EUROPEAN COMMISSION EUROSTAT WORKING GROUP. Document for item 4.3 of the agenda. Definition of indicators to supplement the unemployment rate

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1 EUROPEAN COMMISSION EUROSTAT Directorate F: Social statistics Unit F-3: Labour market statistics Doc.: Eurostat/F3/LAMAS/11/13 WORKING GROUP LABOUR MARKET STATISTICS Document for item 4.3 of the agenda Definition of indicators to supplement the unemployment rate June 2013 BECH Building Room AMPERE Luxembourg

2 1. Introduction In November 2011 Eurostat and some NSIs started publishing the indicators to supplement the unemployment rates. This release came after methodological work at ESS level to agree common definitions, names and dissemination policy for those indicators. Since then, Eurostat has released those indicators again in April 2012, January 2013 (quarterly data) and April End of 2012, Statistics Austria contacted Eurostat to point out an inconsistency between, on the one hand, the calculation algorithm used by Eurostat and NSIs for the calculation of the indicator 'persons seeking work but not immediately available' and, on the other hand, the definitions agreed at ESS level. The discrepancy was however tiny in the data for most countries. Eurostat studied the situation and concluded that there was a case for correcting the calculation algorithm. Given the very small impact, Eurostat decided in the beginning of 2013 to change the calculation. Eurostat co-ordinated this revision with Austria, Belgium and Italy who were releasing the same indicators at national level. LAMAS was informed by but some delegates asked to discuss the situation at plenary meeting. This document reconstructs the issue and proposes a solution. 2. Problem statement The definitions of the supplementary indicators were first discussed by a dedicated task force. The task force reported to LAMAS in June 2010 (LAMAS document 12/10). LAMAS subsequently continued fine-tuning the definitions, names and other aspects for publication until agreement in the December 2010 meeting (LAMAS document 35/10). The DSS finally endorsed the same definitions in its March 2011 meeting. While the indicators and names proposed by the task force where not identical to those eventually agreed, the task force report is relevant because it includes full definitions of the indicators (section 3.2) and calculation algorithms (annex 1). In particular, the report defines the Potential Labour Force (PLF) as Economically inactive persons with a tangible attachment to the labour market. It is composed of two sub-groups, PLF not available and PLF not seeking, and provides the following calculation algorithm in the annex 1: 1

3 Box1: A/ PLF not available: This is the sum of three sub-groups: 1/ Number of inactive persons actively seeking who are not available to work, i.e. (ILOSTAT='3'), (AVAILBLE='2'), (SEEKWORK='4'), ((METHODA='1' or METHODB='1' or METHODC='1' or METHODD='1' or METHODE='1' or METHODF='1' or METHODG='1' or METHODH='1' or METHODI='1' or METHODM)). 2/ Number of inactive persons who found a job starting < 3 months and are not available1 i.e. (ILOSTAT='3'), (SEEKWORK='1'), (AVAILBLE='2') 3/ Number of inactive persons who found a job starting > 3 months, i.e. (ILOSTAT='3'), (SEEKWORK='2'). B/ PLF not seeking: This is the sum of two sub-groups: 4/ Number of inactive persons available to work but not seeking but wanting to work, i.e. (ILOSTAT='3'), (WANTWORK='1'), (AVAILBLE='1'), (SEEKWORK='3') 5/ Number of inactive persons available to work and seeking only through passive methods (J, K or L), i.e. (ILOSTAT='3'), (AVAILBLE='1'), (SEEKWORK='4'), ((METHODJ='1' or METHODK='1' or METHODL='1') and (METHODA '1' and METHODB '1' and METHODC '1' and METHODD '1' and METHODE '1' and METHODF '1' and METHODG '1' and METHODH '1' and METHODI '1' and METHODM '1')). Also included in this group are the inactive persons reporting that seeking and available to work and which cannot identify any search method: (ILOSTAT='3'), (AVAILBLE='1'), (SEEKWORK='4'), (METHODA='0' and METHODB='0' and METHODC='0' and METHODD='0' and METHODE='0' and METHODF='0' and METHODG='0' and METHODH='0' and METHODI='0' and METHODJ='0' and METHODK='0' and METHODL='0' and METHODM='0') Subsequently, LAMAS agreed to rename the indicators and change the definitions as regards moving the group called 5 above from B to A (document 35/10). LAMAS document 35/10 does not spell out the new definitions for the indicators, but it makes clear that "The indicator 'persons seeking work, but not immediately available' is the same as the TF proposed 'potential labour force not available', with only one change [moving group called 5 above from B to A]". LAMAS document 35/10 includes a calculation algorithm in annex II, as follows: Box 2: A/ Persons seeking work but not immediately available : This is the sum of: 1/ Number of inactive persons actively seeking who are not available to work, i.e. (ILOSTAT='3'), (AVAILBLE='2'), (SEEKWORK='4'). 2/ Number of inactive persons who found a job starting < 3 months and are not available 1 i.e. (ILOSTAT='3'), (SEEKWORK='1'), (AVAILBLE='2') 3/ Number of inactive persons who found a job starting > 3 months, i.e. (ILOSTAT='3'), (SEEKWORK='2'). 5/ Number of inactive persons available to work and seeking only through passive methods or not indicating the method, i.e. (ILOSTAT='3'), (AVAILBLE='1'), (SEEKWORK='4') B/ Persons available to work but not seeking : This is the sum of: 4/ Number of inactive persons available to work but not seeking but wanting to work, i.e. (ILOSTAT='3'), (WANTWORK='1'), (AVAILBLE='1'), (SEEKWORK='3') 2

