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Contact points:
For enquiries about this review publication:
Richard Laux
Labour Market Division, Office for National Statistics
Tel: 020 7533 5529 e-mail: richard.laux@ons.gov.uk
For enquiries on the review programme:
The Review Programme Management Team, ONS
Tel: 020 7533 6208/6298
Email: ns.quality.review.teams.ldn@ons.gov.uk
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This is the first review to be completed under the National Statistics Labour Market theme.
The aim was to develop a framework for labour market statistics, and within the context of such a framework, to review the fitness-for-purpose of certain labour market variables and related topics.
The review recommends that an explicit framework for labour market statistics should be introduced using a type of supply-demand model called a labour accounting system. Such an approach has wide international acceptance, including by the International Labour
Organisation (ILO).
The remainder of the Review was concerned with the “fitness for purpose” of particular labour market variables. “Fitness for purpose” is a term used as shorthand to convey the notion of statistical quality. The main elements of quality that the review concentrated on related to: accessibility and timeliness, accuracy and precision, coherence, comparability and relevance. The review highlighted areas in which more work is needed across labour market statistics to meet each of each of these dimensions of quality.
The White Paper Building Trust in Statistics sets out the framework for quality assuring
National Statistics. A key component of the framework is:
“ a programme of thorough reviews of key outputs, at least every five years, with the involvement of methodologists and outside expertise, as appropriate. ”
This programme of quality reviews is an important way of ensuring that National Statistics and other official statistical outputs are fit for purpose and that we are continuing to improve the quality and value of these outputs
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Pages
Overview 5
Charts
1.
Labour Market framework within the context of a social statistics framework
2. Conceptual framework for a UK labour accounting system
9
11
Annexes
A
B
Summary of Recommendations
Detailed evidence
13-18
19-119
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What are labour market statistics?
Labour market statistics relate to both people and businesses. They describe the characteristics of these actors and their behaviours in and around the world of work. Statistics of employment, unemployment, economic inactivity, skills, job vacancies, earnings, industrial disputes and productivity are all directly relevant. In addition, statistics from benefit, tax credit and other administrative records can provide relevant information about the interaction of Government Agencies with people’s and businesses’ behaviour in the labour market.
What is a “framework”?
A framework is defined here as a set of organising principles which support the compilation and presentation of a set of statistics. These principles relate to:
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


The concepts and definitions underpinning the statistics
The sources and methodologies used to derive them
The structure and tables used for presenting them
Links with other areas of statistics.
The framework for labour market statistics forms one of a family of such frameworks which are being developed for all domains of social statistics – see chart 1.
What is the purpose of this Review ?
There have been a number of different drivers, inter-related, for this Review.

For a number of years neither producers nor users of labour market statistics have had an agreed conceptual understanding of the ways in which the separate elements of these statistics fitted together. In the middle of the 20th Century, the labour market could predominantly be characterised in terms of (i) men working in manufacturing industries, doing a full time job, and (ii) the unemployed finding work by registering or, later on, by claiming benefits. But nowadays the labour market is far more heterogeneous.
Employment is dominated by the service sector; women play a major role in the labour market; flexible, “non-traditional” working arrangements are the norm, and there are multiple routes into employment.
 the area of labour market policy has become increasingly involved. Labour market statistics underlie a raft of different needs, including macro-economic policy, employment and welfare policies and employment relations policies. And there is a sub-national
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dimension too, not least in relation to the statistical needs of the devolved administrations.
Finally, there are a range of EU policy and other international requirements which shape the information we collect and the way in which we collect it.

More generally, the world we live in is changing. Stakeholders are expanding in diversity; the questions which we are trying to answer are changing; what we observe in the economy and in society is changing; and we have new statistical models and processes, and we have the internet.
So whilst the tools available to us are improving, the task facing labour market statisticians has become more and more complex. In order to ensure that the most important labour market phenomena can be measured effectively, it became clear that it was necessary to develop a conceptual model of how the labour market works, and then to look at how suitable the existing National Statistics are for the purposes of measurement and description within this model.
When the new Theme Group for labour market statistics was set up therefore – under the new arrangements for National Statistics – its first priority for review was to address the issue of the “framework of labour market statistics”. The Review got underway in early 2001, and was conducted by the Office for National Statistics later that year and in early 2002. Input to the review was sought from across government, academics and researchers in the UK; and from the Statistical Offices of other countries and international organisations overseas. An additional important input to the Review were the comments, advising on how to build greater public confidence in labour market statistics, which have been made in various reports and comments on labour market statistics made by the Royal Statistical Society and Parliamentary
Select Committees over the past decade or so.
The review process was overseen by a Steering Group including labour market experts from inside and outside government.
What are the main findings of the Review?
The Review report makes twenty eight recommendations - which are set out in annex A.
Annex B sets out in detail the background evidence, and views of the various parties consulted, which led to the recommendations made. Against each recommendation in Annex
A a reference is given to the relevant paragraphs of Annex B.
Labour market supply and demand model
The review recommends that an explicit framework for labour market statistics should be introduced using a type of supply-demand model called a labour accounting system. Such an approach has wide international acceptance, including by the International Labour
Organisation (ILO). This supply-demand model is represented in diagrammatic form in chart
2.
In line with the definition given above, people supply their labour to employers. Those not in work, both those who satisfy the internationally-agreed definitions of unemployment, and those defined as economically inactive (for example, they are not looking for work) are potential labour suppliers. The demand side is represented by employers, who parcel up the
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work they require to be done into individual posts. The supply and demand sides meet at the point where someone fills a post – this is their job, for which they receive a wage. At any point in time some posts are not filled – new posts are created, job-holders leave and it takes time to replace them – so the post is vacant. Hence the demand side is represented by jobs and vacancies.
The Review recommends that ONS should promote the recognition and use of this framework among users of labour market statistics by introducing a new “sources and methods” publication for UK labour market statistics.
Fitness for purpose of labour market statistics in the framework
Having established the conceptual model, the remainder of the Review was concerned with the “fitness for purpose” of particular labour market variables. “Fitness for purpose” is a term used as shorthand to convey the notion of statistical quality. The main elements of quality that the review concentrated on related to: accessibility and timeliness, accuracy and precision, coherence, comparability and relevance. The review highlighted areas in which more work is needed across labour market statistics to meet each of these dimensions of quality:
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Accessibility and timeliness: the value of statistics is diminished if they are inaccessible or untimely – this relates to statistical sources as well as value-added analysis. The
Review supported provisional thinking in ONS about a range of related issues, including greater use of the internet (13), more analysis and dissemination of developments in the labour market, especially relating to the experiences of social and demographic groups such as households (14), the use of simpler terminology such as “unemployment” (15), more use of rates, ratios and percentages (18), and the need to provide high quality metadata – data about data (20).
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Accuracy and precision: The key labour market statistics are derived from the LFS – a survey of households – and surveys of businesses. All survey estimates are subject to sampling variability, and estimates of sampling variability are published routinely for most series – although further work is required on the headline estimate of workforce jobs. But accuracy is more problematic. For example, the Review reinforces the need to use certain administrative and Census data in order to improve the quality of survey estimates (19), and to improve vacancy estimates by introducing a survey designed to provide a comprehensive measure and by exploiting the administrative data on vacancies compiled from Jobcentre records (21).
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Coherence: The establishment of a labour market statistics framework provides the basis for systematically improving all aspects of the quality of labour market statistics, but perhaps coherence more than any other aspect (1). The conceptual model described above implies that the total number of people employed (in their only or main job, their second job and so on) should be consistent with the total number of jobs. Employment is measured using the LFS; jobs are measured mainly using business surveys. The Review supported ONS’ continuing work to improve the coherence of these data at the collection stage (2) and the analytical stage (3). And the desire for coherence underlies the need to work with the devolved administrations to improve different aspects of labour market statistics (10). The idea of building links across government and academia in an attempt
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to co-ordinate analytical work from the Time Use survey will also tend to support coherence, as well as being efficient in terms of the use of resources (26).
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Comparability : Statistics are rarely useful in isolation – estimates become more valuable when compared over time or between different areas. In terms of comparisons between areas, the review helped crystallise the concerns of many users about the problematic validity of workplace based JSA claimant count rates for local areas – ie claimants living in an area as a percentage of the number of jobs in the area plus the number of claimants.
The Review recommends that new claimant count rates and job density rates - both based on the resident population of an area - should be compiled to provide valid comparisons of local areas (11), and that the existing workplace based claimant count rates should be withdrawn from National Statistics (12). In terms of comparisons over time, the review confirmed the importance to users of consistent time series of data, and recommended that ONS consider a more strategic approach to ensuring time consistency (17).
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Relevance
: Statistics are relevant when they meet users’ needs. There are two elements of this, the relevance of the statistics available from the sources taken together, and the relevance of individual sources. The Review has identified a need to improve the relevance of our labour market statistics in both respects. For example, at the level of the statistical system, discussions with colleagues in the Department for Work and Pensions proved productive in exploring ideas for how a greater range of the administratively based working age benefits data, produced by that department, could be considered within the new framework for labour market statistics, and hence go further towards meeting users’ needs (7, 8); it was also found that more needs to be done in relation to emerging topics such as potential labour supply and the quality of work (5) and labour market attachment (6), as well as to meet users’ needs in relation to data on flows and dynamics (9), productivity (22), labour costs (23) the self-employed (24), projections of the economically active population (25), and earnings (28).
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There is also scope for improving the relevance of individual sources. For example, a number of suggestions were made about how the LFS could be focused and made more useful; these will be considered by ONS alongside issues emerging from a specific review of the LFS (27). Likewise, suggestions about the ABI and the WFJs series will be valuable inputs to the proposed NS Quality Review of the Workforce Jobs series
(recommendations 4 and 16).
What happens next?
Over the following three months ONS will develop and publish an action plan describing how each of the recommendations contained in the report should be addressed.
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Chart 1
LABOUR MARKET FRAMEWORK WITHIN THE CONTEXT OF A SOCIAL
STATISTICS FRAMEWORK
Labour market
/subject CONTEXTUAL
Eg social, economic and physical environment, including policy framework matter domain
DEMAND/BEHAVIOUR
Eg working, job search
COHORTS
Eg age/sex/ethnic group
INFRASTRUCTURE/SUPPLY
Eg social security, job centres, nursery provision
DIMENSIONS
Eg time, place, lifecycle
Statistical process

Articulate concept

Define concept

Decide characteristics of interest

Decide how to measure

Collect data

Processing and estimation

Analysis
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
Publication and dissemination

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Employers
 ownership
 size
 industry
 location
 sector
Chart 2
CONCEPTUAL FRAMEWORK FOR A UK LABOUR ACCOUNTING SYSTEM
People
 age
 sex
 ethnicity
 disability
 location
Families/HHs
 type
 composition
Employed
 occupation
 industry
 hours worked
 duration of employment
 educational status
 qualifications
 benefit receipt
Unemployed
 job search activities
 work preferences
 duration of unemployment
 previous occupation
 previous industry
 educ status
 benefit receipt
Inactive
 whether seeking
 whether available
 reasons
 educational status
 qualifications
 benefit receipt
Selfemployed income
Unpaid
Family
Workers
Vacancies type of vacancy
Jobs pay other labour costs hours paid for
Employees earnings permanent / temporary working patterns second jobs union member
Government
Schemes earnings work/college based
Youth population
Prime working age group
Older population
Target groups to be analysed by different reasons for not seeking work or unavailability for work, as appropriate to each group, and in terms of (working age) benefit status.
labour demand actual labour
11 quality of work issues supply potential lab. supply increasing LM attachment

