Employment can be measured in two ways:

• the number of people with jobs
• the number of jobs

These concepts represent two different things, since one person can have more than one job, and one job may be split (through job-sharing arrangements, for instance) between two or more people. As with unemployment, the different measures tend to show a similar trend over time.

The number of people with jobs is measured by the Labour Force Survey (LFS), using ILO guidelines and definitions. The fundamental LFS definition of ‘employment’ is anyone aged 16 and over who does paid work for at least one hour a week.

The headline ‘employment rate’ is the proportion of the working-age population who are in employment. In the UK the working-age population currently comprises men aged 16-64 and women aged 16-59; in official publications relating to employment, this is often expressed as ‘Age 16 to 59/64’

In line with ILO definitions, LFS ‘employment’ classifies employed people into one of four categories: employees, the self-employed, participants in government-sponsored employment training programmes, and unpaid family workers.

The distinction between them is normally fairly clear-cut, although some employment is on the margins of the different groups.

A quick guide is:

• Employees work for someone else (usually a company or firm) and their National Insurance (NI) contribution is paid directly from their wages;
• Self-employed work for themselves and usually pay their own NI contributions;
• Unpaid family workers are people who do unpaid work in a business owned by their family.

Employees represent by far the largest component of LFS employment, accounting for over 85% of the total.

As well as measuring the number of people in employment, the LFS also collects information on patterns of employment, such as:

• full-time/part-time status (and reasons for working part-time);
• temporary/permanent employment (and reasons for temporary employment); and
• hours worked.

The latest survey data showed that part-time workers accounted for around a quarter of LFS employment and on average worked just under 16 hours per week. For full-time workers, the average working week is around 37 hours.

The LFS also records the number of people with second jobs, thus facilitating a closer reconciliation between the LFS and the workforce jobs (see below) measures of employment.

The theory is that:

jobs = number of people with jobs + number of second jobs + number of third, fourth, etc. jobs.

'Workforce jobs' is a separate series which, as the name implies, measures the number of jobs (in contrast to the LFS approach which counts people).

So, if a person holds two jobs, each job will be separately recorded in the workforce jobs total. For this reason, this measure of employment is usually higher than the LFS employment figure: in March 2009, the workforce jobs total was estimated at 31.2 million, compared with LFS employment at 28.9 million.

The estimate of workforce jobs is based on a range of official surveys. Jobs are classified into four (self explanatory) categories:

• employee jobs
• self-employment jobs
• HM Forces
• government-supported trainees

Although the groupings are broadly similar to those discussed above, the workforce jobs figure is, where possible, based on surveys of employers rather than the individual.

All else being equal, falling unemployment is generally linked to rising employment.

Between New Labour winning office in 1997 and April 2008, LFS employment (including self-employed) grew by around three million, with the number working on a full-time basis accounting for almost 75% of this rise.

To underline the improvement that took place in the labour market, in Q2 of 2008 there were 31.7 million people in employment, the highest-ever total in the UK.

It was only at the end of 2002, that the 28 million threshold was crossed for the first time. This equates to an employment rate (the proportion of the working-age population who are in employment) of almost 75%, compared to around 70% in 1993. A similar trend is apparent in the workforce jobs series.

The second quarter of 2008 marked the peak for the labour market. Not only has unemployment increased but the number of workforce jobs fell by almost half a million in the next 12 months and employment was down by closer to 600,000. Full-time employees bore the brunt of the squeeze on employment.

Source: ONS

The improvement in the labour market meant that parts of the country came close to reaching full employment. In the South East and South West regions, which account for over a fifth of the adult population, ILO unemployment rates dropped to under 4.0% (compared with the UK average of 5.4%).

At these low levels of unemployment, there was a fear that shortages of skilled labour would emerge as a factor which would curtail future growth or spark inflationary pressures, but the influx of migrants did much to keep wages growth in check.

Even in traditional areas of high unemployment, the jobless rate fell. In the North East for example, the drop was from 9.8% when New Labour took office to 5.5% in 2004 while the North West saw the rate ease from 7.1% to 4.4% over the same period.

