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Soundbite Statistics: the Unemployment Rate

by afew Sat Jun 2nd, 2007 at 04:06:14 AM EST

The unemployment rate again? Well, unless anyone has fresher news than I have, the unemployment rate (hereinafter UR) is still one of the handy key factoids - soundbite statistics - announced by economic pundits and the media as a means of instantly evaluating a country's economic performance. A recent example is furnished by Martin Wolf, who, in a Financial Times article on France the other week (see Rewriting European History, Again), came back to the UR :

France does indeed need domestic reform <...> The unemployment rate is now higher than in all other big western European countries.

We can, of course, without going far wrong, simply reject the notion that the UR can be compared from one country to another. But what is the UR? Is it a (1) dependable and (2) useful metric? What's behind it? No, I don't mean in terms of social exclusion and difficulty, of human suffering, though there'd be plenty to be said about that - but what is the overall labour market picture that is purportedly summed up in this statistic we hear about as often as we hear about GDP growth?

Promoted by whataboutbob

I've been taking a look at labour market data, trying to get a handle on reasonably solid and comparable statistics. Lining up several countries at once seemed like an overwhelming proposition, so I kept things down to France and the UK. The sharp contrast between the two is often cited. In fact, it's often from London (whether from pundits or politicians like the PM-to-be, for instance) that Paris gets lectures about the need for "reform". The two countries are similar in population size and demographic profile, making the comparison handier.

National statistics agencies (in this case INSEE and the NSO) carry out an annual Labour Force Survey (LFS). This is a household survey in which the statistics depend on answers to questions - not, in particular, on claimant counts of the officially unemployed kept by employment agencies. You can go to ILO Statistics for a portal to these (and those of other countries) but you'll only see what you'll see on the national websites. OECD collates national LFS data and standardises it into comparative tables. Eurostat features the EU Labour Force Survey, which is carried out by national statistics agencies according to EU standards, and processed by Eurostat. The so-called "key" numbers are similar whichever of these sources you look at. But, when you want to find and compare more detailed data, you find there are slight variations arising from dates and methodology, and above all that what is available - free to the public - differs considerably in organisation and presentation. So in the end I used EU LFS raw data, cross-checking with INSEE and NSO and drawing on their tables wherever appropriate. The year for which it was easiest to get full data plus analysis was 2004, work on 2005 not being quite completely available yet. The numbers are not out of date, because the situation hasn't substantially changed since.

Disclaimer: Though not a statistician, I'm interested in stats here, and how they are used/abused. Lest anyone should think I'm making light of real-life situations - of the problems of the unemployed in France, of the chronically sick in Britain, for example - I'm not. Neither am I expressing an opinion on any of the numerous issues that might be thrown up: debating the pros and cons of part-time work, for example, or prolonged studies for young people, is off topic. I'm not even trying to knock New Labour, or rather, I'll be trying not to. Every time I come near such an issue, I'll put up the warning SPATS : Simply Paying Attention To Statistics.

Rates and Measures

The Unemployment Rate is the percentage of the unemployed in the labour force, also called active population. The active population is made up of those who have a job (full or part-time, even extremely part-time), plus those who don't but are looking for one; in other words, all those who are considered as being on the labour market.

Labour Force Surveys apply ILO definitions both of :

unemployed : Persons aged 15 years and over who were without work during the reference week, had taken steps to find work during the last month and were available for work within two weeks;

and of

employed : Persons aged 15 years and over who state that they were active or worked for at least one hour during the reference week (the week preceding the survey).

NB: UK labour statistics run from 16+, but this is standardised in EU stats to 15+. Since over 95% of 15-year-olds are at school in both France and the UK (16 is the official school-leaving age in both countries), the inclusion of this cohort has no effect on the unemployment / employment figures. (I spent some time stripping 15-year-olds out of the French stats and saw this did not change the overall picture. In what follows, 15-year-olds are included.)

The UR is not the percentage of unemployed in the total working-age population, just in the part of it labelled "active". Another measure, (call it the "Employment Rate"), is that of those who have a job as a percentage of the total working-age population. Another, called "labour force participation rate" (Participation Rate) is the percentage of the active population (employed + unemployed) in the total working-age population.

If you take out the active population, there's a leftover. I say "leftover" because this group is defined by exclusion: it's made up of those who fit neither the definition of an employed person, nor that of a jobseeker. "Inactive" is a default position. It can cover a variety of circumstances, some of which certainly include work, like looking after a home and children or being a full-time student, or may preclude work because of short or long-term sickness or disablement. An Inactivity Rate can be calculated as the percentage of inactive persons in the total working-age population.