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A1. This section sets out the recommendations for further work flowing from the review.
Any further work arising out of the recommendations of the Review will be accommodated within ONS’s existing budgets. The point should be made that not all members of the steering group, which oversaw the review, agree with all the recommendations which have been made.
A framework for labour market statistics (annex B, section 4)
A2. The present framework for labour market statistics in the UK is largely implicit within the existing form of presentation. While concepts and definitions mostly follow wellestablished international recommendations, user-responses broadly endorsed the need for an improved framework, which should be clearly promulgated. A number of comments about the theoretical and practical nature of a possible framework were taken into account in developing the framework.
A3. A key feature of the framework was the kind of economic structure which might underpin the behavioural relationships of the variables. The most relevant structure appeared to be a supply-demand relationship. In investigating international practices, such a structure also formed the basis of the ILO’s proposals for a labour accounting system. A further relevant aspect to establishing the framework was the initial work in ONS for a framework which might be used across the main aspects of social statistics, including education, health and crime. Finally, consideration was also given to how the framework might be promulgated.
A4. A proposed framework for UK labour market statistics is given as diagram A
1
in annex B, section 4.
A5. The outcome of the discussion on the framework is the following recommendation:
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R1: ONS should use a labour market statistics framework, based on a labour accounting system, to drive the integration of labour market statistics. It should be promulgated via a comprehensive ‘sources and methods’ publication for UK labour market statistics (paragraph 4.8.4).
Other proposals (annex B, section 5)
A6. There were a wide range of comments on the other aspects of improving labour market statistics. These comments were condensed into a series of composite proposals for improving the statistics. The proposals are outlined below, with recommendations for further work.
A7. It was recognised that the concepts of employment and jobs related to the same labour market transactions, in the concept of the framework. Data on both employment
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and on jobs are needed, and both main current sources – the LFS and the employer surveys
– should be retained, albeit with improvements to each source including their greater coordination. A series of specific features of employment/jobs data, including coverage, definitions, better use of data, and the measurement of sub-groups, all required further work. Accordingly, it is recommended that:
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R2: ONS should undertake further work to develop and implement strategies for improving the employment data collected in the LFS, and the jobs data collected in the employer surveys, taking account of the analytical requirements of users, and embodying more co-ordination of data collection processes (5.2.50)
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R3: ONS should continue the work to establish definitive estimates of employment and jobs, through the reconciliation of the data coming from employer surveys and from the LFS (5.2.50)
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R4: The NS Labour Market Theme Group should commission a Quality Review of the Workforce Jobs (WFJ) series. (5.2.50).
A8. A number of comments were received about data needs which can be grouped under the heading of labour market attachment . For example, there is increasing interest in sub-groups within the main groups of employed, unemployed and inactivity, particularly relating to the (potential) contribution they have to make to the labour market, the interaction between labour market state and benefit receipt, and so on. It is recommended that:
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R5: ONS should become more actively engaged with Eurostat, the OECD and the
International Labour Organisation (ILO) in order to play a more influential role in relation to work on the potential supply of labour, and the quality of work (5.3.21).
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R6: ONS should develop and implement an analysis and dissemination strategy relating to labour market attachment (including underemployment, unemployment and inactivity) (5.3.21).
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R7: More information from DWP on the working age population receiving benefits should be included within the labour market statistics framework and the Labour
Market Statistics First Release (see also recommendation 13) (5.3.21).
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R8: ONS should investigate the feasibility of linking LFS data with administrative data on claimants of JSA and Incapacity Benefit (5.3.21).
A9. There is strong interest in information about labour market dynamics , including interest from economists in the series of inter-related processes which lead to changes in labour market indicators such as unemployment and, from the social perspective, in longer term changes such as the performance of different cohorts, for example between generations. It is recommended that:
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
R9: ONS should agree and implement a strategy intended to provide the data and analysis needed to meet different needs for flows and dynamics data, paying due attention to differing priorities and quality requirements (5.4.15)
A10. One of the most clearly articulated requirements in this Review was the need to improve the quality of sub-national labour market data – alongside a recognition that detailed requirements were always likely to exceed what is practicable. It is recommended that:
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R10: ONS should continue to pursue with the devolved administrations opportunities for improving the quality of labour market statistics, from all sources, for the constituent countries of the UK, bearing in mind the need for coherence and consistency (5.5.14)
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R11: ONS should develop an initial set of local labour market indicators at local authority level (in the first place), with other geographies to follow, and that the
2001 Census and other key sources of local labour market data are exploited to the maximum degree possible to populate this set of indicators particularly to meet the needs of Neighbourhood Statistics, on the basis of consultation with users. Quality measures for all local area estimates should be produced as a matter of course, and made available to users alongside the estimates (5.5.26)
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R12: ONS should consult as necessary on the withdrawal from National Statistics of workplace based claimant count rates for local areas below regional level - having demonstrated the statistical limitations of these rates - and their replacement by residence based measures of both claimant count rates and jobs density. (5.5.40)
A11. ONS’s dissemination of labour market statistics uses a number of different vehicles and media, and although greater use is being made of the internet there is clearly potential to do more. There is also interest in new types of publication, and enhancements to existing publications. It is recommended that:
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R13: ONS should develop and implement a strategy for the dissemination of labour market statistics which takes account of users’ data needs and ensures that the potential of web-based publication is applied fully to the dissemination of labour market statistics, including the possibility of releasing labour market data series on the website as soon as they become available (5.6.19).
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R14: ONS should continue to develop a package of labour market analysis and dissemination based on households (5.6.19).
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R15: The term “UK unemployment” should replace the currently used term “ILO unemployment” in National Statistics outputs (5.6.19).
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A12. The Review consultations suggested clearly that ONS should make better use of existing labour market data – improving different aspects of the quality of the data, for example. It is recommended that:
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R16: ONS should continue with work to improve the quality of the ABI information
(5.7.8)
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R17: ONS should develop and implement a strategy to address users’ requirements for data which are consistent over time (5.7.19).

R18: ONS should consider, further, the use of relevant derived measures in particular the quality of data used in denominators (5.7.24).
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R19: ONS should make better use of existing information, such as from administrative sources and from the Census, both as data series in their own right and to improve the quality of other data (5.7.29).
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R20: ONS should review and improve the quality and coherence of metadata provided about labour market statistics (5.7.35).
A13. Consultees welcomed the steps ONS was taking to improve a number of existing data sources, series and analytical work.
Reflecting some of the main strands which emerged, it is recommended that:
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R21: ONS should continue to improve the quality and range of survey and
Jobcentre data on vacancies, in particular to restore the Jobcentre data as soon as practicable, and to resolve issues of dissemination (5.8.9)
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R22: ONS should consider the need to improve, further, the quality of productivity data, for example increasing consistency in the information used to derive estimates and focusing more on hours as the measure of labour input, as well as providing additional information on labour productivity, and also to resolve issues of dissemination (5.8.15)

R23: ONS should work with Eurostat to compile quarterly labour cost indices in
2003, and should assess the feasibility and costs of producing labour price indices
(5.8.21)

R24: ONS should consider, further, how best to meet the important needs for data related to the self-employed (5.8.26)

R25: ONS should continue existing work to publish up-to-date national projections of the economically active population, and consider commissioning work on sub-national projections, which are consistent with the national figures, and incorporate the views and expertise of local authorities (5.8.30)
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
R26: ONS should establish links across government and with the ESRC to develop a programme of analysis of time use data, to explore various labour market issues as well as the coherence of such data with that from other sources (5.8.34)
A14. A range of comments were made on issues related to the LFS, including - clarify goals; extend coverage to the non-household population; improve methodology for grossing; develop monthly data; improve industry classification; improve quality of benefits data; need for new/improved data on eg, hours worked, skills, employability, quality of work, minority ethnic groups, disability, single parents and religion; consider sample size limitations; better education of the potential of survey; improve time consistency of the survey data; improve linkages with the national accounts, and improve treatment of students and HM Forces.
A15. The LFS was the subject of a separate review. It is therefore recommended that:
* R27 : a number of specific concerns relevant to the coverage, timeliness and relevance of the LFS should be remitted to the team currently conducting the LFS
Quality Review (5.9.29)
A16. A range of comments were made on issues related to earnings, including - improve consistency and comparability (i) between earnings and output/employment data, and (ii) between the different surveys collecting earnings information - NES, AEI and LFS; need for new or improved data on the distribution of earnings, on low pay, and on labour costs; more NES data at district level; need for net as well as gross earnings data; and the derivation of a ‘pure’ earnings rate, that is excluding compositional effects.
A17. Earnings were the subject of a separate review. It is therefore recommended that:

R28: a number of specific concerns relevant to the coverage, accuracy and relevance of earnings data should be remitted to the team currently conducting the Distribution of Earnings Quality Review (5.10.5)
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1. PURPOSE
2. BACKGROUND AND SCOPE OF STUDY
3. LABOUR MARKET STATISTICS
3.1 Fitness-for-purpose of labour market statistics
3.2 The policy background
3.3 Public confidence in labour market statistics
3.4 Main labour market statistics, definitions, sources, and dissemination
3.5 Main labour market statistics - key developments in ONS
3.6 Other critical influences
4. A FRAMEWORK FOR LABOUR MARKET STATISTICS
4.1 Introduction
4.2 Issue
4.3 Background
4.4 Historical position
4.5 Current position
4.6 Response to consultation
4.7 Proposals for developing a framework
4.8 Proposals for promulgating a framework
Diagrams
5. LABOUR MARKET STATISTICS WITHIN THE FRAMEWORK
5.1 Introduction
5.2 Improve nature and coherence of employment data
5.3 Improve information on labour market attachment
5.4 Improve information on flows and dynamics of the labour market
5.5 Improve sub-national data
5.6 Improve dissemination of labour market data
5.7 Improve use of existing data
5.8 Provision of new or improved information
5.9 Improvements to LFS
5.10 Improvements to earnings data
5.11 Management and organisation
6. CONCLUDING REMARKS
6.1 Introduction
6.2 Acknowledgements and lessons learned
6.3 Taking the work forward
6.4 Publication of report
APPENDICES
1. Composition of review team and steering group
2. The consultation process and development of the responses
3. List of consultees
4. Glossary of terms and abbreviations
5. The definition and coverage of the statistics of employment and jobs
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Page
21
23-24
25-33
25
25-27
27-29
29-31
32-33
33
35-53
35
35
35-37
37-38
38-39
39-42
42-45
45-46
47-53
55-109
55
55-67
67-71
71-73
73-83
83-87
87-95
95-103
103-106
107-108
108-109
111
111
111
111
111
113-119
113
114-115
116
117
118-119

