Questions & Answers on Unemployment Figures with the ONS

With the current fall in unemployment surprising and delighting people, I contacted Bob Watson of the Office of National Statistics for more information on compiling the figures and on the work of the Labour Market Division.

I asked Bob the following questions:

How does the Claimant Count relate to the Labour Market (LMS) Survey?

The Claimant Count is the number of people receiving benefits principally for the reason of being unemployed. It does not measure unemployment - for the UK as a whole the Claimant Count is only around half the level of unemployment. However, the two have very similar properties. When the Claimant Count is rising it is likely that unemployment is rising, when the Claimant Count is falling it is likely that unemployment is falling. It is also the case that if an area has a relatively high proportion of people on the Claimant Count, it is likely to have a high proportion of people unemployed. Consequently, it can be a useful indicator to reflect areas of high and low unemployment. Consequently, it is used, along with other information, as one of the indicators in the Indices of Multiple Deprivation, which I will get to in a minute.

Are there other ways the government looks at people on very low incomes?

The Claimant Count is only one indicator out of many aspects of deprivation. This is where the Indices of Multiple Deprivation come in. These are not an ONS set of statistics, but are produced by the Department for Communities and Local Government (DCLG). The latest versions were published in September 2015.

https://www.gov.uk/government/statistics/english-indices-of-deprivation-2015

For further information on Indices of Multiple Deprivation IMDs, I would suggest contacting the Department for Communities and Local Government (DCLG).

How do you conduct the Labour Market (LMS) Survey?

The Claimant Count does not measure unemployment. In fact, the measurement of the two are totally independent, with no reference made to benefits within the determination of whether someone is unemployed or not. The Claimant Count comes from administrative data from the benefits system. Measurement of unemployment, however, comes from a household survey, based on interviews conducted with around 40,000 households. As part of the interview, the members of the household are asked if they did any paid work in the reference week. You will note that if they had a zero-hours contract that they did not do any work on, the answer would be no. They must have done paid work. If they did, then they are considered to be employed. Further questions would then check to see whether they meet any of the other criteria of employment; self-employed, government supported trainee, unpaid worker in family's own business, HM Forces.

If through these questions you establish that they did not meet any of the criteria of being employed, then they are asked whether they carried out any actions to look for work during the reference week and whether they would have been available to work if they had found suitable employment. This meets the international criteria of the agreed definition of being unemployed - to not be in work, but be seeking and available for work. Notice that these questions do not make any reference to any benefits that they may or may not be claiming.

Finally, if they are not in work (employed) or out of work, actively seeking and available for work (unemployed) they would be classified as economically inactive.

How will Universal Credit (UC) affect these figures?

The existence of Universal Credit does not have any direct impact on the ability to produce unemployment figures.

However, Universal Credit is affecting our ability to produce accurate Claimant Count figures (as shown above a totally separate indicator from unemployment). This is why the Claimant Count is currently labelled as Experimental, rather than a National Statistic. We are working toward a position where we will be able to produce a Claimant Count that we are confident in, but there are still a number of stages to go to ensure that the information we get from DWP is correctly identifying the appropriate Universal Credit claimants.

Unemployment is said to be low, so how come so many people are in the High Street, should they not be at work? Back in the 80’s my local High Street, Colchester looked empty in photographs during the business day?

To borrow a psychologist’s, hat for a minute - we are always convinced that things are worse than they are and they were somehow better in some halcyon bygone day. Now to put my statisticians hat back on.

On a more serious note, we measure how many people are unemployed in line with the International Labour Organisation's internationally agreed definition of unemployment as given above. This does not necessarily match people's ideas of what unemployment means, having their own ideas about a wider catchall measure that they are not entirely sure of the definition of, but includes far more people than the official definition. Sometimes the definition given will meet a different concept of 'underemployment', which take into account unemployed and those who are employed but could work more hours. Sometimes they will think of some vague parts of the economically inactive as being unemployed, expecting a wider 'workless' definition.

Based on the survey information from the Labour Force Survey, we have record numbers of people in work (often the case as the population increases). However, we also have a record proportion of the population aged 16-64 in work. This is partially fuelled by record numbers and proportions of women in work, partially driven by the changing nature of society, partially driven by changes to benefit rules, partially driven by changes to the female state pension age.

However, the labour market has changed significantly over the last 30 years. Higher proportion of the population are employed part-time, although the numbers who work part-time because "they couldn't find a full time job" has not soared enormously, suggesting that they are happy with their part time work. There is also vastly increased flexibility in what hours and days people work, with more late/early/weekend working than we once had.

So we have record high proportions of people employed, and record low proportions of people economically inactive.

As mentioned before, the Claimant Count is currently experimental, as it is under development. Currently we 'know' that the figures we are getting aren't quite right. However, we do believe them to be fairly close and we know what kind of deficiencies they have. Generally, the Claimant Count is based on raw data files extracted from DWP systems which are passed to us for processing. You could argue that it is possible for DWP to 'tamper' with those files. However, I'm not sure what they would gain from this. The Claimant Count is not the headline measure - unemployment is, and as explained this has nothing to do with the benefits system and could not be directly affected by DWP. The Claimant Count is only really useful in that it provides information at a level that unemployment can't, but looking like unemployment. If it was tampered with to stop looking like unemployment, it would stop being as useful. Whilst unemployment is the main measure and is totally independent of ministerial control, there would be no point deliberately tampering with the Claimant Count.

How do the public know that your figures are correct? Do you ever have any survey carried out checking the work of the ONS?

I can't say that surveys on confidence on ONS statistics are my area of expertise. We have regular surveys with "key account" holders reflecting the main stakeholders. Generally, these people have a certain level of confidence in our statistics, often want us to be able to produce statistics of higher quality - but never suggest that there is any question on the honesty or integrity of the statistics that we produce. There is also ongoing review and assessment of what we do and the statistics we produce. This work is carried out by the UK Statistics Authority - who are basically there to police what we and other government statistic producers do.

In addition, we have some online user feedback surveys, but I'm going to have to admit to really not knowing too much about these. (I know all about the ones to do with the quality and usability of our websites, less about public confidence in our data).

As a general rule of thumb, if we say that unemployment is going up (like we did in the economic downturn) people believe us and use our figures to shake their fists at the government. If we say that unemployment is going down, then it is all government lies and we are all trained government lap dogs.

The biggest problem we have is this persistent public expectation that the measurement of unemployment is in some way directly linked to benefits.

WOW, thank you Bob for those answers! This was a very interesting discussion, and on behalf of our audience I do thank you for taking the time to explain more about the work of your Labour Market Division, and that of the Office of National Statistics (ONS) in general.