In Wales and Scotland, the rate at which unemployment fell was even more marked. Nationally, there was a narrowing of regional unemployment differentials, although the southern areas (East, South East and South West) were still the best performing.

In 2008, these improvements went into reverse and no region was unaffected. In the northern regions, the rise in unemployment started earlier, but by 2008 the increase was nation wide.

With just a couple of exceptions, the rate is at least back to where it was in 1997 and the gains made during this government’s term of office have now been lost.

The shift in the composition of workforce jobs by type of industry reflects long-term structural changes in the UK economy.

Manufacturing, for instance, has been experiencing a downward drift in employment for 30 years or more. From 7.1 million workers in 1979 (27% of all jobs), manufacturing employment fell below 4 million in 2002, and by the first quarter of 2007 stood at just under 3.25 million (10% of all jobs).

By the end of Q1 2009, the number had dropped to under 3.0 million (2.94m), or less than 9.5% of all jobs.

Source: ONS

Services, on the other hand have more than filled the gap. Over the same period, employment in services has grown by 8.4 million and now, at 25.3 million, accounts for over four-fifths of total employment.

This is a feature common to most advanced industrial countries, although the process of ‘deindustrialisation’ (as reflected in manufacturing’s share of GDP) has gone further in the US and UK.

Source: ONS

These changes within the labour market have been associated with a steady increase in the number of women participating in employment.

While the total number of male workers has hardly risen since 1979 (from 16.2 to 16.6 million), female employment has increased by 3.7 million (to 14.6 million).

Indeed, among the female working-age population, the proportion of women with jobs has surged from under 50% in 1960 to 74% now.

Over the same period, the employment rate for men has fallen from nearly 95% to 84%. But although the gap between the genders has narrowed, there are still over two million more men at work than women.

Source: ONS

Changes in working patterns include the greater incidence of part-time working and short-term contracts, an increase in the economic activity rate, and longer working hours.

These features collectively reflect the fact that employment in Britain has become more ‘flexible’.

The UK’s labour market has become less regulated, with a reduced role for both government and trade unions.

From the second half of the 1990s, unemployment fell and employment rose, while economic growth was sustained, and inflation subdued.

In Europe, where labour markets are less flexible, unemployment remains a problem and the jobless rate stood at 9.4% in France, 18.1% in Spain and 7.7% in Germany at the end of Q1 2009.

Part-time workers now represent a quarter of total UK employment, and temporary workers 5.0% (although there is some overlap between the two groups).

For employers, the ability to employ part-time workers is an especially valuable aspect of labour market flexibility, making it easier to react to fluctuations in workloads.

From the point of view of employees, part-time jobs typically have a lower earning potential but, interestingly, less than 8% of part-time workers indicate that their reason for working part-time is because they could not find a full-time job. The overwhelming majority of part-time workers (around 75%) do not want a full-time job, suggesting that other factors are more important.

In particular, part-time work is often better suited to some people’s lifestyle choices, especially for people opting to bring up children. It comes as no surprise, therefore, that women are nearly four times as likely as men to have a part time job.

Of the roughly four million rise in the number of people at work in the 20 years since 1987, around two thirds has been accounted for by part-time work, which now represents around a quarter of total UK employment.

Indeed, this form of employment continued to grow during the early 1990s, at a time when total employment was falling sharply, something that happened again in 2008 and 2009.

Source: ONS

A similar development was apparent in temporary employment during the early 1990s.

One of the enduring effects of the 1990–92 recession was to make employers more cautious about expanding their workforces during the early stages of recovery.

As demand subsequently began to pick up, it is possible that employers may have resorted to increasing use of temporary workers to cope with increasing workloads.

The number of workers in temporary jobs rose from 1.3 million in 1992 to 1.8 million in 1997 but has since drifted back down and was 1.37 million in 2008.

Consistent and sustained economic growth over the past decade resulted in a continuous tightening of the labour market, and it is likely that one consequence of this was the transfer of temporary jobs into permanent ones.