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1.1 This annex complements the material presented in the Overview. It sets out in some detail the users’ views, the ONS analysis, and the conclusions based on these which led to the recommendations made in the Final Review Report
1.2 Section 2 describes the background to the Review, and the scope of the study. It also summarises the review process. Section 3 explains the environment within which the review was conducted – the main data sources and methods of dissemination, the political and international contexts, and the important issue of public confidence in labour market statistics.
1.3 Section 4 concentrates on establishing a framework for labour market statistics, linking in with wider considerations for an overarching framework for social statistics. Section 5 concentrates on the fitness for purpose of certain labour market data sets and various related issues, such as the dissemination of labour market statistics. The coda in section 6 describes how this work will be taken forward.
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2.1 The genesis of the review is the Government’s White Paper - ‘Building trust in statistics’ - which, amongst other things, includes a commitment to assuring the quality of
National Statistics, and refers to a programme of thorough reviews of key outputs.
2.2 To meet these commitments, the ONS Labour Market Division (LMD), which has responsibility for labour market statistics, in consultation with the Labour Market Theme
Working Group, drew up a programme of work for carrying out Quality Reviews of its statistical outputs. Given its overarching nature, it was decided that one of the first reviews should relate essentially to the framework of labour market statistics. However, in undertaking the review, it was considered sensible that it should also embrace certain quality assessments of the main labour market variables, particularly those which were closely associated with the framework.
2.3 For the purposes of the review, labour market statistics embrace employment, unemployment, economic inactivity, vacancies and earnings, and the derived variables of labour productivity and unit costs. Further information about these series is given in section 3.
2.4 The review, therefore, had as its main aims -
(i) to develop a more rigorous and explicit framework for labour market statistics
(ii) to review, within the context of the framework, the fitness for purpose of certain labour market variables.
2.5 A few points should be made on the aims and benefits of the framework review. To begin with, it will be useful to outline what is meant by a “framework”. In the current context we are regarding the framework as a set of organising principles relevant to the production of labour market statistics. These principles relate to the key issues of the concepts and definitions underpinning the statistics; the sources and methodology used for their derivation; the structure and tables used for presenting and disseminating them; and the links with other areas of statistics. Full details on the nature and promulgation of the framework are given in section 4.
2.6 Secondly, an important feature of the framework review was that its focus was largely strategic and conceptual - about establishing a framework for the statistics - rather than examining the whole range of quality issues relevant to the compilation of a particular set of statistics, as would be the procedure for a conventional Quality Review. However, as mentioned above, the opportunity was taken to pursue certain aspects of labour market statistics, essentially those associated with the framework. Reflecting the more strategic approach being adopted, this work was necessarily limited largely to a broad assessment and proposed resolution only of the issues which arose. It was never the intention of the review to resolve, fully, each and every issue raised. Rather, the work would bring together all the needs expressed, and the recommendations made would suggest where ONS should seek to develop particular areas of labour market statistics in its future work programmes.
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2.7 Thirdly, two other Quality Reviews about labour market statistics were taking place in parallel with the framework review. These related to the distribution of earnings and the
Labour Force Survey. This had certain implications for the scope and conduct of the framework review, as mentioned below. In addition, a consultation exercise about some aspects of local area labour market statistics was being carried out.
2.8 Fourthly, reflecting the existence of other reviews and in order to keep the framework review to manageable proportions, two decisions were taken about the scope of the review.
These were (i) to focus more on those aspects which were not being covered in other reviews, and (ii) to limit the range of quality aspects which would otherwise be covered in a conventional review.
2.9 This meant that, for item (i), issues related to the LFS and earnings were not pursued to any great extent in the review. Instead, comments made were recorded, with action being remitted as appropriate to the other reviews, or otherwise dealt with.
2.10 Secondly, in respect of the quality assessment, the limited focus of the review was to cover broadly the following aspects - concepts, definitions, coverage (including gaps), appropriateness (including data linkages), time consistency, presentation and dissemination. But other aspects were not generally pursued - collection arrangements
(including costs and burden on business), estimation methodology, timeliness, and reliability (including revisions). However, again, key issues related to these aspects raised in the course of the review have been recorded in the report.
2.11 The review was carried out in the second half of 2001, to cost and virtually to time.
The work for the review followed guidelines for Quality Reviews which had been laid down in ONS, including drawing up a Project Initiation Document. The scope of the review was published on the National Statistics website. Work was carried out by a review team, which reported to a steering group. The names of the members of steering group and the review team are given in appendix 1.
2.12 A key part of the review was a series of consultations with users. Some further information about the consultation process, including how the comments received were transformed into the proposals included in the report, is given in appendix 2. The list of those who were interviewed or who provided written comments - 30 in all - is given in appendix 3. The cost of the review, covering the work of the team and the steering group, but excluding other contributions, is estimated at about £30,000.
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3.0 This section explains the environment within which the review was conducted. It includes a brief description of what we mean by fitness-for–purpose, the policy background to labour market statistics and the important issue of public confidence in the statistics, then provides an outline of the main labour market statistics and key areas of development work being undertaken by ONS, and finally a brief assessment of some of the range of other influences on labour market statistics.
3.1.1 “Fitness for purpose” is a term used as shorthand to convey the notion of statistical quality – in particular the level of quality of statistics, analysis and metadata that is consistent with the needs of users. The main elements of quality that the current review has concentrated on relate to: timeliness, accuracy and precision, coherence, accessibility, relevance, and comparability. The review highlighted areas in which more work is needed across labour market statistics to meet each of these dimensions of quality, within the context of the framework.
3.1.2 Users’ needs are often difficult to meet within available resources, and in such circumstances it frequently happens that users’ needs are tempered by what actually is practicable. Over time people can become used to this situation. Exercises such as NS
Quality Reviews provide an opportunity to take stock of users’ needs – in the round – afresh, in order to re-assess priorities and take advantage of any technical developments.
3.2.1 The labour market fits into the wider Government policy framework in several areas.
The following paragraphs deal in turn with: macro-economic modelling; monitoring UK employment and welfare policies; monitoring UK employment relations policy; meeting
EU policy and other international requirements; and regional and local policy requirements.
3.2.2 The most publicly prominent activity driving the need for labour market statistics is the monthly assessment of the factors affecting inflationary pressures in the economy - by the Bank of England's Monetary Policy Committee - in order to set the Bank's repo rate of interest. In addition to the latest information about changes in earnings, these assessments take into account a wide range of statistical information about employment, unemployment, inactivity and so on which have relevance to whether labour market conditions are, or are likely to become, inflationary. While much of the statistical information needed is available, there is strong pressure from the Bank and the Treasury for more relevant and more up-to-date information to be produced to meet these needs.
DWP also use these data to look at the macro position but only to brief ministers, not to directly influence policy. We should also be aware of the emerging requirements of the
European Central Bank’s Monetary Policy Committee.
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3.2.3 The Government's goal - of creating and sustaining employment opportunities for all
- involves taking an integrated approach across a wide range of economic and social policy areas. Objectives include: improving productivity; enhancing standards of education and training; reforming the tax and benefit system and making work pay; meeting the needs of both employers and of those people and communities suffering the greatest disadvantages in the labour market; and reducing child poverty. Both the Treasury and the Department for Work and Pensions have a close interest in using labour market statistics to inform a number of elements of this policy. In particular, this information is used to monitor four key PSA targets relating to "Welfare to Work" and a number of national and local targets relating to training and education standards. Related to this overall policy approach is the role of the Low Pay Commission (LPC) in advising the Government on the level to be set for the National Minimum Wage. The LPC's work, and also that of the DTI and the
Treasury in this field, draw heavily on statistics which are produced under the labour market theme.
3.2.4 Labour market statistics are also used in setting and monitoring policies in area of employee relations - information about working hours and conditions, about union recognition and membership and about pay is important, as well as health and safety at work, disability affecting work and sickness absence from work. In addition, Employment
Tribunals use labour market data in assessing awards.
3.2.5 The international background can be seen as falling into two main areas: statutory requirements and general developments. As a member of the European Union, the UK is legally bound in a number of ways, covering requirements for both the LFS and employer surveys. In general, there are increasing pressures for the speedy delivery of labour market information for the UK on a basis harmonised across all Union Member States.
3.2.6 In respect of the LFS, not only is a quarterly survey a legal requirement, but much of the content of the LFS questionnaire is dictated by Eurostat. Although at the moment the
LFS is the main labour market statistical requirement of the EU, there are policy developments which are pushing further developments at the EU level. The most obvious concerns the Euro. Ultimately, the European Central Bank is fulfilling a similar role to the
Bank of England, requires similar information, and as such the move to a single currency has increased both the need for information at a general European level, and the ability of
Eurostat to press for it. Examples of this would be Eurostat moves to establish vacancies surveys across Europe, and the pressure for member states to produce Labour Cost Indices.
Other work that is legally required through ESA 95 is the provision of historical, LFS comparable data. This is currently being addressed through ONS’s ILO time series project, which aims to model estimates of economic activity back to the 1970s.
3.2.7 In respect of business surveys, two regulations have recently been introduced to meet EU, and particularly ECB, needs. The Short Term Statistics Regulation is the key vehicle for producing timely and harmonised short-period economic indicators. The UK is required to provide information on jobs, hours worked, and wages and salaries. The
Structural Business Regulation requires annual estimates of jobs, broken down by gender and full-time/part-time by detailed economic activity. The Regulations specify the variables to be covered, their definitions and the required quality of the estimates.
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3.2.8 The legal requirements outlined above enable comparisons to be made across national boundaries in a meaningful way. The supply of data, to Eurostat, but also ILO and
OECD, should also influence the future of international work in that more comparative analysis should be considered in the coming years. Further, research being done in different countries should also inform the work ONS undertakes.
3.2.9 With policy being increasingly regionally focussed, much of the labour market information needed at national level is also required at sub-national level also. At regional and local area level also there is a pressure for increased labour market information across a wide spectrum. Moreover, there are strong pressures for improved information for
Scotland and Wales in order to meet the needs of the devolved administrations.
3.3.1 This section describes the problems with public confidence in labour market statistics since the 1980s, and charts some of the milestones in attempting to rectify the position. It does not set out to provide a history of UK labour market statistics; some – though not all – of this is covered in 4.4 below.
3.3.2 During much of the 1980s and early 1990s accusations about the quality of labour market statistics challenged the integrity of UK official statistics. Prior to the introduction of the quarterly Labour Force Survey in 1992, the UK's labour market statistics system made much use of an administratively based measure of unemployment - the "claimant count" of people claiming unemployment related benefits. Some further historical information about the statistics is given in section 4.4.
3.3.3 The dependence on administrative sources opened the Government Statistical
Service to frequent accusations of "fiddling" when changes in the rules governing eligibility for benefit, necessarily, had knock-on effects on the statistics of claimant numbers. A particularly influential campaign, playing upon this perceived weakness of the
UK's labour market statistics system, was run by the Unemployment Unit and, despite the efforts of government statisticians to explain the basis of the data, the whole issue of the measurement of unemployment in the UK, regrettably, became politically sensitised.
3.3.4 Reacting to this situation, in 1990, the Royal Statistical Society's (RSS) seminal report "Official Statistics: Counting with Confidence" stated (page 5) that:
"Much of the public debate on official statistics concerns the need for government to rely upon administrative systems. The unemployment figures are an obvious example of this dependence.......".
3.3.5 In its 1995 report "The measurement of unemployment in the UK" an RSS Working
Party ( RSS Series A Volume 158, page 389) concluded that:
"It is clear to us that the general public, many politicians, the media and various pressure groups, do not trust the unemployment figures or find them convincing".
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3.3.6 Then in 1996, a report of the House of Commons Employment Select Committee report "Unemployment and Employment Statistics" endorsed the RSS's views and made a number of recommendations (page xxxvii) for the UK's labour market statistics including:
 giving greater prominence to the Labour Force Survey results, with information from this about a wider range of measures than just unemployment
 retaining the claimant count as a useful measure (of people claimant benefits); and
 reviewing the options for developing a series of manpower accounts as well as considering the introduction of such a system in the UK.
3.3.7 As was acknowledged in the RSS Working Party's report, the introduction, in 1992, of the quarterly Labour Force Survey - and the consequent much more timely and frequent availability of unemployment estimates on the International Labour Organisation (ILO) definition - went some way to improve public confidence in labour market statistics. Later on, in 1994, the position was improved still further by speeding up the publication of the quarterly LFS data from 14 weeks to six weeks after the end of the survey reference period.
3.3.8 Nevertheless, the fact that claimant count figures were published monthly, while the
LFS data were published only quarterly, meant that the position was still far from satisfactory and, in 1995, following the transfer of the responsibility for labour market statistics to the Central Statistical Office, a task force headed by David Steel was set up to study: "The feasibility, and options for, the monthly production of unemployment estimates according to the ILO definition". A paper arising from this work was published in the RSS Journal Series A (Vol. 160, page 5) in 1997.
3.3.9 Following on from the Steel report, a major advance was made in April 1998 with the introduction by the ONS of the monthly publication of LFS estimates. These statistics are based on three-month rolling averages, and include estimates of unemployment set in the wider context of information about employment and inactivity. The LFS data are complemented by labour market statistics produced from other sources, including the administratively-based claimant count.
3.3.10 This development, which implemented many of the advances proposed in the 1996
Employment Select Committee Report, was widely welcomed across the labour market statistics user community. The following extract from the RSS's response to the consultation exercise, which preceded the April implementation of the new approach, typified this positive reaction:
" The Society welcomes the consultation exercise, building on the issues raised in our 1995 report, the Select Committee's own report and the Government's response. We acknowledge that the then Central Statistical Office made some improvements to the presentation of results from the quarterly Labour Force
Survey (the LFS) in the September 1995 LFS Quarterly Bulletin and we look forward, as we also recommended in 1995, to further improvements including the longer term goal of a system of labour market accounts .
The RSS is not able to comment on much of the detail of the present consultation exercise, because its principal value falls to individual users. However, the RSS
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welcomes the ONS plans, both in the provision of more informative and coherent reporting of labour marker statistics and the greater prominence given to the LFS.
These are closely interwoven issues. On the one hand, the strength of the LFS is that it is the only source of labour market data covering all aspects of labour force participation and attachment. On the other hand, the RSS has never argued for the abolition of the claimant count, which has its own strengths, particularly as an indicator of unemployment benefit levels and flows and as a source of very local data."
3.3.11 With the introduction of National Statistics in 2000, the stage was set for the opportunity to build on the developments described above. In particular, the present
National Statistics Quality Review of the Framework for Labour Market Statistics provides the means of taking forward the outstanding recommendation from the 1996
Employment Select Committee report, echoed in the RSS's response to the ONS's 1998 consultation, that options for introducing a system of labour market accounts should be reviewed.
3.3.12 By publishing this review report, ONS aims to take further the strengthening of public confidence in labour market statistics on which such significant advances have been made over recent years. A wide-ranging consultation has been held with users and the report seeks to cover the most significant issues which have been raised.
3.3.13 One final point is worth making about public confidence, in this context. This is that although recent work across labour market statistics, including the current review, will help ONS continue to build confidence in labour market statistics, we are always susceptible to problems with the quality of particular data series. Management and QA procedures are designed to minimise the risks and impact of such problems, but it would be complacent to consider that there could ever be a zero risk that an unexpected problem might arise. Under National Statistics arrangements there are clear procedures for dealing with such problems, and this is an important part of public confidence. Equally important is that we should learn from problems we experience. For example, the Turnbull/King report published in February 1999 looked at methodological and managerial issues surrounding the AEI, following concerns about revisions to the index. This review recommended a new methodology for republishing the index together with a longer programme of work to improve it in future. Many of the recommendations in the
Turnbull/King report had more general applications.
3.4.1 In the UK, responsibility for labour market statistics rests with ONS’ Labour Market
Division. This responsibility covers the key economic variables of employment, unemployment and earnings, and also embraces vacancies and economic inactivity. In addition, the statistics also embrace the derived variables of labour productivity and unit costs, for which responsibility rests with Employment, Earnings and Productivity Division
(EEPD). In addition to their role as economic variables, the statistics - where the key unit of measurement is people - have a strong social dimension.
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3.4.2 The key ONS responsibility for labour market statistics is complemented by a number of other Government departments whose interests, as producers, are brought together in the Labour Market Statistics Theme Working Group - one of twelve theme groups underpinning the delivery of National Statistics.
3.4.3 Within ONS, a number of separate business areas contribute to the production of labour market statistics. The main areas are: Labour Market Division (LMD) - responsible for co-ordinating users' needs and, as mentioned above, the production of a range of labour market statistics, and analysis at national and sub-national levels; Social Survey Division
(SSD) - responsible for conducting and processing the Labour Force Survey, and the production of databases of LFS data; and Earnings, Employment and Productivity Division
(EEPD) - responsible for conducting a number of business surveys and primary analysis covering labour market topics, including the ABI and the NES, and producing estimates derived from these and other business surveys.
3.4.4 Further details about the sources of labour market data are given below.