So the working-age population is considered as being divided between the economically inactive and the economically active. The latter are divided between employed and unemployed.

As mentioned above, the working-age population begins, in the stats here, at 15. It runs to 64. Retirement is in fact at 65 for men in the UK, 60 for women; 60 for both sexes in France. It's possible to find some statistics 16-59/64 for the UK, and to take out the 60-64 group for France, but it's easier to use the standardised 15-64 numbers from Eurostat (or the OECD). As with 15-year-olds at school, the effect of including retired people in the working-age population is simply to swell the size of the inactive population in those age-groups.

This is what the working-age populations of France and the UK look like (in thousands):

Extremely comparable. To appreciate the similarity and symmetry, (again, these are actual population levels), see this graph of the major labour market age groups:

The "youth" segment is 15-24, and the "senior" 55-64. The mid-section, from 25-54, is that of prime-age workers. In each of the two countries, this prime-age working population is made up of about 24 million persons. This is the heart of the labour market.

This vitally important group was mentioned in France is not in decline... in this way:

according to the OECD, 87.6% of men aged 25-54 worked in 2004 in France, as opposed to 87.3% in the US. Yet the unemployment rate for that category then was 7.4% in France, and 4.4% in the US.

The numbers (in fact, they should read 86.7% in place of 87.6%, 86.3% for 87.3%, and 4.6% for the American UR, but the point remains unchanged) are in Table C of the Statistical Annex, OECD Employment Outlook 2005. Along with them are the numbers for the UK:

87.5% of men between 25 and 54 were in employment, while the UR for this group stood at 3.8%.

So the employment rate was similar (86.3% for the US, 86.7% for France, 87.5% for the UK), but the UR was in stark contrast: low for the US and UK with 4.6% and 3.8% respectively, relatively high for France at 7.4%.

Here's another look at the employment rate, this time from EULFS:

This is a picture of employment for the working-age population, both sexes (which is why the percentage is lower than for males alone, since more men than women have jobs [SPATS]!). The mid-section, from 25-54 (we'll get back to the younger and older sections later) shows very similar characteristics in the two countries. In terms of numbers, our two prime-age populations of 24 million have about 19 million employed among them. Yet when we look at the UR for the prime-age group:

there's a surprising difference. Intuitively, what we understand when we see this is that a much greater proportion of people of prime working age are out of work in France than in the UK. Yet the two populations are otherwise homogenous, which is puzzling.

However, we can ask this question: is a greater proportion of people of prime working age part of the inactive population in the UK than in France?

The answer is yes, across the board. Don't compare the percentages literally here, though: the inactivity rate is a percentage of the total population, while the UR is a percentage of part of the population, the active part or labour force. This sets out the comparison in a different way:

Based on the inactivity rate (percentage of inactives in the total population) and the percentage of unemployed in the total population, this graph compares the prime-age population not in employment in each country. The proportion of the population not in employment is similar for all age groups but the youngest and oldest (and even then the difference is slight), but the internal composition differs: the ratio of inactivity to unemployment is considerably higher in the UK.

By way of explanation, we might pick this out from the Eurostat Guide to Labour Force Surveys:

In recent decades the borderline between the labour force and what is termed the "economically inactive" population has become increasingly blurred, due to the increasing incidence of part-time and temporary work and the ease with which large numbers of persons (particularly women and young persons in the final stages of their education) repeatedly enter or leave the labour force.

Education is unlikely to keep many prime-age people out of work, but we might wonder if it's traditional in British society for women to go out to work less, for example, thus increasing the inactive population. But EULFS gives the employment rate for women 15-64 as 65.6% (UK) against 57.4% (FR), so that one won't fly, on the contrary.

Wikipedia takes us a little further : Unemployment - Wikipedia

... the definition of unemployment relies on the distinction between inactive and unemployed, a quite subjective measure which can be easily manipulated by policies that do not change the situation of the labor market, but decrease unemployment by shifting people from unemployed to inactive status.

Or, from (France is not in decline...)

Clearly, the line between "unemployed" and "inactive" is not drawn in the same way in each country.

Women working as homemakers (and classified "inactive" [SPATS]!), or persons in full-time education, form major cohorts of the inactive population, but another component is made up of those who are prevented from working by sickness and/or disability. In 2005, I quoted OECD evidence in OECD says ET was right about UK unemployment that shows a high rate of UK sickness/disablement benefits [SPATS]!, especially compared to countries, like France and Germany, habitually noted for their high UR:

Click to enlarge

Inactivity because of illness or disability
As a percentage of population in each age group, 2003

OECD has not updated this since, but there has been little or no substantial change.

