Employment-to-population ratio

Wednesday, June 17, 2015

Employment-to-population ratio

The Organization for Economic Co-operation and Development defines the employment rate as the employment-to-population ratio. The employment-population ratio is many American economists' favorite gauge of the American jobs picture. According to Paul Ashworth, chief North American economist for Capital Economics, "The employment population ratio is the best measure of labor market conditions." This is a statistical ratio that measures the proportion of the country's working-age population (ages 15 to 64 in most OECD countries) that is employed. This includes people that have stopped looking for work. The International Labour Organization states that a person is considered employed if they have worked at least 1 hour in "gainful" employment in the most recent week.

Background

The employment-population ratio has not always been looked at for labor statistics and where specific areas are economically, but after the recent recession it has been looked at more by the American people, especially economists. The National Bureau Of Economic Research (NBER) states that the recession that began in 2007 ended in June 2009. During 2009 and 2010, however, many areas were still struggling economically, which lies the reason the employment-population ratio still has the eyes of Americans and people around the world.

Key definitions

To understand the use of the ratio some key terms follow...

Employed persons. All those who, (1) do any work at all as paid employees, work in their own business or profession or on their own farm, or work 15 hours or more as unpaid workers in a family-operated enterprise; and (2) all those who do not work but had jobs or businesses from which they were temporarily absent due to illness, bad weather, vacation, childcare problems, labor dispute, maternity or paternity leave, or other family or personal obligations â€" whether or not they were paid by their employers for the time off and whether or not they were seeking other jobs.

Unemployed persons. All those who, (1) have no employment during the reference week; (2) are available for work, except for temporary illness; and (3) have made specific efforts, such as contacting employers, to find employment sometime during the past 4-week period.

Participant rate This represents the proportion of the population that is in the labor force.

Not in the labor force. Included in this group are all persons in the civilian noninstitutional population who are neither employed nor unemployed. Information is collected on their desire for and availability to take a job at the time of the CPS interview, jobsearch activity in the prior year, and reason for not looking for work in past 4-week period.

Multiple jobholders. These are employed persons who, have two or more jobs as a wage and salary worker, are self-employed and also held a wage and salary job, or work as an unpaid family worker and also hold a wage and salary job.

Use

The ratio is used to evaluate the ability of the economy to create jobs and therefore is used in conjunction with the unemployment rate for a general evaluation of the labour market stance. Having a high ratio means that an important proportion of the population in working age is employed, which in general will have positive effects on the GDP per capita. Nevertheless, the ratio does not give an indication of working conditions, number of hours worked per person, earnings or the size of the black market. Therefore, the analysis of the labour market must be done in conjunction with other statistics.

This measure comes from dividing the civilian noninstitutionalized population who are employed by the total noninstitutionalized population and multiplying by 100.