The Labour Force Survey .
The primary source of labour market statistics in the UK is the Labour Force Survey
(LFS). The LFS is the largest regular continuous household survey in the country, interviewing a random sample of about 65 thousand households every three months.
The sample for the survey is drawn mostly from the Postcode Address File. It collects information about the personal circumstances and work of everyone living in those households, the types of jobs they do, their job search activities and so on. The information is published for rolling three-month periods.
One of the strengths of the LFS is that it meets international standards and provides data to international (ILO) definitions. Most countries undertake labour force surveys, reflecting the importance of measuring phenomena such as employment and unemployment. Indeed, the UK's LFS is one component in an EU-wide labour force survey - the UK survey questionnaire is largely governed by the EU's needs for data
(although much of these data are needed for UK purposes too), whilst the design and quality standards of the survey are in large part defined by an EU Regulation.

Employer surveys
These are monthly, quarterly and annual inquiries of businesses drawn from the Inter-
Departmental Business Register (IDBR), also including the public sector. One set of inquiries covers numbers of filled jobs, along with other main economic variables. A separate set of employer inquiries provides monthly information on earnings, essentially for the average earnings index. There is also a second inquiry of earnings - the New Earnings Survey. Information is published, variously, for monthly, quarterly and annual periods. Component detail is available by industry, and annual data on employee jobs are provided on a sub-national basis.

Administrative sources
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These cover two main areas of labour market data - the number of people claiming and receiving unemployment-related benefits (essentially the claimant count data), and the number of vacancies reported to Jobcentres. Both data are for monthly periods, and include some component and sub-national analyses.
3.4.5 It can be seen from the information on sources that, for some variables, particularly employment and earnings, data are available from more than one source. The strengths and weaknesses of the various sources are well known. They were described in a Labour
Market Trends article of May 1998 and will not be repeated here, although some of these features will be evident in the discussion in the report on the need to improve the quality of particular aspects of the statistics.
3.4.6 The main publication sources for labour market statistics are:

Integrated First Release
The monthly first release brings together, in a single document, the key labour market statistics, including employment, unemployment, economically inactive, the claimant count, earnings, labour productivity, and unit wage costs, generally with certain component breakdowns, such as by age, gender or industry. The release also gives some regional and international data. There are also separate regional releases.

Labour Market Trends (LMT)
This monthly publication provides information for a broadly similar range of variables as included in the first release, but with a much greater degree of component detail, particularly for the sub-national dimension. LMT also includes analytical and other articles on labour market statistics.

Labour Force Survey (Quarterly supplement)
This quarterly publication includes the main, detailed analyses of the LFS data.

Other
Other publications include (i) the new quarterly release on labour productivity, (ii) the annual NES release, (iii) the annual first release on low pay estimates, and (iv) the twice-yearly news release on work and worklessness among households. In addition,
LFS information is also provided as micro-databases, while much information on labour market statistics generally is available through the Web, particularly LFS data on NOMIS.
3.5.1 In order to provide a more complete picture of the background for the review, it will be useful to indicate the main areas where ONS is currently undertaking work to improve the quality and range of labour market statistics.
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
Improve methods of incorporating latest population estimates into LFS estimates

Further reconciliation of LFS and employer survey estimates of employment and jobs

Establish a new survey-based whole economy job vacancy series

Establish new and improved series for labour productivity

Establish a new framework for local area labour market statistics

Develop a new average earnings ratio series

Compile projections of economic activity rates

Collect certain time-use data

Improve dissemination through the National Statistics website

Development of a Labour Price Index and a Labour Cost Index.
3.5.2 It is worth making a few final points, in the context of the development of sources of labour market statistics. The first is to recognise the pressures on the LFS questionnaire.
Because of the labour market focus of an increasing range of UK and international policy
– see section 3.2 above – users have sought to collect information on the LFS in order to be able to contextualise it. And the large sample size of the LFS has proved attractive to users, in terms of the ability to analyse data for relatively small sub-groups. The capacity issues that this has raised are being addressed as part of the current NS Quality Review of the LFS.
3.5.3 A second, related point, which echoes 3.16 above, is that surveys and administrative sources in general have their own inherent strengths and limitations. Surveys can collect the exact information that is being sought - by asking the ‘right’ questions – and from those it relates to. But they are expensive; they typically provide data that are relatively out-of-date; they only provide estimates of what they are trying to measure, and they are affected by coverage and non-response problems. Survey non-response is a significant and increasing phenomenon across the world – it is a problem to the extent that different levels of non-response for different sub-groups can lead to the production of biased estimates.
Accordingly ONS has developed complicated methods of estimation to address the problems caused by non-response to its major surveys, and regularly reviews the applicability of such methods.
3.5.4 On the other hand, data from administrative sources can normally be produced quickly and cheaply, and typically give full coverage of the group that the administrative system relates to. But there are disadvantages too, mainly because they are by-products of a system designed to do something other than to produce statistics – they are liable to be affected by changes to the administrative system, eligibility rules, processing methods, and
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so on, and because they are so specific to one country’s administrative system they tend not to be comparable with other countries.
3.6.1 Previous sections have made clear that our custodianship of labour market statistics is affected by a range of issues, including policy requirements for data and public confidence in data. This section 1 summarises a range of factors that influence labour market statistics, directly or indirectly:

Stakeholders are expanding in diversity : New stakeholders arise from globalisation, world treaties and organisations – with, for example, requirements for harmonised statistics.

The questions are changing : New issues arise from ageing populations, the information age, changing perceptions (including self-perceptions) of ethnic and other groups, and devolved government.

What we observe is changing : In recent years we have seen the growth in a servicebased economy, and the type of jobs associated with this. We have also seen deregulation and privatisation, new household forms and forms of business organisation. This all changes the world we are trying to measure.

We have new statistical models and processes : We have access to official administrative information, and a great awareness of the analytical possibilities presented by the linkage of such data offered by information management and technological advances. At the same time we are aware of the sensitivities around data linkage and the potential threat to individuals’ confidentiality.
1 Based on notes prepared by Len Cook.
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4.1.1 This section presents proposals for the main aspect of the review – the establishment of a framework for labour market statistics. The section begins by explaining what is meant by a framework and why it is needed. It then considers the present position in the UK and why the existing framework needs to be improved, and the views of users. The proposals for a framework are seen to link in with the wider considerations for an overarching framework for social statistics generally. Also considered is how the framework might be promulgated. Other proposals emerging from the review are covered in section 5.
4.2.1 A key feature of the Labour Market Statistics Framework Review has been to develop a more rigorous and explicit framework for labour market statistics. This note recommends what such a framework should look like, and how it should be promulgated.
The recommended framework would facilitate the development of an organised system of labour accounts in the United Kingdom. This was seen as necessary by the Royal
Statistical Society in its 1995 report “The measurement of unemployment in the UK”; and subsequently was a recommendation of the House of Commons Employment Select
Committee in its 1996 report “Unemployment and Employment Statistics”.
4.3.1 A framework may be regarded as a set of organising principles. What this means, essentially, is a formal presentation of the concepts and definitions underpinning the statistics, the sources and methodology used for their derivation, the structure and tables used for presenting and disseminating them, and the links with areas outside labour statistics.
4.3.2 These principles, as relating to the provision of labour market statistics, may be brought together into four broad groups:

Concepts and definitions underpinning the statistics
These, ideally, should follow well-established international recommendations, for example as presented by the ILO, embracing also the need for comprehensive coverage of the statistics. These various features will incorporate, to a greater or lesser extent, certain principles of economic behaviour which underpin the inter-relationships of the variables, for example a demand/supply structure, as well as recognising the need for both national and sub-national information.
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
Sources and methodology used for the derivation of the data
The approaches to collection and compilation of the data should aim to incorporate proper statistical practices of, for example, sampling and estimation. This would include comparability and best use of the various sources; use of appropriate units of observation (eg businesses and households) and units of measurement (eg money or numbers); consistency over different measurement variables (eg stocks and flows); establishment of appropriate estimates of error; and consistency of the data over time.

Arrangements for presenting and disseminating the data
This would cover the timeliness of the data and the way in which they are published and interpreted. Timeliness should be related to accuracy, mentioned above, while publication and interpretation should recognise the inter-relationships of the variables.

Links with other statistics
There is a need for the labour market data to link with other statistical information, particularly the national accounts and areas of social statistics such as education and health.
4.3.3 For labour market statistics, a particular form of framework is provided by a labour accounting system. Labour accounts provide a framework to bring together labour market data from a variety of sources, and improve coherence with other areas of statistics. Such accounts are concerned with data of levels/stocks, gross flows and net changes. According to Hoffmann (2001),
“the term "labour accounts" or "labour accounting system" emerged from discussions which started in the early '80s between representatives of some national statistical offices and statistical secretariats of some international organisations. These discussions concerned the objectives, principles and mechanisms for pulling together in an effective manner the fragmented statistics available on labour markets, i.e. statistics on employment, unemployment, wages and income from employment …The discussants felt that users as well as producers of labour market statistics would benefit from the creation of a framework which could assist in the production of comprehensive and coherent statistics with improved precision for these areas, and in better use of fragmented, incomplete and partly overlapping primary statistics which often are less precise than required by users.
4.3.4 Hoffmann goes on to note that the use of the term Labour Accounting System
(LAS) for this framework
“was intended to signal (a) the intention to make use of any relevant definitional relationships between central concepts and units; and (b) the conviction that a useful LAS framework would serve as a co-ordinating tool for all labour statistics, in the same way as the SNA serves as a coordinating tool for economic and financial statistics. It was also felt that
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with a developed LAS it would be easier to describe statistically the interaction between production, income generation and the labour market”.
4.3.5 Hoffmann distinguishes between two sets of issues – those concerning the logical and definitional structures, and those concerning the observation and estimation of the corresponding data. This distinction is important in avoiding confusion between issues such as inconsistency in primary statistics, and logical consistency within the labour accounting system:
“Thus one basic use of the LAS is to provide a logical framework for obtaining consistent estimates of key labour market variables and their distribution over the population: estimates which are also consistent with corresponding estimates prepared within the SNA framework. Such consistent estimates may in turn facilitate the description and analysis of the state and dynamics of the labour market, and its interaction with the rest of the economy. In addition to "accounting relationships", the logical framework will require consistent use of units of observation and measurement, time references, definitions and classifications”.
4.4.1. The framework for labour market statistics in the UK used to be based on counts of the numbers of people, measured as either employed or unemployed according to National
Insurance contributions (‘cards’), and were framed around a ‘narrow' definition of what was then called the working population (employees (people not jobs) plus registered/claimant unemployed).
4.4.2. Over time, the working population estimates of employment moved away from NIbased estimates to employer-based surveys of employees (and, therefore, from people to jobs). In addition, there was increasing interest in non-administrative sources of information on the numbers in the labour market, partly because of the growth of female employment that did not show up in traditional sources. Before the advent of the Labour
Force Survey in 1973, much of this information was Census-based, with wider definitions of both employment and unemployment. Those interested in employment began to consider areas such as self-employment, and those interested in unemployment began to consider not just registered/claimant unemployment but also non-registered unemployment.
4.4.3. The ILO convention on labour market statistics in 1984 had two major effects on the framework of UK labour market statistics. First, the introduction of a more comprehensive and authoritative definition of employment led to the inclusion of not just employees but also self-employment and Government supported employment programmes (and from
1992 unpaid family workers) in the definition of the population in employment. Secondly, the standard definition of unemployment moved away from national-based definitions towards an international (ILO) definition. In terms of the framework for labour market statistics, the business survey and administrative-based estimates were shifted towards the
ILO convention, with the broader definition of what was now called the workforce in employment combined with claimant unemployment to produce the workforce estimates.
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Similarly, labour force estimates based on household surveys began to use the more comprehensive employment information and the new ILO unemployment definition rather than the national-based definitions. The LFS evolved to reflect this changing framework – for example its frequency changed from biennial (1979 to 1983) to annual (1984 to 1991) and then to quarterly, from March 1992.
4.4.4. Over the next few years there was little change in the framework, with the workforce and the labour force forming the basic descriptions of the labour market and with the workforce initially retaining its primary focus. Over time, with the development of the
LFS, the labour force increased in importance relative to the workforce and, with the introduction of the integrated first release for labour market statistics in 1998, assumed the primary focus. There was also some shift away from the concept of the workforce estimates, with the term ‘workforce’ (encompassing both employment and
“unemployment”) being dropped – although the workforce jobs series was introduced and the claimant count was retained. From 1998 LFS estimates have been produced monthly
(albeit relating to the latest three-month period). Such estimates, for example of employment, have become valuable economic indicators.
4.4.5 Reflecting the increasing importance in official statistics of coherence across sources, considerable efforts have been made in recent years to reconcile estimates of employment from employer-based surveys and from the LFS, and estimates of ILO unemployment with the claimant count. This work has improved understanding of the strengths and limitations of the different sources, as well as forming the basis for improvements to data collection itself.
4.5.1 At present, the framework for labour market statistics in the UK is largely implicit within the existing form of presentation. In the monthly Labour Market Statistics First
Release, data are provided from a range of sources describing all of the main elements of the labour market. It is recognised that the concepts and definitions used for the collection of the statistics mostly follow well-established international recommendations, and these are documented in various publications. A further strength lies in having more than one source for certain series, particularly employment and earnings. Other features include generally good timeliness; provision of certain estimates of statistical error; estimates of the seasonality of key indicators; and an extensive presentation of information, including much sub-national data.
4.5.2 Despite these many favourable core aspects of the UK labour market statistics, the current implicit framework fails to provide users with an explicit and overarching model of the labour market within which the statistics can be established and interpreted. In specific terms, some of the deficiencies in the existing system include -
 the need for a clearer structure for the presentation of labour market statistics, including inter-relationships between variables and between labour market and related indicators, such as inflation rates;
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 the need for comprehensive definitional and statistical coverage of the data, for example full institutional coverage for the LFS, and coverage of those below the
PAYE threshold in the NES, and extending the AEI to include Northern Ireland;
 better development of both cross-section and longitudinal analyses;
 better use of the data from the various sources, in particular to resolve the issue of different estimates for the same variable (eg jobs);
 better consistency of the data over time;
 improved links with other statistics, particularly national accounts and demographic accounts, and the areas of education and health .
4.5.3 In order to improve the quality and use of labour market statistics, it is clearly desirable to try to resolve these various deficiencies. A labour market framework provides a key, visible and readily assimilable basis for undertaking such developments. These issues had been recognised for some time, and some work had been put in hand in ONS before the review began. The review has taken such work further forward.
4.5.4 Some of the issues mentioned in paragraph 4.5.2 are discussed in this section, in particular, the nature of the economic behaviour (4.6) and the links with other statistics
(4.7.8-9). Section 5.4 embraces the issue of the dynamics of the labour market, while time consistency is considered in section 5.7. Finally, the important issue of better use of the data is covered specifically for employment in section 5.2, and more generally in section
5.7.
4.6.1 In the current Review we took as our starting point a demand/supply structure as the likely key feature of the framework, and sought views on its suitability. In large part it appears that this form of structure is implicit in the way in which the present data are currently seen in the UK, although a few users differ in their acceptance of this.
4.6.2 There is widespread agreement that the labour market is a genuine market, embracing demand for labour and supply, based on the wage rate at which people need or wish to work. Demand and supply are deemed to be in equilibrium when these two components are equalised at a particular level of real wages. There is therefore some formal basis for the establishment of a structure, although, as will be evident below, we are looking at a slightly different and simpler formulation of the concepts of demand and supply. Of course the labour market is a special market, because it provides the mechanism by which most people gain most of their income. Some of the links between the labour market and “society” and the “economy” are discussed further at 4.7.8.
4.6.3 A good example of a labour accounting system, as mentioned above, has been developed by the International Labour Organisation (ILO). In the context of demand/supply, the system provides a means of relating demand (posts, both filled and
39