Incapacity Benefit [SPATS]!

In fact, the problem was already known and recognized by the British government, since a Green Paper (Pathways to Work) about it was published in 2002. Here's a quote:

The number of working-age people claiming incapacity benefits is now over 2.7 million. That is greater than the combined total of lone parents and unemployed people on benefit. About 7.5 per cent of the working-age population now receive these benefits. These numbers have more than trebled since the 1970s.

The Financial Times has commented on the matter (Martin Wolf should read his own paper?). Here's Simon Briscoe in 2004:

Generous disability benefits encouraged more than 500,000 men of working age to leave the labour market over the course of the 1990s according to a Bank of England report.

The Bank says this "remarkable decline" in the male employment rate was particularly noticeable in relation to the least-educated who were under threat of losing their jobs. Those with low-skill levels appeared to have chosen to claim long-term incapacity benefit rather than attempt to re-enter the labour market.

David Webster, a research fellow at Glasgow University, said the paper was important as it showed "the UK has not had the labour market success which the British economic establishment has been claiming; unemployment is far higher than the official statistics indicate; and official unemployment statistics misrepresent the geographical distribution of unemployment". He suggested that policymakers should reassess labour market policies. <...>

The drift to sickness benefits went largely unnoticed in the 1990s as the expansion of employment and sharp decline in unemployment masked divergent trends in labour market participation.

While many women entered the labour market, this analysis shows a decline in participation among men - almost exclusively unskilled. At the same time this group reported increasing long-term illness.

The decline was most pronounced among men aged between 25 and 54, with early retirement explaining "very little of the change".

The Bank of England working paper Briscoe refers to says :

Trends in the UK labour force participation remain puzzling. The 1990s witnessed a rapid expansion of employment in the United Kingdom and an associated decline in unemployment to levels last seen in the 1970s. Yet over the same period, the aggregate participation rate was flat... The decline in labour force participation has been most pronounced among prime-age men <...> very few of these workers entered retirement; the largest flow was into long-term sickness. At the same time, there was a sharp increase in the number of such men claiming disability benefits.

And, conclusion after analysis: The decline in participation is almost exactly matched by a rise in disability benefit rolls.

A 2004 social and geographic study of the phenomenon by researchers from Sheffield Hallam University The Diversion From `Unemployment' To `Sickness' Across British Regions And Districts (a study I referred to in my 2005 diary, and that was summarised by Detlef here), explains:

It is not widely recognised that in the UK two separate benefit systems provide support to non-employed adults of working age.

The first relates to `unemployment'. Since 1996 this has taken the form of Jobseeker's Allowance (JSA). To claim JSA a person must demonstrate that they are available for work and looking for work, and they must `sign on' once every two weeks. For most claimants, including all those claiming for more than six months, JSA is means-tested (on the basis of household income).

The other benefit system relates to `sickness'. Since 1995 this has taken the form of Incapacity Benefit (IB). IB is paid to non-employed adults of working age who have health problems or disabilities. About two-thirds of IB claimants actually receive Incapacity Benefit. The remaining third, with insufficient National Insurance (NI) credits to qualify for IB itself, are counted as `NI credits only' claimants and in most cases actually receive means-tested Income Support with a disability premium. Importantly, Incapacity Benefit is not means-tested except for a small number of new claimants with substantial pension income. Also, although Incapacity Benefit payments start at almost the same rate as JSA they increase after six months and again after twelve months. The disability premium payable to `NI credits only' IB claimants also makes this worth more than JSA.

The workings of the benefits system may seem a long way removed from the measurement of unemployment. The point is however that for many of the longerterm jobless who have health problems, the differential in benefit payments creates an incentive to claim IB rather than JSA.

This is a fairly long-term phenomenon, as the tripling, almost quadrupling, over a quarter of a century shows; it has been happening in other countries too, and has simply been particularly marked in the UK. New Labour is not "to blame" for it either, as this Bank of England graph demonstrates:

The rise is even sharper before 1997

However, the Blair/Brown government has always been perfectly aware of the facts, and has now built policy to bring about a reverse movement from inactivity to activity that is designed to reduce the total number on Incapacity Benefit by at least a million over the coming years. Apart from the Green Paper quoted above, here are some BBC articles that discuss the problem and government reaction to it:

The phrase "long-term jobless" of course lets the cat out of the bag. According to EU LFS 2004 (Eurostat), the total French long-term unemployment rate stood at 3.8%, while the UK was credited with just 0.9%. This apparent success camouflages the uncomfortable fact that a large number of the long-term unemployed in Britain are on Incapacity Benefit and not available for work "within two weeks" - while the French benefits system, in which claiming sickness offers no palpable advantage except in the case of permanent disablement, tends to keep the long-term unemployed signing on as jobseekers, and therefore answering the survey questions in such a way as to be (correctly) categorised as unemployed.

