Here is a quick test: what is the definition of 'unemployment rate' and roughly how many lone parents are unemployed?
If your answers were that "the unemployment rate is the proportion of working-age people who are not working" and that "quite a lot of lone parents are unemployed" then you definitely need to read this section.
The term 'unemployed' has an agreed international definition, set down by the International Labour Organisation (ILO), which is used in all surveys and analyses.
So, the term 'unemployed' is much narrower than those who are not working. It does, for example, exclude most non-working lone parents and disabled people as they are deemed not to meet the 'available to start work immediately' criterion. Note, however, that the term 'unemployed' is wider than those in receipt of the unemployment benefit, Jobseeker's Allowance (JSA). One reason is that recipients of JSA also have to pass either a contribution-based test or a means-test. Another reason is that the value of JSA is actually the same as the value for the other out-of-work benefits Income Support and Incapacity Benefit so there is not reason for either the individual or the system to strive to make sure that they are in receipt of JSA rather than these other benefits.
Those classified as unemployed plus those who are working are together defined as the 'economically active' population and the rest of the population is defined as the 'economically inactive' population.
The 'unemployment rate' is then defined as those who are ILO unemployed as a proportion of those who are economically active (not as a proportion of the whole population).
So, for example, the unemployment rate among lone parents is actually around 10% even though almost half of all working-age lone parents are not working.
Does all this mean that we can simply ignore the economically inactive when looking at issues of work? The answer is emphatically not. First, the fact that they are not working means that they have no earned income and many are therefore poor. Although clearly not all will be poor as their spouse might be working or they might have substantial income from savings. Second, many of them say that they want to work and it is just due to their personal circumstances that they count as economically inactive rather than unemployed (e.g. lone parents would have to make arrangements for childcare). Third, their numbers are large, much larger than those who are ILO unemployed.
In reaction, surveys such as the Labour Force Survey draw a distinction between 'the economically inactive who want work' and 'the economically inactive who do not want work'.
From a lacking work perspective, the concern is then with both those who are unemployed and those who are economically inactive but want work. The 'lacking but wanting work' rate is defined as the combined number in these two categories divided by the overall population.
The final distinction that is sometimes drawn is between those who are employed and those who are self-employed plus (with the employed group) whether they are working full-time or part-time. These distinctions are largely for practical reasons; for example, it is much more difficult to estimate the hourly rate of pay for someone who is self-employed and thus analyses of low pay are usually restricted to those who are employed only.
The diagram below summarises this discussion (where those groups who are of concern from a lacking work perspective are highlighted in yellow).
The work status of a household is simply the combined work status of all the adults in that household. From a lacking work perspective, the main concern here is with 'workless households', which are households where none of the adults is in paid work.
Analysis of low income by work status is typically done by 'benefit unit' rather than by either individual or household. The main reason that individual work status is not used is that it would group together individuals in households where no one is working with non-working spouses of rich individuals. The main reason that household work status is not used is that, apart from a simple division between working and workless households, there are an infinite number of number of combined work statuses at the household level just as there are an infinite number of household types. For a discussion on the definition of a 'benefit unit' and its relationship with the term 'household', see the page households, families and benefit units. In summary, a benefit unit is an adult plus their spouse (if applicable) plus any dependent children they are living with. The term 'family' is then just a user-friendly term for 'benefit unit'.
Because a benefit unit contains precisely one or two adults, there are a limited number of possible work status that it can have. In the main relevant survey, Households Below Average Income, benefit units are allocated to one of 8 work statuses, as set out in the table below.
|Major grouping||Minor grouping|
|Self-employed||One or more self-employed.|
|All working||Single or couple, all in full-time work|
|Couple, one in full-time work, one part-time|
|Part working||Couple, one in full-time work, one not working|
|No full-time work, one or more in part-time work|
|Workless||Workless, head or spouse aged 60 or over|
|Workless, head or spouse unemployed|
|Workless, other economically inactive|
Note that these statuses are implemented in a hierarchical fashion. So, for example, all benefit units containing someone who is self-employed are in the 'self-employed' group whilst every benefit unit in all the other groups contain no one who is self-employed.