vacant) and supply (persons, employed and unemployed) through a concept of jobs. (It is worth noting at this stage that we are explicitly considering the supply and demand for numbers in employment – yet we could just as well consider the supply and demand for jobs or hours ). A similar presentation is available in a recent Australian Bureau of
Statistics (ABS) publication on labour statistics concepts, sources and methods. The form a structure might take for use in the UK and some practical issues of measurement are considered below.
4.6.4 In the consultations for the Review, while there was broad support for the creation of a framework, there were a few comments about the theoretical and practical nature of a possible framework. Some of these concerned issues of detail, such as the position of the self-employed in a supply-demand model. Others related to the relevance of such concepts to public sector labour markets, and postulated an extension to cover “resources/needs”.
This is helpful, and is described in more detail later.
4.6.5 The main alternative model suggested was itself based on the principles of supply and demand, but goes a stage further. Under this approach, the ‘supply’ side is seen to be represented by individuals who have a particular perception or view of the labour market, whilst the ‘demand’ side is seen to be represented by employers who have their own view.
For the sake of convenience in the following discussion, the ‘supply’ side view is termed the “labour force”, whilst the ‘demand’ side view is termed the “workforce” – see 4.4.3 on the historical development of this concept.
4.6.6 In both the supply/demand model underlying the labour accounting system (4.6.3) and the “labour force”/”workforce” model (4.6.5), there is agreement over the composition and nature of labour supply – the employed, the unemployed, and the economically inactive. Differences arise though in the consideration of “demand”. Whilst the labour accounting system as outlined above considers demand in terms of jobs and vacancies, the alternative view of “demand” is represented by the “workforce”. This comprises the number of contracts of employment (as measured by a business survey), plus recipients of the claimant count (which is deemed to be “society’s view of unemployment”).
4.6.7 In looking at the relative advantages and disadvantages of these two approaches, it is worth trying to identify the ideal characteristics of a labour market framework. To begin with, it should be capable of being readily linked with other areas of statistics, particularly the national accounts, where consistency of definition and the boundary of the statistics are both very important, and also with, for example, the areas of education, health and welfare.
A related issue includes the boundary of the labour market in relation to unpaid voluntary work. Further, the framework should, in principle, be relevant at different geographical scales. The framework should be dynamic. It should be readily understandable, and should have real-world meaning. And it should be consistent with international best practice and guidelines.
4.6.8 Both the supply/demand accounting framework and the society/individual perception approach support links with other areas of statistics and society. Both are relevant at a range of geographical levels, and both can be expressed in dynamic terms.
But the latter sets of issues – around how understandable the framework is, having realworld meaning, and international comparability – provide the clearest lead in considering which framework is most suitable for the UK’s labour market statistics.
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4.6.9 The concept of individuals and society having different and valid perspectives of the labour market is not an obvious one 2 . Certainly individuals and employers are likely to have distinct views of their own role in the labour market – as, respectively, supplying and demanding labour – but it does not follow that the “labour force” and “workforce” are complementary. Further, the “workforce” itself is an unclear concept – a combination of employment data measured (mainly) by surveys of employers, and the claimant count - and it is out-dated. It reflects an era when for most of the unemployed the main way to find employment was to register as unemployed or, later on, to claim benefit.
4.6.10 Nowadays it is inappropriate to consider that an employer’s view of unemployment should be restricted to those people who are claiming Jobseeker’s Allowance (JSA) or even (on a ‘wider workforce’ definition) those claiming inactive benefits as well.
Although Jobcentre Plus and the New Deal schemes involve a large amount of interaction between the supply and demand sides of the labour market, measures such as the workforce which span supply and demand-side concepts are too simplistic. In practice, we know that many students and women returners to work enter employment from economic inactivity as well as from non-JSA unemployment using routes such as direct applications to employers which are independent of the benefit regime.
4.6.11 What of international best practice? As mentioned above, the ILO have developed and promulgated 3 a conceptual framework for a labour accounting system which sets jobs and vacant posts against employed, unemployed and inactive people 4 . This framework has not yet been ratified as a convention, though the Netherlands, Denmark and Switzerland are going down this route, while the framework explicitly adopted in Australia is in line with the ILO’s formulation. In their contributions to this review, Eurostat wrote that the labour demand/supply framework is the most appropriate conceptual framework to identify the key statistics and to describe their relationships, whilst the United States’
Bureau of Labor Statistics wrote that, although there are some measurement problems, they naturally think about the labour market in a supply/demand framework and they are not aware of any superior conceptual structure. It is worth noting though that some countries, for example Germany, still use the equivalent of the claimant count as their main labour market statistic, and hence might be considered to be operating within a
“workforce” framework. Even Germany, however, has committed itself to implement, by
2005, the 1998 European Union Regulation for the conduct of a continuous Labour Force
Survey.
4.6.12 Whilst it is difficult to be absolute about international best practice, it is clear that international organisations (including the ILO) and those countries leading in labour
2 However, an extension of this approach might be useful. The concept of “main status”, used in a survey context, enables the classification of people by the way in which they think about themselves – for example, employed, unemployed, housewife, student, retired, and so on. Set alongside data collected using the more rigorous ILO definitions this main status approach might be useful in considering issues of labour market attachment.
3 “A labour accounting system – reflection on main concepts and principles”, Hoffmann E., Statistical
Journal of the United Nations ECE7 (1990), 253-263.
4 This classification of the population into mutually exclusive groups of employed, unemployed and economically inactive is embodied in Resolution 1 “Concerning statistics of the economically active population, employment, unemployment and underemployment” adopted by the 13 th International
Conference of Labour Statisticians (October 1982).
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market statistical issues support the supply/demand model described in the context of labour accounts.
4.6.13 The idea of a resources/needs construct was mentioned above. The rationale for this is that it would improve the relevance of the concepts of supply and demand to matters such as education policy and long term planning in the public sector. Statistics of labour resources would embrace the economically inactive population. For example, government policy might be informed by statistics on the number of trained teachers and nurses who are not in the labour market. On the other side existing Government plans for the educational and health sectors would imply needs for qualified labour that might not easily translate into current market demand. This type of thinking is attractive and provides an insight into different types of application of the overall supply/demand framework, especially in what might be termed the ‘public sector’ labour market. It need not be considered an alternative to the supply/demand formulation of the labour accounting system, though – more an extension of the formulation.
4.6.14 How will the framework be used? It is likely to have a number of benefits, both direct and indirect. For example, the process of consultation about the nature of the framework has already stimulated a debate which has helped to explore and test different thinking about the labour market. But it should have more tangible benefits too. For example, it should help clarify our thinking about the need for data from different sources, and the importance of reconciling and integrating series on employment, hours worked, earnings and unemployment. It will provide a stimulus for us to review the relative importance of different series we produce – for example, to explore the relative merits of series such as total employment, jobs, and hours worked. It will help in reviewing the way in which we present data in tables, and the way in which we interpret different series together. Fundamentally, it should ensure that we think more about what we are actually trying to measure – the phenomena, the definitions, the units of measurement, and the classifications we apply.
4.7.1 Diagram A
1
at the end of this section shows a conceptual framework for a UK labour accounting system. This is in line with, for example, the ILO formulation referred to above. It explicitly sets supply – actual and potential - against demand, including unmet demand. It also embodies two related concepts which have attracted strong interest during the consultations, of (a) quality of work, and (b) labour market (LM) attachment. There is some discussion of the need for improved information about labour market attachment elsewhere (section 5.3); the main point to note here is that this concept provides the main interaction with the need for more information about the benefit status of people inside and outside the labour force – active and inactive benefits respectively.
4.7.2 Each main element of the labour market is represented by a box, in the diagram.
Within each box the key variables of interest are shown. In a similar vein, it is worth noting that in general data about elements on the (left hand) demand side of the diagram are generally better collected from employers, whilst better quality information about the characteristics of the supply side tend to be collected from the individuals themselves.
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4.7.3 The particular position of the self-employed was mentioned above. In common parlance it might not make sense to think of a self-employed person filling a post. But whilst an employee typically has a contract with their employer, so we can think of a selfemployed person having an implicit contract with themselves. This is convenient because leaving aside this issue of status, the characteristics of employees that are of interest to users of labour market statistics are of equal interest in relation to the self-employed: hours worked, occupation, and industry. Additionally, there is considerable interest in the earnings of employees and self-employed, as series in their own right and in terms of their contribution to national accounts – but there are significant difficulties of definition and collection for the self-employed (see also paragraphs 5.8.22-26).
4.7.4 Describing and measuring labour markets – especially but not only in an international context – requires an appreciation of interactions with the national institutional framework including, for example, the education system, the social security system, the provision of childcare, and so on. So the characteristics of particular interest in relation to individuals are their educational attainment and qualifications, and whether or not they are in receipt of a state benefit. Qualifications are widely used as a proxy for skills, in assessing the relationship between the skills required by employers, and those available from the labour force.
4.7.5 Benefits are included explicitly in the framework in recognition of their relationship with the labour market, particularly in the context of the “welfare to work” policy programme. People can claim benefit while being either employed, unemployed or inactive. Those in employment can either be working part-time below earnings thresholds or for sick and disabled people, undertaking therapeutic work. Tax credits can be payable to those both in and out of work. They are designed to facilitate movements into employment by affecting people’s net earnings. Hence as tax credits are rolled out individuals are likely to make decisions about moving into employment on the basis of net rather than gross earnings.
4.7.6 In general both education/training and benefits provide a link between supply and demand, either through the acquisition of skills or the support mechanisms for those out of work seeking to re-enter employment. More detail is provided in section 5.3 below.
4.7.7 It was noted above that a labour market framework should embody a dynamic (flow, change) element; indeed this is touched upon above. Dynamics are a key part of the proposals shown here:

Gross flows between elements of the accounts may be represented as in diagram A
2
, which covers both the supply and demand sides. On the supply side, the arrows linking the three activity states represent flows of people from one state to another – the arrow within the employment state represent people changing job without visiting unemployment or inactivity. On the demand side the corresponding dynamic features are similar, but are in terms of posts rather than people. So a new job is created and immediately adds to the stock of vacancies – once the post is filled then the stock of jobs increases, and the stock of vacancies falls. Although couched in terms of jobs the analogous concepts in terms of people are of people quitting their jobs or being laid off
– job separations, or outflows from the stock of people in jobs – and hirings, which represent the inflow of people into jobs.
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The dynamic representation of both the supply and demand sides in A
2
shows the interactions between the ‘closed system’ and the ‘rest of the world’. For example, people may move between the states of employment, unemployment and inactivity – but they may also leave this ‘system’ – by emigrating or dying – and they may be added to this system – reaching the age of 16, and in-migrants. Likewise, whilst the stock of posts may be viewed at any point in time as either filled (jobs) or unfilled
(vacancies), in a dynamic context new posts are created, posts/jobs are closed, and – in the case of out-sourcing for example – posts are ‘closed’ for a particular business but
‘created’ for another, without there necessarily being a vacancy.
There are also geographic considerations to the dynamics of supply and demand (see
4.6.7). For example, the open labour market in the EU – and indeed, the international labour market – are consistent with the framework and the description given above of the dynamics of supply and demand. There are two separate layers of geography - relating to seeking work, and relating to travel to work. The actual geographies will vary according to different types of occupation and rewards. For example, the low paid/low skilled are most likely to look for work in the area in which they are prepared to travel to work.

