the unemployment rate isn't what many people think it is - can you answer this question

[chomalungma]

Imagine there are 5 people

They were given a hypothetical population of five people consisting of a 13-year-old pupil, a 33-year-old with no job but looking for work, a 45-year-old full time worker, a 52-year-old full time worker, and an 89-year-old pensioner

Unemployment is defined as economically active but not in work

What is the unemployment rate in this population?

Apparently it's 20% - the 13 yr old and the pensioner are not unemployed.

So when they say the unemployment rate - I guess that includes children and pensioners as well? So what does that mean the unemployment rate is for people who want work and are actively looking for it?

www.dailymail.co.uk/news/article-8985433/Majority-Britons-lack-basic-understanding-economics.html

No the unemployment rate doesn't include children and pensioners. Why would it? It is 20% because only the 33 year old is actively looking for work and can claim job seekers allowance.

Seems the Daily Mail journalist is illiterate and can't read - they got it wrong.

The actual report

escoe-website.s3.amazonaws.com/wp-content/uploads/2020/11/24191147/ESCoE-OP03-Public-Understanding-of-Economics-and-Economic-Statistics.pdf

. The correct answer would be 33% since the unemployment rate is calculated as the proportion of unemployed people in the ‘economically active population’. As such, in this case, it is only the 33-year old, 45-year-old and the 52-year old who constitute the labour force, and only 1 out of those 3 are unemployed, meaning that the unemployment rate is 33%.
However, as Figure 21 shows, despite the fact that all respondents used in this analysis correctly identified who was unemployed, only 17% answered this question correctly. Meanwhile, 60% of
respondents answered that the unemployment rate would be 20%, and therefore seem to have calculated the unemployment rate as a proportion of the whole population, including the young pupil and old pensioner. This suggests that people’s perception of the
unemployment rate is closer to how the employment rate is calculated, in the sense that it is calculated as a proportion of the whole population rather than the economically active
population. Of course, even the employment rate is only calculated with reference to theworking-age population for those aged 16-64.

It is 20% because only the 33 year old is actively looking for work and can claim job seekers allowance

So if you are excluding the child and the pensioner, then it's 33% because there is 1 / 3 people.

The DM report is wrong.

You only include 'economically active' people.

I would have thought it was 33% but this is a confusing thread...

I'm glad I waited before posting.
I assumed 33% and was confused by the original OP and the article.
If you are excluding 2 people they are excluded from the denominator as well, not just the numerator!

For future reference OP, if you read something in the Daily Mail and think “That looks wrong!” then the correct course of action is to double check with a reputable source before assuming that they’ve got it right.

FT article on this is better than the Daily Mail effort:
amp.ft.com/content/93821297-96ea-4286-8f01-ccb6fa09161f?shareType=nongift&__twitter_impression=true

It doesn't make sense to stop the age at 64 when people are working age up until pension age which at the moment is 66

Great thread OP, people need to know this stuff. And I include myself in that! 😳

@Oldsu

It doesn't make sense to stop the age at 64 when people are working age up until pension age which at the moment is 66

The actual report is interesting.

I have to admit I was a bit surprised to read the bit about unemployment - as it seemed to imply that out of those 5 people, only 1 would be classed as unemployed and the rest were classed as 'doing something else including working'. The ONS report is clearer.

It still means that there are a lot of questions about how unemployed is defined and who should be included.

My More or Less 'training' means I try to work out what the definitions mean and who is included.

Do I was wrong then haha

I wouldn't be included in the "unemployed" category because I have just enough (early) pension to prevent me (as a single adult) claiming any benefits at all. Since I can't claim JSA, I don't class as a job seeker. Neither does my cousin, whose partner earns enough so she can't claim JSA. So neither of us appear on the "unemployed" statistics, even though we are both looking for work.

I did know that as I teach Economics. Always comes as a surprise to students though when I tell them they're economically inactive. You can really offend a busy person by calling them economically inactive!

So neither of us appear on the "unemployed" statistics, even though we are both looking for work

I wonder how many people are looking for work at the moment?

And then it gets more complicated with people who have zero hours / PT work looking for full time work, people who are self employed but want an employer etc.

Lies, damn lies and statistics

The whole report itself is worthy of a thread.

Always comes as a surprise to students though when I tell them they're economically inactive

So if a student is working, what statistics do they come up in?

And if a student wants to work but can't get a job, are they unemployed?

They're adding to GDP but their status is full time student. If they can't find work, they're not unemployed, just without work. I guess it is assumed they are not paying their own bills.

I don't think there are statistics for students in work. If there were, that would lift a lid on the can of worms that is the student finance system! But there is a concept of "hidden unemployment" which covers some of these scenarios.

And you care this much because?

I used to do a job which involved calculating the official unemployment rate.
Anyone who does 1 hour of paid employment in the reference week is considered to be employed and therefore is not included in the unemployment figures.
A stay at home parent, a disabled person ,students, retired people, anyone who is not activily seeking work are not considered to be unemployed.
This data is collected mainly by surveying people.

@Allergictoironing

I wouldn't be included in the "unemployed" category because I have just enough (early) pension to prevent me (as a single adult) claiming any benefits at all. Since I can't claim JSA, I don't class as a job seeker. Neither does my cousin, whose partner earns enough so she can't claim JSA. So neither of us appear on the "unemployed" statistics, even though we are both looking for work.

It always used to be the case, and I think it still is, that there were two measures of unemployment - 1) the official figures that counted the people who were claiming benefits related to unemployment and 2) the figures in the Labour Force Survey which counts those say they are unemployed and actively seeking work.

So you would be counted in the second but not the first.

@Unhomme

And you care this much because?

Why do I care? Because these different statistics are used as a barometer as to how the country and the economy is going.