The extent of the UK problem can be seen here:

Source EULFS and IB/SDA Quarterly Summary of Statistics 2005

The graph shows the share, for the prime-age population, taken up by people on IB in the inactive population. For the 40-54 group, the proportion is surprisingly high, around 50%.

What is the effect of this? Supposing a French-type benefits system were in application in the UK, what would the UR look like? The UK government has suggested that 90% of recipients of IB would like to work. Applying 90% to 2.7 m would suggest a drop of 2.4 m. Perhaps more realistically, the government has stated its intention to reduce (over several years starting in 2008) the number of IB beneficiaries by at least a million. A careful appraisal was carried out, catchment area by catchment area, in Beatty and Fothergill's Sheffield study referred to above. The authors estimated the diversion from unemployment into sickness-related benefits, (across the whole working-age population and not just prime-age), at 1.1 m persons.

In the 2004 aggregate working-age population of 38 m, a transfer of 1.1 m from inactivity to the unemployed category would result in (my calculation):

Total PopulationIn EmploymtEmploymt RateUnem- ployedURParticip. RateIBOther Inactives
38 m27.6 m72.7%1.4 m4.7%76.2%2.7 m6.3 m
38 m27.6 m72.7%2.5 m8.3%79.2%1.6 m6.3 m

Meanwhile, the French UR (EULFS) for 2004 was 10.3%. Higher than 8.3%, but in a much more similar range.

I'm not attempting to say that UK unemployment is the same as French (or to deny the importance of unemployment in the French economy, [SPATS]), but to point out the volatility of the UR metric and its susceptibility to influence by factors such as benefit and classification systems. In this simulation, a 12% fall in the inactive population leads to a 77% increase in the UR. This may only be a rough calculation, but it's based on serious statistics and on considerable discussion of long-term unemployment issues in the UK in the media, by academics, by organisms like the OECD, and by government.

Beyond the BBC articles and other sources already linked to above, see also:

Labour Market Trends April 2002: Sickness and Unemployment

and this study (hat-tip to Detlef) :

Inactivity, Sickness and Unemployment in Great Britain: Early Analysis at the Level of Local Authorities

There is so much the UR doesn't say. Here we have looked at two blocs of prime-age labour of similar size (24 m) and a similar employment rate - but a contrasting UR that doesn't tell the whole story. Not just the whole human story, the history and geography and sociology of labour market disadvantage, (see Beatty & Fothergill op cit for an overview), but not even the proper statistical story.

In the second part of this diary, we'll look at the "Youth" and "Senior" segments of the working-age population.

:: :: :: :: :: :: :: ::

Previous European Tribune writing on employment/unemployment :

What's really wrong with the Eurozone labour market? by Colman June 2005

The Party line by Jerome a Paris Aug 2005

Comparing unemployment statistics by Colman Sep 2005

OECD says ET was right about UK unemployment by afew Oct 2005

European Unemployment by TGeraghty Nov 2005

Youth unemployment by Jerome a Paris Jan 2006

Graphic statistics by Alexandra in WMass Jan 2006

More employment statistics by Jerome a Paris Jan 2006

The Inverted Example of Spinning Jobless Statistics by DoDo Feb 2006

Actual facts about the French labor market by Jerome a Paris March 2006

European Employment: Some Good News by TGeraghty Sep 2006

What's unemployment, again? by Jerome a Paris Jan 2007

Fascinating employment and unemployment numbers by Jerome a Paris Feb 2007

CS Monitor: stats are only good when they suit us by nicta March 2007

(I'm sure there are more, please add links in comments and I'll edit the list).

What you have to say about Incapacity benefit, during the 80's and 90's I had occasion to visit many unemployment benefit offices. It wasn't unusual for the benefit officer to quietly ask if your doctor would be willing to sign you onto the sick, then you could avoid the quiet indignity of the fortnightly questionaire from a spotty sixteen year old who appeared to have aquired his on the job training from the hitler youth. In fact  became a standing joke amongst the local layabouts that there must be a standing policy to reduce the figures by getting us off their books and onto the books of the department of health. now this would have been  late eighties/early nineties, can't be more precise than that because I never took them up on the kind offer.