Net change in labour market variables may be visualised by looking at the differences between the elements of the labour accounts at different points in time. So for example the net change in employment between two successive time periods will be the combined effect of the four flows affecting employment shown in A
2
.

The supply/demand formulation also provides a mechanism for describing and understanding labour market dynamics over extended time periods. Changes in labour demand can have impacts on the supply of labour. For example, in recent years the industrial base of the economy has evolved from a concentration on manufacturing to services. Over the same period there has been a significant change in the gendercomposition of the labour force, and different working patterns have emerged. This is consistent with an interpretation that the demand for labour has changed over time, and that the nature of the supply has changed to satisfy this demand. These are complicated and inter-related issues, and to understand them requires consideration of wider changes in society and the economy (see below).
4.7.8 A further development of this accounting system is shown in diagram B. This places the labour market in the context of “society” and “the economy”, in order to begin to demonstrate some of the linkages between the labour market and ‘government’, private enterprise and the voluntary sector – the supply of labour, on the one hand, and cash flows on the other. The overall linking concept is income/expenditure – so for example firms spend money on labour (and other factors) some of which spending represents earnings to individuals. Diagram B also clarifies the existence of different kinds of labour market. It shows explicitly, for example, private sector and public sector labour markets, though of course there are innumerable different labour markets, defined on the basis of factors such as geography (Travel to Work Areas – self-contained labour markets), qualifications/skills and (relatedly) occupations.
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4.7.9 Note that the linkages in diagram B are more complex than those currently shown – for example, links between the tax paid by individuals and firms, and government’s income from taxes.
4.7.10 Diagram C shows how this labour accounting model might be consistent with the developing overarching social statistics framework (work in hand under the aegis of
National Statistics (Social) committee), and also brings in some of the other necessary attributes of a labour market framework as outlined in paragraph 4.6.7 above. The left hand part describes the characteristics of interest, the centre box the various sub-groups of the population of interest, and the right hand box the dimensions of change over time and differences between areas. The contextual and infrastructure parts of the system are important when looking at the more complex issues of explaining inequality and multidimensionality.
4.7.11 The idea is that each element of the overarching framework applies to any area of social statistics (health, education, crime, labour market etc), at different levels of abstraction. The most critical element for current purposes is the element labelled demand/behaviour – relevant aspects from the labour market perspective would include working, job search, reasons for not looking for work, benefit receipt, and so on. In general, the production of frameworks for a range of social statistics domains will help improve consistency and coherence across domains, and will help identify the linkages between the different social domains.
4.8.1 In full form, the framework is considerably more than the pictorial representation of the structure of labour market statistics, as described above. It embraces also the description of the concepts and definitions underpinning the statistics, of the sources and methodology used for their derivation, of the structure and tables used for presenting and disseminating them, and of the links with areas outside labour statistics.
4.8.2 The issue of how best to promulgate the framework was also considered in the review. A number of users supported the idea of a ‘sources and methods’ publication, say similar to what was done for the national accounts. A manual might cover the following basic issues which should be addressed within the overall structure of the framework:
 concepts and definitions
 accounting framework
 units of observation (essentially businesses, households or persons)
 units of measurement (for example, monetary or physical units)
 sources (LFS, business surveys, other surveys, Census, admin data)
 methodology
 classifications
 issues of periodicity: levels/changes; stocks/ flows; gross/net
 territorial issues, including land geography (UK, foreign workers in the
UK, British workers overseas)
 institutions – private households, communal establishments.
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 seasonal adjustment
 time consistency
 revisions policy
 derived rates/ratios and percentages
 description of the variables - employment, jobs, hours, unemployment, earnings, vacancies, productivity, unit costs and labour costs; inactivity; population, and other related topics such as benefits, education and training
- and particular features of the labour market such as flows between the states of employment, unemployment and economic inactivity
 labour market attachment, and under-employment and over-employment
 aspects of sub-national data
 link with national accounts and other areas of statistics, including education/skills, transport, immigration, fiscal etc policy
 the published data
 the interpretation of labour market data, for example dynamics of supply and demand
 list of abbreviations / glossary of terms.
4.8.3 Producing such a manual – electronically, with appropriate cross-referencing – and perhaps in hard copy is a significant undertaking. A sensible first step would be to explore in more detail international practices and approaches to disseminating such material.
Recommendation
4.8.4
R1: It is recommended that ONS should use a labour market statistics framework, based on a labour accounting system, to drive the integration of labour market statistics. It should be promulgated via a comprehensive
‘sources and methods’ publication for UK labour market statistics.
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Employers
 ownership
 size
 industry
 location
 sector
Diagram A
1
CONCEPTUAL FRAMEWORK FOR A UK LABOUR ACCOUNTING SYSTEM
People
 age
 sex
 ethnicity
 disability
 location
Families/HHs
 type
 composition
Employed
 occupation
 industry
 hours worked
 duration of employment
 educational status
 qualifications
 benefit receipt
Unemployed
 job search activities
 work preferences
 duration of unemployment
 previous occupation
 previous industry
 educ status
 benefit receipt
Inactive
 whether seeking
 whether available
 reasons
 educational status
 qualifications
 benefit receipt
Selfemployed income
Unpaid
Family
Workers
Vacancies type of vacancy
Jobs pay other labour costs hours paid for
Employees earnings permanent / temporary working patterns second jobs union member
Government
Schemes earnings work/college based
Youth population
Prime working age group
Older population
Target groups to be analysed by different reasons for not seeking work or unavailability for work, as appropriate to each group, and in terms of (working age) benefit status.
labour demand actual labour
47 quality of work issues supply potential lab. supply increasing LM attachment

48

Jobs
Vacancies
FLOWS WITHIN LABOUR ACCOUNTS
Diagram A
2
Employed
(E)
UE
EN
EU
NE
Economically inactive
(N)
UN
NU
Unemployed
(U)
Plus: new posts created
Less: job closure
Plus:
People turning 16
In-migration
Less:
Deaths
Out-migration
Hence the net change in employment between any two time periods is:
(EN – NE) + (EU – UE) plus the net effect of births/immigration and deaths/out-migration
49

50

Diagram B
LABOUR MARKET AS A LINKING MECHANISM WITHIN SOCIETY AND
THE ECONOMY
Individuals / households
Earnings
Benefits
Pensions
Goods/services
Tax
Social security contributions
Inheritance
Equity withdrawal
New borrowing/ credit
Return on investment
Debt repayment
Savings/investments
Tax
Government
Government borrowing
Debt recovery
Social security contributions
Labour
Grants
Debt repayment
Goods/services
Investment
Benefits
LABOUR
MARKET
Sales
Borrowing
Share issues
Return on investment
Subsidy
Firms
Labour
Lending
Goods / services
Debt repayment
51
Rent/ overheads
Investment
Tax
Voluntary sector
Sponsorship Labour
Grants
Investments
Goods/services
Donations

52

Diagram C
LABOUR MARKET FRAMEWORK WITHIN THE CONTEXT OF A SOCIAL
STATISTICS FRAMEWORK
Labour market
/subject CONTEXTUAL
Eg social, economic and physical environment, including policy framework matter domain
DEMAND/BEHAVIOUR
Eg working, job search
COHORTS
Eg age/sex/ethnic group
INFRASTRUCTURE/SUPPLY
Eg social security, job centres, nursery provision
DIMENSIONS
Eg time, place, lifecycle

Articulate concept

Define concept

Decide characteristics of interest

Decide how to measure

Collect data

Processing and estimation

Analysis

Publication and dissemination
53
Statistical process

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5.1.1 The scope of the Labour Market Statistics Framework Review included two main aims. The first - to develop a more rigorous and explicit framework for labour market statistics - is covered in section 4. This section covers the second main aim of the review - to review, within the context of the framework, the fitness for purpose of certain labour market variables. Many comments were received on this second aim during the review consultation, and this section summarises and assesses these views and makes various recommendations for action.
5.1.2 Proposals 5.2 to 5.6 concern largely specific areas of labour market statistics; proposals 5.7 and 5.8 embrace a more varied selection of issues brought together under two broad headings; and finally proposals 5.9 and 5.10 cover those issues raised in the framework review which are being remitted to the two other reviews.
5.1.3 Certain proposals appear in more than one group, for example some of the improvements suggested to the information on vacancies and labour productivity (in 5.8) also appear within the section on sub-national data (5.5). Main proposals of this kind are generally cross-referenced. Also included at the end of this section (5.11) are a number of other suggestions about management and organisation which, although largely peripheral to the scope of the review, were recorded and will be addressed.
5.1.4 For each of the proposals, a summary is given of the responses, followed by the existing position in ONS, some discussion and then a recommendation for taking relevant work forward. The proposals included are:

Improve nature and coherence of employment and jobs data (5.2)

Improve information on labour market attachment (5.3)

Improve information on dynamics of labour market (5.4)

Improve sub-national data (5.5)

Improve dissemination of labour market data (5.6)

Improve use of existing data (5.7)

Provision of new or improved information (5.8)

Improvements to LFS (5.9)

Improvements to earnings data (5.10)

