Understanding Economically Active, Inactive, and Employed Populations

Posted on Dec 2, 2024 in Economy

Economically Active Population

A group of people of a certain age who are working or want to work in economic activities. According to the ILO definition:

  1. Group of people from a certain age (usually the age of completion of compulsory education, varying by country).
  2. At a certain age, working or seeking work (unemployed). It does not count people who have not sought employment.
  3. Engaged in economic activities, defined by national accounting plans for data homogenization (e.g., EUROSTAT in the EU). Economic activities include:
    1. Production of goods and services for the market (public or private).
    2. Public service activities not destined for the market.
    3. Production for household consumption.
    4. Production of goods or real estate for personal consumption (e.g., building a house to live in).
    5. Excludes housework.

This population is measured through surveys, such as the Labour Force Survey (LFS) in Spain.

Population in the Labour Force Survey

People who are working are referred to as the employed population. An employed person is 16 years or older, performing work for pay or engaged in gainful activity for at least one hour in the reference week. To be considered employed:

  1. People working for at least an hour in the reference week for salary or other remuneration (monetary or in kind).
  2. People with jobs but who have not worked in the reference week (vacation, sick leave, etc.).

The following are not considered employed:

  1. Unpaid family or household work.
  2. Unpaid social services or charity work.
  3. Entrepreneurs, freelancers, and cooperative members working in the same company.
  4. People on lay-off with a weak employment link.
  5. Occasional or intermittent workers who did not work in the reference week due to inactivity.

Unemployed People

Those who have sought a job without success. To be considered unemployed, three requirements must be met:

  1. Searched for a job during the month preceding the reference date.
  2. Being without work during the reference week.
  3. Available to work within two weeks from the Sunday following the survey date.

This includes those who have worked even one hour in the reference week but are seeking other employment, those affected by a suspension record but not returning to work, etc.

Types of unemployment:

  1. Frictional Unemployment: Due to the normal functioning of the economy (sometimes called “natural unemployment”).
  2. Structural Unemployment: People unemployed for over a year, often associated with age.
  3. Cyclical Unemployment: Occurs during periods of moderate economic growth.

Inactive Population

Persons under 16 years and those aged 16 or older who are not available for work, or those who are available but do not work. The potentially active are those who could work but do not. The Labour Force Survey measures:

  1. Inactivity status is not constant; it changes between active and inactive.
  2. Inactive population data helps determine future labor supply and demand.
  3. Inactive groups are important for employment policy.

Who are the inactive?

  • Group 1: Work from home, without other economic activity.
  • Group 2: Students.
  • Group 3: Retired or early retirement.
  • Group 4: Receive a pension other than retirement or early retirement.
  • Group 5: Perform social services and benefits (excluding family allowances).
  • Group 6: Unable to work.
  • Group 7: Other situations not covered above.

Reasons for inactivity:

  1. Without work but available (not seeking employment for various reasons, including discouragement or suspension).
  2. Not available for work (elderly, disabled, pensioners, students, etc.).
  3. Population counted separately.

Activity Rate

The percentage of the population aged 16 and older who are in the workforce. (Activity Rate = (Economically Active Population / Population 16+) * 100). A higher activity rate is generally desired. This rate can be calculated by age, gender, and education level.

Employment Rate

The number of employed persons per 100 of the population aged 16 and older. (Employment Rate = (Employed Population / Population 16+) * 100). Data can be cross-referenced.

Unemployment Rate

The percentage of the economically active population that is unemployed. (Unemployment Rate = (Unemployed Population / Economically Active Population) * 100). This rate measures overall unemployment as a percentage of the labor force.