Any idiot can face a crisis - it's day to day living that wears you out.
by ceebs (ceebs (at) eurotrib (dot) com) on Fri Jun 1st, 2007 at 12:55:06 PM EST
Late eighties/early nineties fits with the accounts and numbers given for this. That was the time when most people left unemployment for IB. However, the numbers have not gone down since...
by afew (afew(a in a circle)eurotrib_dot_com) on Fri Jun 1st, 2007 at 12:58:56 PM EST
[ Parent ]
I know that in Wales the higher disability related unemployment figures are partly due to the decline in industry - mining, steel etc. Many miners left with genuine long term health problems, and also mental health problems/depression resulting from the loss of the only type of work they were skilled for, economic decline and increased poverty in mining communities, loss of community identity and so on.

Excellent and very comprehensive diary, afew. I'll try to read through it in more detail once I get my next essay out of the way!

by In Wales (inwales aaat eurotrib.com) on Fri Jun 1st, 2007 at 01:06:05 PM EST
[ Parent ]
I suggest reading Beatty and Fothergill on the regional occurrence - it's the old industrial regions that are concerned, of course. And the Welsh Valleys among the most concerned.
by afew (afew(a in a circle)eurotrib_dot_com) on Fri Jun 1st, 2007 at 01:11:40 PM EST
[ Parent ]
Quite a few of the people who did take it up were long term unemployed, in their late twenties/early thirties, who were on the point of becoming institutionalised into unemployment/ on sink estates in run down mining villages/steel towns. Now they would, if their life is still running the same way be twenty years older and unemployable, so there's no personal reason for them to come off the sick for another 15 years.

Another factor I seem to remember was at this time there was a thing in the news saying that benefit officers were to get cash bonuses to reduce the number of people on the books, and there was an undercurrent among the consumers that it wasn't considered to be that important how the numbers were reduced.

Any idiot can face a crisis - it's day to day living that wears you out.

by ceebs (ceebs (at) eurotrib (dot) com) on Fri Jun 1st, 2007 at 01:11:09 PM EST
[ Parent ]
I would simply highlight the fact that while it is true that the UK (and the Netherlands and the Scandinavian labor market "success stories") all to some extent hide their issues in the unskilled labor market with LT disability schemes, the statistics you site all still point out a pretty depressing career-starting picture for the younger cohorts of French.

This is seen in the 25-29 cohort rather strikingly, and to a bit less of an extent that of the 30-34 cohort.

The younger cohorts, esp the 20-24, run into other issues making it harder to draw any conclusions: people extend their schooling (and are therefore not part of the active population) when the job market is lousy, and tend to jump into the labor market when there are well-paid jobs to be had. The latest Unesco data on this (warning, pdf) had France actually with a lower rate of post-secondary scolarisation in 2002-03 (56%) than either the UK (64%) or the US (81%). The eight point disparity between the UK and France probably explains most of the differential in the 20-24 cohort in your chart above. (Also noteworthy: in all three countries, this rate had gone up markedly, by 5-8 points, versus the period five years prior, as the job market soured a bit for new entrants to the work force.)

Unfortunately, when you're 25-34, there's not a lot more studying you can do, and this is where France's performance is really, really weak.

And obviously, I'm not agreeing with the neo-liberal consensus that France needs labor market liberalization reforms, but it needs to be pointed out that there is indeed a problem which should be addressed, and that there were in fact alternative programs in the election campaign we just saw (Buffet's program coming first to mind) which went in the right direction.

The Hun is always either at your throat or at your feet. Winston Churchill

by r------ on Fri Jun 1st, 2007 at 02:14:33 PM EST
I don't understand, 25-29 cohort has the same employment rate in FR than in UK.

Of course this is one of the cohort were the UK unemployed to inactive machine works its magic at full power.

For 19-24, you need part-time / hours worked and in school statistics to say anything more.

UK 40% of 15-19 that works is totally at odd with the french stated objective of 80% of people reaching baccalaureat at 18.

A political choice of course.

by Laurent GUERBY on Fri Jun 1st, 2007 at 03:33:43 PM EST
[ Parent ]
I must not be reading the same charts.

I see 79% or so for that cohort in UK, 75% for France. Unemployment - 5% in UK, 13% in France, an eight point difference, offset by roughly half via inactive differential.

Agreed on the in school statistics for 19-24, and my unesco figures are only obliquely addressing this.

The Hun is always either at your throat or at your feet. Winston Churchill

by r------ on Fri Jun 1st, 2007 at 03:40:09 PM EST
[ Parent ]
Unemployment means nothing, just forget about it :)

Employment level is quite close, and don't forget that part time is circa 25% in the UK vs 17% in France  (43% vs 31 for women).


