Employment GapFill

Employment and unemployment are key measures of economic performance. It is important that you are familiar with different types of unemployment, how employment levels are calculated, the causes of high and low employment and the effects of high and low employment.

There are two primary methods of measuring unemployment in the UK. The first is the  Labour Force SurveyHuman Development IndexNational InsuranceClaimant Count undertaken by the International Labour Organization, which takes a sample of roughly 85,000 people over a three-month period, and classifies unemployment as those who have been looking for work in the past month, and/or are available to start work within two weeks. Those who are not employed or do not fit this description are regarded as  underemployedeconomically inactiveimmobile labourflexible labour. The second measure is the  Claimant CountLabour Force SurveyNational InsuranceHuman Development Index, which is conducted by the UK government. This measures unemployment as those who are claiming benefit payments and can prove they have been seeking work. The first measure is regarded as the official statistic.

It should be noted that the first measure has a very broad definition of unemployment, including those who may only be seeking very limited part-time work, and so it tends to overestimate unemployment. Conversely, the second measure has a very narrow definition of unemployment, counting only those claiming benefits, and so it tends to underestimate unemployment. Increasingly, attention is being given to those for whom employment is insecure, unreliable or not sufficient to cover their living costs. This is known as being   economically inactivehigh-skilled labourorganised labourunderemployed and is not captured by unemployment statistics. This phenomenon is regarded to have become more prevalent in the UK in recent years as a result of supply-side policies which have generated more  flexible labourunderemployedorganised labourhigh-skilled labour positions.

Reducing unemployment is regarded as an important policy goal for multiple reasons. Firstly, it improves  government financesinflationeconomic growthexports by increasing the tax take and lowering public spending. Secondly, it maximises output, which is beneficial for  economic growthexportsinflationgovernment finances and makes the country more competitive. Finally, it decreases  inflationeconomic growththe balance of paymentsexternalities such as poverty, health issues and crime.