June 1998 - Ref 688
Unemployment, inactivity and non-employment

Internationally agreed definitions of unemployment are based on those actively looking for work. However, they do not show the number of people who would come forward for work if more jobs were available. A recent study by the Employment Policy Institute has looked at patterns of economic inactivity over the last 20 years and the similarities and differences between those classified as unemployed and those classified as economically inactive. The study found that:

• Only one out of every five people of working age who are not working, is classified as unemployed. The main distinction between the definitions of unemployment and of economic inactivity is whether someone has actively looked for work in the immediate past.
• Half of all movements from non-employment into employment involve people who were previously classed as inactive. Some groups of inactive people are at least as likely to get jobs as those who are classified as unemployed. There is also considerable two-way movement between inactivity and unemployment. It therefore makes sense to regard the unemployed and the inactive as part of a spectrum.
• There has been an increase in inactivity among men, particularly those over 50, of whom a quarter are now inactive. Much of the increase took place between the late 1970s and the mid-1980s. Most inactive men are not available for work because of sickness or disability.
• Inactivity is concentrated among those with few or no qualifications. Nearly a third of working-age men with no qualifications are inactive.
• There has been a fall in inactivity among women, particularly those who are well qualified, who have children, and live with partners who have jobs. Most inactive women are looking after the family or home.
• Inactivity, like unemployment, has become more concentrated in households where nobody has a job.
• Regions with high levels of unemployment also have higher levels of inactivity, and this is concentrated among those with relatively poor job prospects.

Active women, inactive men

Excluding students, around a quarter of the working age population (around 7 million people) is classified as economically inactive. This proportion has not changed much over the last twenty years, but its composition has changed markedly. Twenty years ago only 5 per cent of men were inactive, while the proportion is now 13 per cent (an increase of around two million). In contrast, the inactivity rate for women has fallen from 35 per cent to 27 per cent.

There has been a particularly dramatic increase in inactivity in men over 50. Twenty-eight per cent of men over 50 are now defined as inactive compared with only 7 per cent in the 1970s. Much of this increase took place between the mid-1970s and the mid-1980s. There has been a similar quadrupling of the inactivity rate among men under 50; 8 per cent are now neither students nor economically active, up from only 2 per cent in the 1970s.

For women, the fall in inactivity has been concentrated among those between ages 25 and 49. The increase in economic activity has been the most dramatic among mothers of children under age 2. Only a quarter of this group were economically active in the 1970s, while over half are now.

Qualifications matter

Both inactivity and unemployment are concentrated among men and women with few or no educational qualifications. Nearly one-third of all men of working age with no educational qualifications are inactive, compared with around one in ten of those with qualifications of O level/GCSE level or above.

Among women, inactivity rates halved for graduates from 23 per cent in the late 1970s to 12 per cent in 1997. There were also increases in economic activity among those with qualifications at A level and O level/GCSE. Inactivity rates remained broadly unchanged among those with lower qualifications (at 40 to 45 per cent).

Workless households

The increase in female activity rates has not produced an increase in the proportion of households where the woman is working and the man is not. The decline in female inactivity has occurred only among women who have working partners. Three-quarters of mothers living with a working partner were economically active in 1997, up from 55 per cent in the late 1970s. Similarly, 85 per cent of women without children and living with a working partner were economically active, up from 75 per cent in the late 1970s.

Inactivity among lone mothers, at around 50 per cent, has been stable since the early 1980s. Women whose partners are not working have also had stable inactivity rates over this period (around 65 per cent if they have children, around 50 per cent if they do not).

There has been a large rise in the proportion of households of working age where none of the adults has a job. Within this broad pattern several other features emerge. In 1981, 38 per cent of unemployed people lived in households where nobody had a job. By 1997, 58 per cent did. Similarly in 1981 only a quarter of the inactive lived in households where nobody had a job, but by 1997 over half did.

Part of the explanation is the increase in the number of single adult households. The proportion of the workless who live alone doubled between 1981 and 1997. There has also been a large increase in non-working lone parents living with their children. In addition, two-adult households with no children where neither partner works have also increased.

Disguised unemployment?

Statistical definitions produce a sharp divide between the unemployed and the economically inactive, but in reality it makes more sense to consider all those without work as being on a spectrum. At one end, where people are defined as unemployed, will be those currently engaged in active job search, and at the other end will be those who do not intend ever to seek work.

In between there are those who would like to work, but are not actively looking for work at the moment. They are all defined as inactive. They include those who believe that no work is available, are waiting for a child to start school, recovering from an illness or accident, finishing a training course, or simply have not got round to it. Then come those who do not want to work immediately, but would want and expect to do so at some stage in the future. Finally, there is a group who might work at some point if the circumstances were right.

When asked what was the main reason for their inactivity, in 1997 nearly two-thirds of inactive men described themselves as sick or disabled and a further 15 per cent as retired. Eight per cent were looking after family or home. Among women this was the reason given by three out of five for their inactivity, while a quarter described themselves as sick or disabled. Only 1 per cent of the inactive described themselves as discouraged, while 10 per cent gave other reasons.

The rising incidence of sickness among men is concentrated among those with few or no educational qualifications. Among women with low educational attainments the same pattern is apparent. More generally, this development has occurred at a time of rising standards of health among the population as a whole, although other sources also show an increase in long-term illness or disability among the population under pension age. One explanation is likely to be that illnesses or impairments which in the past were not a significant obstacle to getting or keeping a job have become so in the current labour market.

The regional pattern of male inactivity mirrors the pattern of male unemployment. On average an additional percentage point on the regional unemployment rate is associated with an additional two percentage points on the regional inactivity rate. This suggests that often inactivity levels are masking high unemployment levels due to poor job prospects for those with low skills. Moreover, there may be some asymmetry in the relationship. Inactivity rises as unemployment rises, but does not fall to the same extent as unemployment falls.

Movements between states

Between 1996 and 1997 around 13 per cent of the unemployed became inactive each quarter (around a third of those who ceased to be unemployed). Around 5 per cent of the inactive got jobs, and a similar proportion became unemployed. This means that every three months around 700,000 people become inactive, and a similar number leave inactivity.

Nearly half the moves into work in any quarter come from the previously inactive, not from the unemployed. Similarly, over half the moves into unemployment come from those leaving inactivity rather than those leaving jobs.

The crucial feature in defining whether someone is unemployed or economically inactive is active job search. As soon as an inactive person engages in job search they become unemployed. As soon as an unemployed person takes a break from job search they become inactive.

If we take all those who were unemployed or inactive between the spring of 1995 and the spring of 1996 and examine where they were three months later, we find that although those unemployed for under six months were most likely to be in employment, the inactive who had been seeking work but were not available to start work immediately were as likely to be in jobs as the 6-12 month unemployed, and twice as likely to be working as the 12 months plus unemployed. Moreover, among the 4 million inactive people who claimed that they did not want work, 140,000 were employed three months later. Those unemployed for more than twelve months were twice as likely to become inactive as they were to get a job.

These figures confirm two points: that internationally agreed definitions of unemployment do not include all those who are available to work, and that the boundary between unemployment and inactivity is defined as much by the state of the economy and job prospects as it is by objective circumstances.

About the study

This study forms part of the Foundation's 'Work and opportunity' programme. Two of the key strands of the programme cover research into bridges and barriers into employment and research into the distribution of work. This project, which is based on analysis of the Labour Force Survey, takes all those of working age who are not working, whether or not they meet statistical definitions of unemployment, and considers whether they are likely to want or be able to work either now or in the future, and how close they are to getting employment.

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