By Andy Beharrell (auth.)
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Extra resources for Unemployment and Job Creation
The take-up rate on most benefits is far from 100%, simply because people are unaware that they are entitled to them. The unemployment figures can be further distorted by changes in the labour supply. Those who are considered to be 'economically inactive' - that is not working and not eligible for benefit - are not counted as part of the labour supply. So if people are re-defined from unemployed to inactive the unemployment figures fall, even though true unemployment does not. This was particularly true in 1987 when benefit changes and 'restart' interviews dissuaded many people from claiming.
In this calculation they use the criterion that a person must have actively sought work at a 26 Unemployment and Job Creation government job centre in the previous week. If this time limit is extended to four weeks, as in the International Labour Organisation (ILO) definition, then another 100-200,000 are added to the unemployed. But there is an altogether different approach to calculating the 'headline' figure of unemployment. This is the figure that is given monthly by the media, and that attracts so much political attention, when their message seems better than that of the official statistics.
The third important spending group is the government. We have already mentioned their investment spending, but more important in many ways is their current spending on goods and services - wages for their employees, books for schools, medical supplies for the hospitals and so on. This spending is often politically difficult to change and there are always many calls to increase spending in various areas, but the overall level is basically determined by the government's aims and objectives. Some of the spending is out of their hands - for example as unemployment increases so the level of welfare spending increases automatically with the number of claimants.