Management and organisation (5.11)
Background
5.2.1 This proposal covers some key aspects related to the need to improve the nature and coherence of the employment and jobs data collected in the LFS and the employer surveys.
The issues covered here are generally closely associated with the development of the framework, as discussed in the previous section.
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5.2.2 In addition to these items, a number of other issues relating to the need to improve the employment statistics are covered elsewhere in the report. These include: improvement to the quality of the data classified by industry from the LFS (5.9.13-14); the need for monthly data (5.9.10-12); improvement to the information on self-employed
(5.8.22-26); and various needs for new or improved data, as covered in the section on labour market attachment (5.3).
Issue
5.2.3 This sub-section considers various issues related to the nature of the employment and jobs data, including the difference between them, the needs for the statistics and the sources used to provide them, the definitions, and the need to reconcile and make best use of the data from different sources.
Present position
Nature of the employment and jobs series
5.2.4
The accounting system described in section 4 embodies the concepts of employed people and of jobs, from the supply and demand perspectives, respectively. It follows from this that, within a defined labour market, all of the jobs are performed by all of the employed people - so leaving aside measurement issues it should be possible to reconcile exactly estimates of employed people and of jobs. The main differences between employed people and jobs are that:
 an employed person may have more than one job - indeed, it appears that well over a million people in the UK have a second job, and some have a third job too
 conversely, two or more people may job-share
Thus, crucially, while a common concept underlies employment and jobs, there are two statistical series which represent two different entities.
5.2.5 There are also some conceptual niceties which need to be considered. The position of the self-employed was addressed within 4.7.3 - that self-employed people may be regarded as having a contract to supply labour to themselves, in other words to do a job for themselves. The ILO-defined group of unpaid family workers is worth mentioning too - this is a sub-group of the self-employed who supply labour to a family-owned business, but - by definition - without direct financial reward.
5.2.6 There is also a strong interest in measures of the volume of work undertaken, as a measure of labour input. There are two main approaches to this, relevant to both employed people and jobs - hours worked, and full-time equivalents. The latter is generally considered as somewhat out-of-date, in that it gives prominence to one form of working arrangement over another, and is also difficult to interpret, as there is no agreed definition of full-time work. However, there is much interest in data on hours worked, both in their own right and as the labour input component in productivity calculations. The use of hours worked has the advantage for example that it is not affected by changes in working patterns, such as the growth in part-time employment in the last twenty years - in this sense
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it provides a pure measure of trends in the volume of labour input. Such data are already published from the Labour Force Survey and employer surveys.
Needs for information on employment and jobs
5.2.7 Employment. Users have a range of needs for employment statistics, for both the whole economy and sub-nationally, particularly small areas. There are clearly-defined UK economic and social policy needs, and international - especially European - needs, as outlined in 3.2. The articulation of statistics on employment with those on unemployment and economic inactivity - as set out in the internationally-agreed ILO standards - is important to users as it supports the analysis of labour market supply within the context of the whole population. And the approach to analysing sub-groups within employment, for example, distinguishing between employees and the self-employed - which is in line with the International Classification of Status in Employment - is fundamental to the analysis of employment.
5.2.8 More specifically, users want to know about a whole range of employment-related topics, including:
 people's occupations
 the social and demographic characteristics of working people
 trade union membership
 working patterns and arrangements
 accidents at work
 the hours people work
 commuting patterns
 students who work and they want to be able to look at these topics in different ways – levels, proportions and distributions. There are also important needs for the national accounts. Users also have needs in terms of quality standards; these are considered below in paragraph 5.2.19.
5.2.9 Jobs In respect of needs for information on jobs, there are some broad similarities with needs for employment data, mentioned above, but also some important differences.
As discussed in section 4, jobs are seen essentially as relating to labour demand, representing the elements of work done in the posts which employers fill, or seek to fill, in order to carry out their business. Nevertheless, it should be noted that jobs are also of relevance from a labour supply point of view, since if people choose to take more than one job, this may affect their social and economic circumstances – taking a second job is likely to impact on the work-life balance of individuals and their families, as well as on their financial situation. However, while for this reason information about jobs will be a key input to some of the economic and social policy aspects outlined in section 3.2, the main focus of LFS-based employment analyses is on employed people analysed by their labour market-related and demographic characteristics and the area in which they live (area of residence). In the case of business survey-based analyses, the main focus is usually on jobs analysed by industry and the area in which the job is based (area of workplace).
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5.2.10 This focus has an important micro-economic dimension, as well as the macroeconomic role. The use of jobs data with other labour market statistics, particularly on earnings, will provide a basis for aspects such as
 local authority planning;
 determining issues of industry location;
 assessing industry performance and comparing such performance between different industries or industry groups, for example labour productivity and labour costs (see also paragraph 5.2.11);
 providing a base for businesses to plan.
As with the employment information, there are similar issues of data quality, and these are covered in paragraph 5.2.20.
5.2.11 A particular feature of the use of jobs data should be mentioned here. This is that, in compiling the figures of labour productivity and labour costs, the use of the labour market jobs data from the employer surveys provides a degree of consistency, through using the same source, with the national accounts figures of production or value added, and with information on costs or prices. However, as explained in paragraphs 5.8.11 and 5.8.15, the benefits of this consistency are partial – it is considered preferable to use labour input variables of hours worked or employment, neither of which are fully available from the employer surveys. Finally, it should also be noted that some components of “jobs” data are derived separately from employer surveys.
Sources of information on employment and jobs
5.2.12 A brief description of these sources - the LFS and employer surveys - has been given in sub-section 3.4. The key features in relation to employment are given below.
5.2.13
LFS . The LFS collects information on both employment and numbers of jobs
(includes main and second jobs only). Much component analysis is produced, for example by category of employment, as well as for regions and sub-regions. A particular feature of this analysis is the linkage of employment data with a wide range of economic and social variables collected in the survey.
5.2.14 Based on the survey, ‘LFS employment’ is defined as:
 employees plus self-employed plus Government-supported trainees plus unpaid family workers.
Here, figures for all components, which are essentially based on ILO definitions, come from the LFS. The figures include HM Forces and students living in private households, and those living in NHS accommodation.
5.2.15 Three measurement issues should be mentioned.
(i) the aim is to measure the numbers of individuals in employment (as an ‘activity state’), with this state sitting alongside those for unemployment and economic inactivity.
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(ii) the published information relates to a rolling three-month period.
(iii) as the basic data relate to the reference week when the household is included in the LFS, the amalgamation of the separate weekly returns will mean that the figures are more equivalent to an average estimate, than to a point estimate.
5.2.16 Employer surveys . In respect of jobs, monthly and quarterly inquiries collect the short-term information on employee jobs, with the annual business inquiry (ABI) providing firmer annual data, as well as the basis for the corresponding local area information. All inquiries give numbers of filled jobs, along with some other main economic variables. There is also a separate monthly employer inquiry on earnings, and a second annual inquiry - the New Earnings Survey.
5.2.17 Information on numbers of jobs from the employer surveys ‘workforce jobs
(WFJ)’ - is defined as:
 employee jobs plus self-employed jobs plus HM Forces, plus Government-supported trainees.
Within the above definition, only the information on employee jobs, which are broadly in line with the definitions used in the European System of National Accounts (ESA), comes from the employer surveys; the estimates for self-employed jobs are derived from the LFS; and figures for HM Forces and Government-supported trainees from administrative sources.
5.2.18 Again, there are some relevant measurement issues:
(i) the workforce jobs series essentially reflects the numbers of jobs, although it should be recognised that, where two people share one job, the information returned by employers, perhaps largely for administrative reasons, is likely to relate to two (people) rather than one (job).
(ii) the largest component of the workforce jobs series - employee jobs - will relate to a particular point of time in the relevant month. The WFJ estimate itself comprises some point-in-time estimates and some estimates which are averaged over time.
Responses and discussion on LFS employment
5.2.19 Users, generally, mentioned a range of issues related to the quality of the LFS employment data, some of which were already being pursued by ONS. The issues are given below, together with an indication of how they are being dealt with:

Definition/coverage
Need to cover all those in employment, in particular to improve coverage of the institutional population. A proposed, extended definition of employment is discussed
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below (see 5.2.30); the issue of the institutional population is being addressed in the review of the LFS - see 5.9.4-6.

Period of statistics
Need for monthly information. This is being addressed in the review of the LFS - see
5.9.10-12.

Accuracy and reliability
Concerns exist about the accuracy of :
(i) employment data by industry. This is being addressed in the review of the LFS -
5.9.13-14.
(ii) the public sector component of employment. This is covered below (5.2.41-49).
(iii) the amount of detail which can be made available, particularly for sub-groups and for small areas. This is being addressed as part of the review of the LFS - see
5.9.19-21.

Coherence and consistency
Need to examine further the relationship between the LFS and employers survey data, and to produce ‘best’, definitive estimates. This is covered below (5.2.26-34)
Responses and discussion on employer survey jobs
5.2.20 Users, generally, mentioned a range of issues related to the quality of the employer survey data on jobs, some of which were already being pursued by ONS. The issues are given below, together with an indication of how they are being dealt with:

Definition/coverage
Need to cover all jobs. A proposed, extended definition of employment is discussed below (5.2.30)

Period of statistics
Possible need for monthly whole economy information by industry. The need for monthly information should be addressed alongside the consideration of what is done for monthly data on employment in the LFS (5.9.10-12).

Accuracy and reliability
Concerns exist about the accuracy of
(i) small area data, particularly the analysis by industry. This issue is being considered within the developments on the ABI (5.7.3-8),
(ii) certain public sector information. This issue is being considered within the work on reconciliation (see 5.2.26-34; 5.2.48-49)
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(iii) the DWP administrative figures of Government-supported training and employment programmes. This issue is being considered by ONS
(iv) estimates of quarterly change (5.2.16) which are derived by linking results from monthly and quarterly surveys to the most recent annual estimates.
In addition, ONS do not currently publish standard errors of estimates of levels or changes in WFJs.

Coherence and consistency
Need to examine further the relationship between the employer survey and LFS data, and to produce ‘best’, definitive estimates.