The UK and France situation are very similar except than France went for the 35 hours work-week and UK for the 20 hours work-week :).

by Laurent GUERBY on Fri Jun 1st, 2007 at 06:03:56 PM EST
[ Parent ]
As I said in this Part One, I'll be getting back to both the older and younger segments in the second part.

But look, I went to some lengths here to point out ([SPATS]) that I was addressing the question of the different rates and especially the UR. This is not a question of doggedly defending what happens in France, but of deconstructing talking points and soundbites based on a flimsy construct that might have meant something once, when labour forces were stable, but now means less and less.

by afew (afew(a in a circle)eurotrib_dot_com) on Fri Jun 1st, 2007 at 04:33:50 PM EST
[ Parent ]
Note that the "Unemployment - Wikipedia" paragraph you qute is not really independant from ET since I wrote it :).

Diary about it here:


by Laurent GUERBY on Fri Jun 1st, 2007 at 03:27:36 PM EST
LOL, I hadn't seen that!
by afew (afew(a in a circle)eurotrib_dot_com) on Fri Jun 1st, 2007 at 04:27:00 PM EST
[ Parent ]
And now, in case you need more references for wikipedia you can qoute ET...

Sweden's finest (and perhaps only) collaborative, leftist e-newspaper Synapze.se
by A swedish kind of death on Sat Jun 2nd, 2007 at 08:56:59 PM EST
[ Parent ]
I think we're one step closer to being a think-tank.

Can the last politician to go out the revolving door please turn the lights off?
by Carrie (migeru at eurotrib dot com) on Sun Jun 3rd, 2007 at 01:52:15 AM EST
[ Parent ]


In the long run, we're all dead. John Maynard Keynes

by Jerome a Paris (etg@eurotrib.com) on Fri Jun 1st, 2007 at 03:38:47 PM EST
The tailend of that graph, (from 1998), is in the UK government Green Paper, widened to make it look less dramatic...
by afew (afew(a in a circle)eurotrib_dot_com) on Fri Jun 1st, 2007 at 04:39:52 PM EST
[ Parent ]
Actual facts about the French labor market

In the long run, we're all dead. John Maynard Keynes
by Jerome a Paris (etg@eurotrib.com) on Fri Jun 1st, 2007 at 03:41:17 PM EST
I'd be interested in statistics in relation to the vast number of "micro-businesses" where "self-employment" rather than "employment" is involved...

"The future is already here -- it's just not very evenly distributed" William Gibson
by ChrisCook (cojockathotmaildotcom) on Fri Jun 1st, 2007 at 04:29:43 PM EST
"Employment" here means salaried employment + self-employment. I didn't give a breakdown on that because it has no effect on the standard rates, but you can find it at Eurostat or OECD.
by afew (afew(a in a circle)eurotrib_dot_com) on Fri Jun 1st, 2007 at 04:37:03 PM EST
[ Parent ]
As a freelancer, and as someone who occasionally consults for other freelancers about the perils of running a micro start-up, it's worth pointing out that work is reliably patchy, and the concept of full employment is a fairly unconvincing one - at least by the standards that most people use.

So yes - in practice, so-called self-employment is a great sink for many people who are really just temping. It's presented as being terribly entrepreneurial, but the reality is that PLCs are increasibly buying in short-term help when they need it rather than developing extended relationships. At the same time permanent positions are being converted into 'freelance opportunities.'

That latest stats I could find [PDF] suggest that around 3 million are self-employed.

To be fair, insolvency figures are running at about 10-15,000 a year, which suggests that most of that 3 million are doing enough work to stay afloat. Tax breaks also make survival easier. So it's not all bad news.

But I'd guess around half a million to a million are somewhat precariously self-employed, rather than being propelled at full tilt by the glorious headwinds of free enterprise, and should really be counted as part-time rather than full-time workers.

by ThatBritGuy (thatbritguy (at) googlemail.com) on Fri Jun 1st, 2007 at 05:54:31 PM EST
[ Parent ]
On "so-called self-employment" I agree and can personally confirm ;). It would be interesting to look into it comparatively - but my impression is that it's fairly general. Corporations have downsized and put skilled people out to fend for themselves as consultants, freelancers, agents, whatever; or they simply don't hire any more for positions that used to be in-house. Anything to put those extra points on the bottom line that our dynamic financial system requires.

The difficult thing in studying this would be to find objective statistical measures that would deal with the real amount of work available and carried out - but we can certainly compare numbers of self-employed. I suspect they're fairly numerous in France, as in the UK, and for the same reasons. The narrative about them is, of course, as you say, dynamic, go-getting entrepreneurs blah. In how many cases it's really a start-up rather than a finish-up it's hard to say.

by afew (afew(a in a circle)eurotrib_dot_com) on Sat Jun 2nd, 2007 at 01:53:24 AM EST
[ Parent ]
I am working on an initiative - with Norwegian government backing - looking at ways in which "micro-business" may be supported across the "Hanseatic" area(Scotland, Norway initially).