But, as the economy slowed and full-time job prospects diminished, the number of temporary jobs again started to rise and in mid 2009 stood at 1.45 million.

There has also been a marked rise in self-employment in the UK, particularly during the 1980s, as more people have opted to set up in businesses on their own.

The number of self-employed workers has grown from under two million in 1979 (7.5% workforce) to 3.8 million in 2007 (some 13.0% of the workforce) and seems to have settled at that level.

The combined total of those in work plus the unemployed forms a group that is referred to as the ‘economically active’ population.

By contrast, the ‘economically inactive’ group is defined as people who are not employed but who do not meet the criteria for ILO unemployment (wanting a job, seeking a job in the last four weeks, and available to start work in the next two weeks).

Economic commentators in the UK tend to concentrate on employment and, especially, unemployment. Because of economic inactivity, however, the unemployment figures represent a surprisingly small fraction of the total number of people not in work.

The proportion of people who are economically active (or inactive) is the activity (or inactivity) rate. As with employment, these rates show the proportion of the working-age population (men aged 16-64 and women aged 16-59) that is economically active (or inactive).

Activity and inactivity are often closely linked to trends in overall economic growth, because strong growth usually encourages higher levels of participation in the labour market.

By contrast, a period of stagnation usually sees higher levels of inactivity as potential workers become discouraged from seeking employment.

This was apparent during the boom years of the late 1980s, when the level of economic inactivity fell from 7.8 million in 1983 to 6.7 million in 1990.

The trend then went into reverse as the recession of the early 1990s bit, with inactivity levels quickly rising back above 7.5 million by 1994 since when it has never again dropped below 7.0 million again. In mid 2009, the level was 7.96 million.

It is clear that although the UK economy has enjoyed steady growth and falling unemployment for a decade or so, this has not been mirrored by falling levels of inactivity.

The inactivity rate meanwhile has remained broadly stable at around 21.5%, over a fifth of the working-age population so inactivity has merely kept pace with the increase in the size of the workforce.

One striking consequence is that the number of economically inactive people of working age has grown from double the number of unemployed in 1984 to over three times in 2009. (In 2007, it was five times.)

So, even though there are more people in work than ever before, it appears that Britain suffers from hidden unemployment.

Among this inactive group are those who:

• have simply been discouraged by not being able to find a job
• have returned to education
• look after the family and home
• have taken early retirement
• are on long-term sickness benefits.

Among middle-aged people who are made redundant or take early retirement from a previous job, it has become more common not to seek work, thereby putting those people into the group classified as ‘economically inactive’.

Certain groups of people classified as inactive may be considered as being closer to being part of the labour market than others.

In particular, those that satisfy the two criteria of wanting a job and looking for work, but are unable to start (someone, for example, who has not yet arranged childcare) are the most likely to become economically active.

Source: ONS

Trends in economic inactivity differ for men and women. Between 1984 and 2009, inactivity rates fell for women from 33% to 26% but increased for men from 11% to 16.5%.

The reasons for inactivity also tend to differ between men and women.

In mid 2009, one third of economically inactive men were described as long-term sick, nearly double the comparable figure for women. Some commentators have speculated that this is an area where so-called ‘hidden unemployment’ may occur.

Developing policies to encourage labour market participation by these groups is fraught with difficulty, and represents a major challenge not only for the UK but for many other developed economies.

Family responsibilities are one of the main reasons why activity rates differ between men and women, with women much more likely to stay at home to look after the family.

In 1994 this was the reason given by 54% of women who were economically inactive, but by 2009 this figure had fallen to 44%.

This doubtless reflects the ongoing social changes of recent decades and in particular the growing economic independence of women generally.

Source: ONS

With overall inactivity rates having moved little over the past few years raising participation in the workforce will be a major challenge over the next decade once the recession ends.

Indeed, issues such as age discrimination, delayed or phased retirement, and ‘family-friendly’ working, are already coming to the fore.

Source: ONS