I don't know what term I would consider appropriate. My biggest issue with the term though is that it defines people in terms of what they are not and not what they are.
This might not be important to everyone, and that's fine.
The fact is, there are lots of people who are not working and earning money, but the umbrella term economically inactive does two things.
It necessarily describes all those who are working as economically active, thus creating an authority voice and an 'other', and it also lumps everyone who doesn't work in together. 'Active' is always preferable to 'inactive' (or dormant)
This has the effect of categorising everyone who doesn't work in the same group. Therefore, the woman who has chosen to be a SAHM to bring up her children; the carer who has had to give up work to look after a disabled child/partner/parent; the person who simply chooses not to work; the reckless and the feckless all get categorised together.
The message: this country values those who 'work' and doesn't value those who don't.
This is a bit garbled, I know. I've got to go out in a minute. But that's just my opinion!
Actually, I like 'not in paid employment' that's different to being 'unemployed'. It recognises that you are gainfully employed/occupied but that you do not receive payment for it.