasons are no longer able to work. Rather than be classed as unemployed they have effectively left the labour force. In one sense they are not unemployed because they are not seeking work. However, on the other hand this economic inactivity is a type of unemployment. Under different circumstances they could be working. Often sickness benefits disguise the extent of unemployment in certain areas. For example, many former miners were given sickness benefits, rather than be classed as unemployed when the mines closed down.
This types of unemployment is often known as hidden unemployment
Part Time Temporary Unemployment
Another disguised form of unemployment is the existence of part-time rather than full time work. A person may want to work 40 hours a week. However, he might only be able to find part time work. Therefore, he is not classed as unemployed, but at the same time, he doesn’t have a full time job – we could say he is underemployed.
Possible Over Estimation of Unemployment
It is also possible that some people counted as unemployed are actually working. It is possible that people receive benefits but still work for ‘cash in hand’ However, the criteria are quite strict. Also, it the Labour Force survey doesn’t rely on numbers receiving benefits.
See also: disguised unemployment
See also: Changing natural rate of unemployment