In this "Northern Periphery" - as the EU calls it - microbusiness / self-employment are increasingly the rule, rather than the exception, and the proprietors of these businesses carry a lot of votes.

Our initiative promotes the use of:

(a) "Guarantee Societies" - allowing micro-businesses to club together both to engage in major procurements and to mutually guarantee bilateral credits; and

(b) "Capital Partnerships" - ie revenue/production sharing partnerships between investor and user of investment - which allow quasi Equity "micro-investment" (as opposed to micro credit) to be raised irrespective of the legal form of the microbusiness.

I believe that the big corporations are becoming increasingly "hollowed out" as most of the best people leave.

"Linked/networked small" will be the new "big" IMHO.

"The future is already here -- it's just not very evenly distributed" William Gibson

by ChrisCook (cojockathotmaildotcom) on Sat Jun 2nd, 2007 at 04:28:33 AM EST
[ Parent ]
To allow a really accurate comparison, you must take into account the structure of employment, and especially the share of part-time employment. The best way would be to use as indicator the employment rate measured in full-time equivalent (équivalent temps plein).

"Dieu se rit des hommes qui se plaignent des conséquences alors qu'ils en chérissent les causes" Jacques-Bénigne Bossuet
by Melanchthon on Fri Jun 1st, 2007 at 04:56:03 PM EST
I intend to talk about part-time in the second half of the diary. I'll look into the full-time equivalent idea, thanks.
by afew (afew(a in a circle)eurotrib_dot_com) on Fri Jun 1st, 2007 at 05:07:06 PM EST
[ Parent ]
It's important because, as far as I know, there are big differences between France and UK (and the Netherlands) for the share of part-time employment.  

"Dieu se rit des hommes qui se plaignent des conséquences alors qu'ils en chérissent les causes" Jacques-Bénigne Bossuet
by Melanchthon on Fri Jun 1st, 2007 at 05:33:10 PM EST
[ Parent ]
by afew (afew(a in a circle)eurotrib_dot_com) on Sat Jun 2nd, 2007 at 01:37:54 AM EST
[ Parent ]
By the way, thanks for this excellent synthesis. I can't wait for part 2!

"Dieu se rit des hommes qui se plaignent des conséquences alors qu'ils en chérissent les causes" Jacques-Bénigne Bossuet
by Melanchthon on Fri Jun 1st, 2007 at 05:01:52 PM EST
Let me add my thanks for that very pedagogic work. My only criticism is that this was posted as a diary, and cannot be switched to the debate box. Will you post part 2 as a story? Please?!

In the long run, we're all dead. John Maynard Keynes
by Jerome a Paris (etg@eurotrib.com) on Fri Jun 1st, 2007 at 05:36:07 PM EST
[ Parent ]

The Return of NILF

Over the years, we have mentioned on more than one occasion the not-as-dirty-as-it-sounds measure, NILF. No, it has nothing to do with moms -- rather, it stands for Not In Labor Force.

It is one of the reasons the official BLS unemployment rate is actually understating the actual unemployment rate.

A quick primer on how this works: The Unemployment rate is depicted as a percentage, and like all percentages, it is actually a fraction. You take the total number of people in the labor pool, the total number of workers:

    Employed Individuals
    _______                =   Percent Employed

    Total Labor Pool

Subtract the percent employed from 100% and you get the unemployment rate.

Most of us think about the unemployment rate going down due to more people getting jobs. But there's also another way the official unemployment rate can go down. It happens when the denominator -- the bottom number of the fraction -- goes down.

And that is what has been occurring again recently. The Labor Pool has shrunk, making the unemployment rate look better than it actually is.  


by Laurent GUERBY on Sat Jun 2nd, 2007 at 09:38:42 AM EST
Yes, Not In Labour Force is the interesting segment (= "inactive population" above).

I don't get his terminology, though. If you calculate the percentage he indicates (assuming "Labor Pool" = total working-age population), you get the employment rate (called by OECD employment/population ratio). If you subtract that from 100%, you don't get the unemployment rate, you get the percentage of (unemployed persons + NILF).

Either that or he's calling "Labor Pool" what he elsewhere calls "Labor Force".