4 The differences between box 1 and box 2 are at the core of the issue here. In addition to the changes in the indicator names, and moving group 5 from B to A, the other change here is a new calculation algorithm not involving the EU LFS variables METHODA to METHODM. Eurostat made this change with the understanding that both where fully equivalent and it would be preferable to have a simpler, neater calculation algorithm using fewer variables. This new and simpler calculation algorithm without METHODA to METHODM variables was in the document 35/10 approved by LAMAS. It was also used in the document that DSS endorsed in March Finally, Eurostat asked LAMAS to validate country estimates in May 2011, also against the same calculation algorithm, and no issue was noted by any LAMAS member. However, while the formulations in boxes 1 and 2 for group 5 are fully equivalent 1, they are not fully equivalent for group 1. The difference is in those persons economically inactive, not available to work, reporting to be looking for work (SEEKWORK) but not reporting to be using any method METHODA to METHODM. Otherwise said, the calculation algorithm in box 2 does not check that the persons are active jobseekers, just that they are jobseekers. The impact in the estimates of difference between algorithms in boxes 1 and 2 is very small in most countries: Table 1: Impact of the change in 'Persons seeking work not immediately available' (thousands of persons) AT BE BG CH CY CZ DE DK EE ES FI FR GR HR HU IE IS IT LT LU LV MK MT NL NO PL PT RO SE SI SK TR UK EU Given that the name of the sub-group 1 still refers to actively seeking people, but the list of variables does not, the question is which one prevails. There are two alternatives: i) Number of inactive persons seeking who are not available to work, i.e. (ILOSTAT='3'), (AVAILBLE='2'), (SEEKWORK='4'). ii) Number of inactive persons actively seeking who are not available to work, i.e. (ILOSTAT='3'), (AVAILBLE='2'), (SEEKWORK='4'), ((METHODA='1' or METHODB='1' or METHODC='1' or METHODD='1' or METHODE='1' or METHODF='1' or METHODG='1' or METHODH='1' or METHODI='1' or METHODM)). Eurostat thinks alternative ii better reflects the general understanding of the LAMAS and DSS during the discussions, even if it requires re-introducing EU LFS variables METHODA to METHODM in the estimation of the supplementary indicators. It is for this reason that Eurostat proposes to reintroduce it in the definition of the indicator 'persons seeking work but not immediately available'. It is most important that LAMAS agrees one single interpretation to be equally applied in all countries. 1 Somebody who is inactive, available for work, and seeking work, cannot seek work actively otherwise he would be either employed or unemployed. 3

5 3. Conclusion As seen, the differences are very small and they are due to an unintended, overlooked error. However, given the effort already put into having common ESS definitions of the supplementary indicators, it is worth that LAMAS discusses it again and agrees a common interpretation for the group 1 listed above. The LAMAS working group is invited to - give its opinion on the alternatives i and ii for group 1, part of indicator 'Persons seeking work but not immediately available' - agree a common calculation algorithm to prevent any discrepancy in national and Eurostat publications. 4