Labour Force Participation, Employment and Unemployment Indicators

Labour-market indicators classify people in a specified population group as employed, unemployed or outside the labour force. The Labour Force Participation Rate (LFPR) measures participation in the labour market, the Worker Population Ratio (WPR) measures the share actually employed, and the Unemployment Rate (UR) measures unemployment only among labour-force participants. Their values depend on the age group, reference period and activity-status approach used.

Population classification

For a common population universe, let P denote population, E employed persons and U unemployed persons. The labour force consists of employed and unemployed persons, while those neither working nor seeking or available for work are outside the labour force.

• Labour force (LF) = E + U.
• An employed person, or worker, is one engaged in an economic activity under the specified activity-status criterion.
• An unemployed person is one without employment who sought or was available for work under the specified criterion.
• Students, homemakers and others who are neither working nor seeking or available for work are generally outside the labour force.

Definitions and calculation

• LFPR = (Labour force ÷ Population) × 100 = [(E + U) ÷ P] × 100.
• WPR = (Employed persons ÷ Population) × 100 = (E ÷ P) × 100.
• UR = (Unemployed persons ÷ Labour force) × 100 = [U ÷ (E + U)] × 100.
• LFPR and WPR use the relevant population as their denominator, whereas UR uses only the labour force.
• Rates must be compared for the same age group, sex, rural-urban category, reference period and activity-status approach.

Arithmetic relationship among the indicators

When all three indicators use the same population universe and activity-status definition, they are linked by an exact accounting relationship.

• WPR = LFPR × (1 − UR/100).
• UR = [(LFPR − WPR) ÷ LFPR] × 100, provided LFPR is greater than zero.
• LFPR − WPR equals unemployed persons as a percentage of the population; it is not the unemployment rate.
• For example, an LFPR of 60% and a UR of 10% imply a WPR of 54%.

Interpretation and reference periods

The Periodic Labour Force Survey reports indicators using specified activity-status approaches, notably usual status and current weekly status. These can produce different estimates because they examine activity over different reference periods.

• Usual status considers activity over the 365 days preceding the survey and is commonly presented using principal plus subsidiary status.
• Current weekly status considers activity during the seven days preceding the survey.
• A low unemployment rate can coexist with a low WPR when many people remain outside the labour force.
• The unemployment rate may fall without employment increasing if unemployed persons leave the labour force.
• A rise in labour-force participation can raise measured unemployment temporarily if employment does not expand correspondingly.

How UPSC asks this