Am I missing something, as they say?

by afew (afew(a in a circle)eurotrib_dot_com) on Sat Jun 2nd, 2007 at 11:28:14 AM EST
[ Parent ]
I think he uses labor pool = labor force.
by Laurent GUERBY on Sat Jun 2nd, 2007 at 12:22:51 PM EST
[ Parent ]
if it is possible to cut through all the official disinfo on employment, i'd love to see a similar comparison between, say, UK/france on the one hand, and the US on the other.
by wu ming on Sat Jun 2nd, 2007 at 08:05:16 PM EST
For another angle on UK/France you get some data on my blog here:


Total hours worked in France and UK are similar (within 1%) and the country have similar population and age structure.

But in the UK unemployment is 4.7% vs 9.5% in France, a good factor of two.

So much for unemployment measuring anything useful.

by Laurent GUERBY on Sun Jun 3rd, 2007 at 01:15:32 PM EST
[ Parent ]
on that data is as follows:

  • number of hours is similar
  • French productivity per hour worked is supposed to be quite higher than in the UK (by 20-30%)
  • total GDP is slightly higher in the UK?

How is that possible??

In the long run, we're all dead. John Maynard Keynes
by Jerome a Paris (etg@eurotrib.com) on Mon Jun 4th, 2007 at 10:00:15 AM EST
[ Parent ]
If you look at the table on page 8 of the OECD report on labour productivity linked to by Laurent, the number of hours worked is 23% higher in the UK than in France, and 8% higher per employed person.

Can the last politician to go out the revolving door please turn the lights off?
by Carrie (migeru at eurotrib dot com) on Mon Jun 4th, 2007 at 10:30:45 AM EST
[ Parent ]
From the links on my blog:

The annual hours worked indicator is one of the most widely cited indicators provided by the OECD. The Factbook's comparability note says that "The data are intended for comparisons of trends over time and not yet suitable for inter-country comparisons." This warning is usually ignored. In its original form in the data annex to the annual OECD Employment Outlook, this table includes a warning about comparing levels as well as a great deal of country-by-country notes that assist the data user in assessing comparability among different countries. For example, data for the Netherlands exclude overtime hours--helping to explain the relatively low annual hours for this country. These notes could be attached to the tables in the Internet version of this table. An alternative to the chart for this indicator that is more consistent with the comparability note in the Factbook would be to chart the change in hours worked from 1990 to 2003 for each country rather than the 2003 level for each country."
by Laurent GUERBY on Mon Jun 4th, 2007 at 03:36:52 PM EST
[ Parent ]
But if the annual hours indicator is not comparable, neither is the productivity indicator which is based on it.

Can the last politician to go out the revolving door please turn the lights off?
by Carrie (migeru at eurotrib dot com) on Mon Jun 4th, 2007 at 03:47:13 PM EST
[ Parent ]
I haven't found yet use of a productivity number together with its definition and measurement methodology (and I've read thousands of economist papers by now).
by Laurent GUERBY on Mon Jun 4th, 2007 at 05:09:02 PM EST
[ Parent ]
In fact there's a fight over how to count hours actually worked. The OECD certainly adopts a system that shows a very clear difference between UK and France, but doesn't get its data from equivalent sources in each country, if I understand a methodology article I haven't finished reading:


by afew (afew(a in a circle)eurotrib_dot_com) on Mon Jun 4th, 2007 at 11:39:02 AM EST
[ Parent ]
It depends on what economists use when they compute productivity.

If they take officially paid hours it can change the picture.

Also GDP is price-based, whereas some productivity numbers you see might be based on physical output (in the manufacturing sector for example).


No economist will admit that total hours really worked is similar in France and in the UK to start with: that's contrary to orthodox economics since UK is liberal with a flexible labour market and France is full of rigidity and must be reformed, so the only way to make number match is to say that french worker are more productive per hour.

And I'm pretty sure 99.999% of economists haven't the slightest idea on how the productivity numbers they cite all day long are really compute and what they really mean.

by Laurent GUERBY on Mon Jun 4th, 2007 at 03:45:54 PM EST
[ Parent ]
Oh one of my favourite topics!! I'm glad I found this older diary. I also liked it's the periodic SPATS warnings ;-) I'm looking forward to the instalment on youth and mature workers.

I stand by the fact that the way to make cross country comparisons is to look at the whole population by age group and look at what specific activity or inactivity they are involved in.

Pyramids are my favourite although you do need a lot more data to be able to put them together:

Original diary

Afew do you have or have a source for the raw UK data? I'd love to be able to do comparable pyramids, at some point, for UK and French Youth.

by Alexandra in WMass (alexandra_wmass[a|t]yahoo[d|o|t]fr) on Sat Jun 23rd, 2007 at 09:43:22 PM EST

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