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The need for underutilisation measures

The number of people unemployed and the unemployment rate are widely used as indicators of labour market performance and unutilised labour resources in the economy. For many years the measure of unemployment and the unemployment rate have been criticised from both an economic and social perspective. Some of the main criticisms are that the unemployment rate:

  • fails to capture labour market downturns in all contexts
  • does not fit with common perceptions of ‘lack of work’
  • is no longer sufficient on its own in increasingly diversifying labour markets to describe all aspects of attachment to the labour market and insufficiency in paid work 
  • fails to capture the economic hardship experienced by individual workers.

In response to these criticisms, the International Labour Organization (ILO) undertook work to review unemployment measures and other current indicators of the labour market. As a result of this work, the ILO published the report Beyond unemployment: Measurement of other forms of labour underutilisation in 2008. It concludes that:

“…the standard definition of unemployment is essentially sound and the resulting data meaningful. The concept should be maintained and continue to be measured as precisely as possible. But, at the same time, the statistical community should devote serious efforts to introduce, at a par with unemployment, a supplementary concept which measures the employment problem as experienced by individual workers. Thus, the measure should be able to reflect not only total lack of work as measured by unemployment, but also other insufficiencies in the volume of work …”(ILO Working Group on Underutilization, 2008).

In October 2013 at the 19th International Conference of Labour Statisticians, new recommendations for the standard measurement and reporting of underutilisation measures were agreed upon as this supplementary concept.

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