Unemployment, Permanent Sickness, and Nonwork in the United Kingdom

Employment, unemployment, and inactivity need to be studied in real historical time, not in the context of theoretical, timeless, market-clearing equilibrium. Four data sets from the UK Census, the Labour Force Survey, the Department of Employment, and Social Security Statistics are used to show changes in employment, unemployment, inactivity, and permanent sickness between 1971 and 2001. The different sources confirm that unemployment becomes increasingly unreliable as a measure of labour market slack. In low-opportunity labour markets many potential workers are not part of the labour force; they are not looking for work or are classified as unemployed. Low levels of opportunity add to measured sickness. The general rule is the greater the degree of labour market slack, the less appropriate unemployment is as a measure of labour reserve.