Measuring employment and unemployment

The ILO definition

Under the International Labour Organization (ILO) measure, a person is unemployed if they are without a job, have actively sought work within the last four weeks and are available to start work within the next two weeks. Data come from a labour force survey of households.

An alternative is a claimant count: the number receiving a benefit mainly because they are unemployed. It is usually lower than the ILO figure because not everyone is eligible or chooses to claim.

Rates

• Economically active = employed + unemployed (the labour force).
• Unemployment rate = unemployed / economically active x 100.
• Employment rate = employed / working-age population x 100.
• Economically inactive: of working age but neither employed nor ILO unemployed (students, carers, the long-term sick, early retired, discouraged workers).
• Inactivity rate = inactive / working-age population x 100.

The unemployment rate can fall because people give up looking and become inactive, so always check the inactivity rate too.

Underemployment and net migration

Underemployment: people in work who want more hours than they have, or who work in jobs below their skill level. They count as employed, so the unemployment rate understates spare labour capacity.

Net migration (immigration minus emigration) changes the size and skills of the labour force. Migrants can fill skill shortages and raise output, so they create jobs through their spending too; unemployment rises only if the labour force grows faster than jobs, or in particular occupations or regions.

Worked example

Working-age population 39 m: 28.5 m employed, 1.5 m ILO unemployed, 9 m inactive. Find the unemployment, employment and inactivity rates.

1. Labour force = 28.5 + 1.5 = 30 m
2. Unemployment rate = 1.5 / 30 x 100 = 5.0%
3. Employment rate = 28.5 / 39 x 100 = 73.1%
4. Inactivity rate = 9 / 39 x 100 = 23.1%

Answer: 5.0% unemployed, 73.1% employed, 23.1% inactive

Check yourself

1. A country has 18 million employed and 2 million ILO unemployed. Find the unemployment rate in %.
   Show answer

   10 %. 2 / 20 x 100 = 10%.

2. The working-age population is 40 million, of whom 8 million are economically inactive. Find the inactivity rate in %.
   Show answer

   20 %. 8 / 40 x 100 = 20%.

3. There are 31.2 m employed and 1.3 m unemployed. Find the unemployment rate to 1 decimal place.
   Show answer

   4.0 %. 1.3 / 32.5 x 100 = 4.0%.

4. Which person is ILO unemployed?
   • A student studying full time who is not looking for work
   • A graduate with no job who applied for jobs last week and can start immediately
   • A retired person
   • A part-time worker who wants more hours
   Show answer

   A graduate with no job who applied for jobs last week and can start immediately. No job, actively seeking in the last four weeks, available within two weeks.

5. The unemployment rate falls because many unemployed people stop looking for work. How would this show in the data?
   • The employment rate rises
   • The claimant count rises
   • The labour force grows
   • The inactivity rate rises
   Show answer

   The inactivity rate rises. They move from unemployed to inactive, leaving the employment rate unchanged.

6. Why might the unemployment rate understate spare capacity in the labour market?
   • Students are counted as unemployed
   • Underemployed workers who want more hours count as employed
   • The ILO measure counts everyone without a job
   • Inactive people are included in the labour force
   Show answer

   Underemployed workers who want more hours count as employed. Underemployment is hidden spare capacity.

7. A large rise in net migration of skilled workers into sectors with labour shortages is most likely to
   • raise unemployment by the same number as migrants
   • reduce the size of the labour force
   • reduce AD
   • raise output without much rise in unemployment
   Show answer

   raise output without much rise in unemployment. Filling vacancies raises output, and migrants' spending creates further jobs.

8. State the ILO definition of unemployment.
   Show answer

   People without a job who have actively sought work in the last four weeks and are available to start work in the next two weeks.. All three parts are needed: no job, searching in the past four weeks, available within two weeks.

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Sources

• Pearson Edexcel International Advanced Subsidiary/Advanced Level in Economics specification, Issue 2 (June 2018)
• Office for Statistics Regulation: Labour market and unemployment guidance

Last updated 8 November 2026. Spotted a mistake? Tell us.