Irish Unemployment Rate

Paleface

Can someone tell me if we count people who are not actively looking for work in Ireland as part of our unemployment rate?

As far as I know we do and I wonder if its a fair reflection of the state of our economy or not. In 2001 when the economy was booming we had a record low unemployment rate of 3.7%.

I would imagine that the vast majority of people who were unemployed at that time were not looking for work and had no intention of doing so fullstop. This is proven by the influx of foreign workers who filled the positions left by this percentage of people who felt they were happoer the way they were.

My point is there will always be a certain percentage of people who just do not want to work and will live off social welfare for the vast majority of their lives.

Now I'm not here to beat those people over the head with a stick. The system is there to allow them to do so and its their decision at the end of the day.

I'm just curious as to why we don't follow the US model of only counting people who want to work as being unemployed. Today they announced a lower rate of unemployment (6.7 %) simply because more people have stopped actively looking for work. The reality is that the number of people who are unemployed is much higher.

Do any of our European counter parts follow the same practice? Do we have to use the system we are using due to EU regulation?

Our unemployment rate is something thats always talked of when we are being compared to other countries and I am curious to know why we calculate it to always include people who are effectively not part of the workforce.

Nino Brown

They do record the correct figure in the US, its called the U-6 I think. They just like to report more politically favourable numbers, just like the CPI.

http://portalseven.com/employment/unemployment_rate_u6.jsp

ardmacha

I would imagine that the vast majority of people who were unemployed at that time were not looking for work and had no intention of doing so fullstop.

This is partly true. However, at least some of them were in transition between jobs, had a seasonal gap or the like, but with every intention of working in the near future.

Paleface

Thank for the info.

So according to that graph our unemployment rate is lower than the real figure for the US.

Why aren't we told this?

My question still stands though. Why do we calculate it the way we do and is the US the only country that paints a brighter picture about it by only including their effective workforce at that time?

Nino Brown

Paleface wrote: »

My question still stands though. Why do we calculate it the way we do and is the US the only country that paints a brighter picture about it by only including their effective workforce at that time?

Just my opinion, but 71% of the US economy is consumer spending, and consumers don't spend when economic data is negative. So the US fudge whatever numbers they can to create the illusion of a recovery, and generate the "wealth effect" so people will spend.

We wouldn't achieve much if we reported numbers the same way, we'd only be fooling ourselves. Plus we have a much more generous benefits system in this country, so we can lie about the unemployment number but the social welfare spending will tell the truth anyway. In the US, many unemployed receive very little.

sock puppet

Nino Brown wrote: »

They do record the correct figure in the US, its called the U-6 I think. They just like to report more politically favourable numbers, just like the CPI.

http://portalseven.com/employment/unemployment_rate_u6.jsp

There is an economic reason to only count those seeking work. My limited understanding is that the unemployment rate is used as a way to measure a country's output gap between actual and potential output. If people drop out of the labour force that reduces potential output so the gap is narrowed. If you were the count those people as unemployed then the output gap would seem bigger than it really is, so governments and central banks might end up trying to close an output gap that doesn't exist.

Nino Brown

sock puppet wrote: »

There is an economic reason to only count those seeking work. My limited understanding is that the unemployment rate is used as a way to measure a country's output gap between actual and potential output. If people drop out of the labour force that reduces potential output so the gap is narrowed. If you were the count those people as unemployed then the output gap would seem bigger than it really is, so governments and central banks might end up trying to close an output gap that doesn't exist.

But they have access to both sets of figures, so they're not going to act on bad data to try to close any gaps, they just always choose to report the "good" data.

sock puppet

Nino Brown wrote: »

But they have access to both sets of figures, so they're not going to act on bad data to try to close any gaps, they just always choose to report the "good" data.

True. Though I thought part time workers weren't usually included in unemployment rates?

Nino Brown

sock puppet wrote: »

True. Though I thought part time workers weren't usually included in unemployment rates?

I think if you're part time by choice, you're not included. But if you're part time but would rather be full time then you are. I'm not sure though, I don't know much about how its calculated

carpejugulum

The government is already lowering the rate by excluding as many people out of the labour force as possible.

Geuze

Employment and unemployment is measured by a survey of households.

It is known as the QNHS - Quarterly National Household Survey.

See here:
http://www.cso.ie/en/qnhs/releasesandpublications/qnhs-calendarquarters/


Here is the most recent survey:
http://www.cso.ie/en/media/csoie/releasespublications/documents/labourmarket/2013/qnhs_q32013.pdf

Geuze

The QNHS uses two measures of employment and unemployment.

The first is the ILO meaure - Intl Labour Office.

The primary classification used for the QNHS results is the ILO (International Labour Office) labour
force classification. Labour Force Survey data on this basis have been published since 1988. The
ILO classification distinguishes the following main subgroups of the population aged 15 or over:

In Employment: Persons who worked in the week before the survey for one hour or more for
payment or profit, including work on the family farm or business and all persons who had a job but
were not at work because of illness, holidays etc. in the week.

Unemployed:Persons who, in the week before the survey, were without work and available for work
within the next two weeks, and had taken specific steps, in the preceding four weeks, to find work.

Inactive Population (not in labour force): All other persons.

The labour force comprises persons employed plus unemployed.


So every adult is either employed or unemployed or inactive. The ILO measure has just three categories.

Geuze

Note that to be unemployed according to ILO measure, you must have:

"in the week before the survey, were without work and available for work
within the next two weeks, and had taken specific steps, in the preceding four weeks, to find work."

Of course, people may lie, but that is true of all surveys.

Geuze

Paleface wrote: »

Can someone tell me if we count people who are not actively looking for work in Ireland as part of our unemployment rate?

I'm just curious as to why we don't follow the US model of only counting people who want to work as being unemployed. Today they announced a lower rate of unemployment (6.7 %) simply because more people have stopped actively looking for work. The reality is that the number of people who are unemployed is much higher.

Do any of our European counter parts follow the same practice? Do we have to use the system we are using due to EU regulation?

Our unemployment rate is something thats always talked of when we are being compared to other countries and I am curious to know why we calculate it to always include people who are effectively not part of the workforce.

If you aren't looking for work, then you aren't counted as unemployed in the QNHS.

goose2005

Paleface wrote: »

Can someone tell me if we count people who are not actively looking for work in Ireland as part of our unemployment rate?

As far as I know we do and I wonder if its a fair reflection of the state of our economy or not. In 2001 when the economy was booming we had a record low unemployment rate of 3.7%.

I would imagine that the vast majority of people who were unemployed at that time were not looking for work and had no intention of doing so fullstop.

Many were between jobs. If there were 4% unemployed in January and 4% unemployed in July, there's no guarantee that those are the same people. Many of those who had jobs in Jan lost them, many who were unemployed In Jan are working in July. An unemployment rate of 0% would actually be bad because companies would find it impossible to hire people.

moxin

Around 85,000 are on activation schemes, worthwhile or not. Together with emigration, its a handy way of reducing the unemployment rate and presenting the face of an "improving economy". The activation schemes won't help the overall welfare bill, new jobs do, they cannot hide that.