Sources used to derive WFJs
WFJs estimates are derived from a number of sources (5.2.16-17). There is scope for considering the quality of these against possible alternatives.
Responses and discussion on the need for two sources
5.2.21 As mentioned above, the employment and (employee) jobs series are provided by two sources - the LFS and employer surveys. In the review consultation, one or two users raised the question of the need for both these sources – it is worth noting explicitly that noone questioned the importance of both data series . The following brief discussion considers the needs for the two sources, based on some assessment of their relative strengths and weaknesses.
5.2.22 For the LFS, the key issues and relative strengths are
(i) while both employment and jobs data are needed, for many analyses employment is likely to be more appropriate than jobs
(ii) the value of being able to link information on employment with a wide range of economic and social variables collected in the survey
(iii) this source could perhaps be more readily and economically adapted to provide monthly data
(iv) there is an EU Regulation for an LFS.
5.2.23 For the employer surveys, the key issues and relative strengths are
(i) the industry analysis, based on the IDBR, is more reliable than the corresponding information from the LFS, which is based on self-classification
(ii) the ABI component of the WFJ series is largely consistent with the corresponding production and value added figures which are used in the compilation of estimates of labour productivity
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(iii) the much larger sample coverage of the population should, other things being equal, yield more accurate estimates
(iv) there are two EU Regulations for data on jobs from business surveys.
5.2.24 Two other points relevant to the assessment of the need for two sources should also be made. First, work is in hand to try to improve the industry classification in the LFS
(5.9.13-14), for example by holding a sub-section of the Inter-Departmental Business
Register (IDBR) on interviewers’ computers, in order to establish a link to the respondents’ employer and hence industry during the interview – this would tend to improve the consistency of estimates from the two sources at the collection stage.
Secondly, there is some discussion in the sub-section on labour productivity (5.8.10-16) on the appropriateness of the use of data on numbers of jobs in the denominator.
5.2.25 Against this background, therefore, it does seem possible that significant improvements could be made which might lead to a more efficient data collection strategy in future. Planned reconciliation work – see below – will influence our thinking about the utility of the different sources of employment/jobs data.
Definition and reconciliation of the business-based estimates of jobs and the householdbased estimates of employment.
5.2.26 Whilst there is support for both employment and jobs series data to be provided from the LFS and employer survey sources, and the prospect of some rationalisation of data collection, a number of the responses wished to see the LFS and WFJ definitions of employment and jobs made more comprehensive and more consistent. In particular, it was suggested that the LFS should be extended to include, fully, the institutional population
(people living in NHS accommodation and students living at home are already included), and the WFJ series expanded to include unpaid family workers (these are included in the
LFS estimates). The need to resolve the way in which the estimates of numbers in HM
Forces was made and their coverage in the two series was also raised.
5.2.27 On reconciliation, many responses, mainly from outside Government, were in favour of continuing with the two existing LFS and WFJ series, with better reconciliation and explanation, and some improvement in data quality. In addition, a number of
Government users wished to see the reconciliation work taken further, essentially to establish a single, definitive figure of employee jobs from the two data sources.
5.2.28 The point was also made that, in addition to differences in the estimates of the aggregates for employment, there was concern that the two series often showed comparatively large differences in the estimates of change, and this was seen as making interpretation of the data somewhat difficult.
Present position and discussion
5.2.29 The definitions and form of the two series - numbers of jobs and numbers in employment - have been set out above (see 5.2.14 and 17). As mentioned earlier, although a common concept underlies employment and jobs, there are two distinct statistical series.
The differences between the two sets of data, which arise at the national level or sub-
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nationally, or for analysis by particular groups, reflect a number of factors related to how the variables are measured. The main differences relate to second (or more) jobs, the effects of job-sharing, the institutional population, and the omission of certain jobs from
WFJ, particularly as a result of inadequate coverage, either businesses not being covered or jobs not being recorded. In addition to the differences in definition, other factors such as timing of measurement and statistical methodology, including data validation, imputation and grossing, will also be contributory factors to the difference in the two sets of estimates.
It is worth stressing that although the different sources are measuring more-or-less the same phenomenon, it would be unrealistic to be able to achieve complete coherence, because the key sources are surveys - hence even leaving aside all of the definitional, coverage and estimation issues, estimates derived from the sources will be subject to sampling variability (see 3.5.3).
5.2.30 On the first issue, appendix 5 sets out proposed, extended and consistent definitions of employment/jobs from the two sources. This in essence involves, for the workforce jobs series, adding estimates for unpaid family workers, and for LFS employment, adding estimates for employees living in institutions not currently covered. There would be a need to derive series on the new bases for earlier years on a consistent basis.
5.2.31 On the second aspect, ONS has, from time to time, undertaken reconciliation of the two sets of employment estimates and much other analytical work in order to improve the coherence of the data. Since the introduction of the ABI, which led to higher estimates of the number of employee jobs, the two estimates of total jobs are now fairly close.
However, some important differences remain when the data are analysed by industry; there are also differences by gender and FT/PT.
5.2.32 Although the reconciliation is presented in terms of annual levels, as mentioned earlier, a particular concern arises when the two sets of employment data show differing movements in terms of short-term change. These differences are likely to reflect a wider range of potential differences in the source data than might arise for the annual levels comparison. In particular, the statistical (sampling) errors in the two sources are likely to be much more relevant factors.
5.2.33 ONS is tackling the problem in two ways. First, the Office is updating earlier reconciliation work, taking on board revised LFS data for 1998 to 2001, with the aim of reporting conclusions in a series of LMT articles planned for the second half of 2002. The work will look at both issues of levels and changes, as well as the breakdowns of the various data, including in particular the estimates for the public/private sector split. Some aspects of this last issue are considered in 5.2.41-49.
5.2.34 Secondly, as well as this explanatory reconciliation work, further work will involve:
(i) undertaking a fundamental review of the WFJs series, to establish what users need in terms of estimates of jobs, and how these needs should be met. Such a review would cover issues such as: timeliness and periodicity, definitions, accuracy, and sources (5.2.20).
(ii) reducing measurement error at the data collection stage by making use of the
Inter-Departmental Business Register (IDBR) to improve the quality of LFS
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industry data and the coherence of these data with those from the employer based surveys - see 5.9.13-14.
Other definitional issues: the needs of national accounts.
5.2.35 The UK national accounts, which are compiled according to the strict international requirements of the ESA, have a number of particular needs for employment data. The two main areas concern (i) the definition and coverage of employment, (ii) the use of employment data in compiling the estimates. The main focus here will be on employees/jobs; national accounts needs for information on the self-employed is covered in 5.8.22-26.
5.2.36 For national accounts, first, in respect of the definition of employment, there is a
Eurostat Directive which requires provision of employment data consistent, in terms of definition and coverage, with that used for the accounts. There is a further, related Eurostat national accounts need for information on hours consistent with the definition of the employment data. Secondly, certain labour market data on employment and earnings are used in the estimation of compensation of employees for the national accounts, and also for estimates of labour productivity. The latter issue is covered in paragraphs 5.8.10-16.
5.2.37 For national accounts, the coverage of the UK national economy has two main features - the economic territory of the UK, and the production boundary, that is the kind of activities which are to be included. In brief, the definition of economic territory for the accounts, while mostly equivalent to the geography of the UK, contains some important inclusions and exclusions. Further, the production boundary includes not only conventional production by firms, but also, for example, own-account production of agricultural and craft products, own-account construction of dwellings, services of paid domestic staff, and voluntary work leading to goods. However, the production of services for own consumption, essentially household domestic and personal services such as cleaning, cooking and caring, are not included.
5.2.38 For labour market statistics, the employment information, from both the LFS and employers surveys, relates essentially to the UK geographical territory, with the work boundary covering the conventional activity of individuals. The specific definitions of the
‘employment’ data from the two sources are given in appendix 5.
5.2.39 The main adjustments which would be needed to the LFS and employer survey data in order to provide definitions of employment for the national accounts are of three types. In brief, the first would embrace the kind of adjustments mentioned in appendix 5 in order to achieve full and consistent definitional coverage; the second would relate to certain unpaid family workers and certain unpaid voluntary workers who are within the national accounts production boundary; and the third would reflect the differences in the geographic and economic territory as between the LFS and the national accounts.
5.2.40 In compiling and publishing the national accounts, there is a requirement for employment information on both levels (annually) and changes (quarterly). The annual data meets a Eurostat requirement, essentially to provide information which, alongside population data, can be used to provide per ‘worker’ or per capita figures, for comparison across countries. The quarterly information, relating only to employees, is used for the
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estimation of compensation of employees by extrapolating annual data. For quarterly needs, it will probably be adequate to use a labour market (LFS) definition of employees, rather than trying to establish the full definition required for the annual data on levels.
Improved data on public sector employment
5.2.41 The need for improved data on public sector employment was mentioned above in the context of the accuracy of both LFS and employer survey data. The main issues for each source are considered below. This is a particularly topical subject given the policy focus on public sector service delivery.
5.2.42 The LFS . An annual article on “Jobs in the Public and Private Sectors” is published in each June’s
Economic Trends . Estimates of public sector staffing in this article are based on administrative returns and are used in the national accounts; estimates of private sector jobs are obtained by subtraction from the relevant quarter’s WFJ series. Total public sector staffing at June 2000 was estimated at 5,093,000.
5.2.43 However the estimate of public sector staffing levels available from the Labour
Force Survey is much higher. As well as occupation and industry, LFS respondents in employment are asked whether the firm/organisation they work for is:
(1) a private firm or business or a limited company
(2) or some other kind of organisation.
5.2.44 For those replying (2), there is a follow-up question to discover what kind of nonprivate organisation they work for. On the basis of these answers, respondents’ main jobs are classified as public or private sector. The LFS estimate of people working in the public sector in their main job for summer 2000 was 6,332,000. Thus the LFS estimate of public sector staffing is over one million higher than that derived from administrative returns.
5.2.45 As mentioned above, investigating this large difference forms part of the current work on employment reconciliation being carried out in ONS. The bulk of the analysis will be carried out in Spring 2002, when re-grossed LFS data become available, and conclusions will be reported in a series of LMT articles beginning in July 2002.
5.2.46 Preliminary work suggests that some of the disparity can be explained by the difference between the national accounts definition of public sector and the perceptions of
LFS respondents who may consider all publicly funded organisations and functions to be part of the public sector. For example, national accounts classifies people working at universities, polytechnics, higher education colleges, and FE and 6 th
form colleges as private sector, whereas LFS respondents working for these organisations may consider themselves as working in the public sector.
5.2.47 Further, some of the disparity can be explained by contracted-out workers such as security guards and cleaners erroneously reporting the industry of the customer for their services – in the public sector – rather than the industry of their employer – in the private sector. There are, more generally, some inconsistent combinations of occupation, industry sector and public/private split in the LFS which require further investigation.
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5.2.48
Employer surveys . Public sector employers are included on the IDBR since they are registered for PAYE and VAT. They therefore are part of the ABI sample in the same way as any other employers, and the benchmarking of the WFJ to the most recently available
ABI should have no particular problems with the public sector. However, although the
IDBR holds a public/private indicator, a public/private split is not published for ABI or for
WFJ, although some SIC categories, for example Public Administration and Defence, are known to be predominantly public sector. The monthly wages and salaries inquiry collects information on both earnings and jobs for the public sector, and thus provides another source of jobs information for this sector.
5.2.49 The problems however arise with the data used to update the WFJ in the quarters since the most recently available ABI. In manufacturing and much of the rest of the private sector, monthly or quarterly employer surveys are used. But for the public sector (and some private sector, for example banking) administrative returns or published data are used. For some sectors, data are not available quarterly, or at the required level of detail
(sex, full-time/part-time, region), or in time for the publication schedule of WFJ. In these cases, the most recent figures may be carried forward, or figures may be adjusted using knowledge from other sources (eg LFS). Summary data may have to be split according to fixed ratios (often ratios corresponding to the last time a detailed breakdown could be provided). NHS data have in recent months been particularly problematic, although discussions have recently taken place with DH with a view to improving the detail and timeliness of these data.
Recommendations
5.2.50
It is recommended that
R2: ONS should undertake further work to develop and implement strategies for improving the employment data collected in the LFS, and the jobs data collected in the employer surveys, taking account of the analytical requirements of users, and embodying more co-ordination of data collection processes
R3: ONS should continue the work to establish definitive estimates of employment and jobs, through the reconciliation of the data coming from employer surveys and from the
LFS.
R4: The NS Labour Market Theme Group should commission a Quality Review of the
Workforce Jobs (WFJ) series.
Issue
5.3.1 Consultees were not specifically invited to comment on their interest in labour market attachment, but a wide variety of views were expressed in response to a number of questions which are most readily summarised in terms of interest in improved information about labour market attachment.
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Current position
5.3.2 In October 1997, ONS published an article in Labour Market Trends on the
“Measurement of Labour Market Attachment using the Labour Force Survey”. This article outlined the concept of labour market attachment, considered as a spectrum from fully attached workers at the one extreme to those who do not want a job, at the other. The rationale for this article was to encourage users to develop a fuller understanding of the labour market than by simply looking at headline figures of employment and unemployment. The article identified a number of groups within the ILO classification of employment/unemployment/inactivity which had differing degrees of attachment.
5.3.3 ONS does not publish any regular information under the heading of 'labour market attachment' although information about many of the key groups with differing degrees of attachment is available - for example, a detailed classification of the economically inactive by whether they want a job, whether they are looking for work, whether they are available and so on.
Responses
5.3.4 Comments were received from many users both within and outside Government.
Two important inter-related themes which emerged were the desire to obtain a better indication of 'potential' labour supply and of labour market slack. Other main issues raised are, as far as possible, considered below separately for employment, unemployment and economic inactivity.
5.3.5 For employment , requests covered the need for new/improved data on (i) hours worked and unpaid hours, (ii) the self-employed, (iii) terms of employment, (iv) quality of work, (v) skills and (vi) under-employment and over-employment. There were also suggestions that the definition of employment be examined (essentially the 'one hour' criterion, the part-time breakdown and the treatment of part-time students on Government
Training Schemes).
5.3.6 For unemployment , ONS and others strongly support the continued use for UK statistics of the ILO definition of unemployment - considering this to be an essential element both for international confidence in UK official statistics and for retaining public confidence. In contrast, other contributors suggested that the definition of unemployment used for the presentation of UK statistics should be wider than the ILO definition. A variant of this view was that, while preserving the ILO definition, alternative definitions of
'unemployment' should be examined. This investigation might also embrace issues of international practice and comparability of unemployment series. In respect of the claimant count information, comments covered the need for improved quality of the data collected in the LFS (grossed up survey estimates did not tie in well with national totals from the administrative system), and for better reconciliation between the CC and ILO series.
5.3.7 For economic inactivity (and unemployment) , the main requests were for (i) new/improved data on non-JSA claimant benefits, (ii) improved figures of incapacity benefits (specifically, a monthly series, and generally, to make the information more timely and visible, and with better geographical breakdown), and (iii) for improved information on (a) wanting to work, covering especially desired working hours, barriers experienced or
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perceived to returning to work, and working age benefit status, (b) 'worklessness', and (c) the publication of a want work rate.
5.3.8 Many of these requests are most readily dealt with outside the context of the current review - for example, some issues relating to the need for new or improved data have been remitted to the NS quality review of the Labour Force Survey, which is proceeding in parallel (see sub-section 5.9). ONS does not support proposals to make unilateral changes to internationally standard definitions of employment or unemployment. For many users, the relative consistency of these definitions over time is in itself important. And, as described in sub-section 3.3, the focus on these internationally standard definitions has been a key element of the strategy to improve public confidence in labour market statistics, initiated in the late 1990s.
Discussion
5.3.9 Proposals for taking forward the work on labour market attachment have been brought together under a number of headings.
5.3.10 International aspects . Amongst various international work, an OECD Working
Group is exploring the potential supply of labour by looking at the likelihood of joining the labour market of different groups within the economically inactive, whilst Eurostat are exploring a similar concept, but are doing so by trying to identify a single group within inactivity which might be called the 'labour reserve'. On the quality of work issue, Eurostat have been trying to develop indicators. Quality of work includes topics such as: financial rewards, working time, work-life balance, job security, and so on.
5.3.11 It is important to work alongside these international agencies, partly because of the efficiency of partnership working on topics where the objectives are shared, but also because it gives UK an opportunity to shape future definitions or data requirements. The
UK’s labour market statistical base is well-regarded internationally – for example, many features of the European Community Labour Force Survey adopted in 1998 were based on the UK’s quarterly LFS – and this improves our ability to play an influential role in international labour market statistical discussions. Indeed ONS are contributing to an
ILO/Eurostat/ECE programme of work in relation to the Quality of Employment.
5.3.12 Underemployment and overemployment . In 1999, ONS improved the LFS questions used to collect data on underemployment, and at the same time started to collect data about overemployment. Some users have expressed reservations in the past about the usefulness of both concepts - particularly overemployment - so it will be important to evaluate the quality and usefulness of these data, especially as they are required under EU Regulation.
This analysis work is currently underway, and forms the basis of an article in August’s issue of LMT.
5.3.13 Measures of joblessness Whilst ONS intends to continue to publish as its headline unemployment series the ILO measure, it is accepted that users are interested in a range of measures of joblessness. In the United States, the Bureau of Labor Statistics publish a range of indicators, labelled U1 to U5. But given the recent history of public distrust of official labour market statistics – see section 3.3 – great care is needed to avoid presenting what might be seen as a series of alternative measures of “unemployment”. There is merit
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in making available statistics of groups of particular interest – such as ‘discouraged workers’ – to complement the current official measure.
5.3.14 In addition, there are a series of measurement issues, which are not generally well understood. There is a need to clarify issues to do with local area denominators, interactions with the benefit system (including the effect of the benefit system on behaviour and hence on ILO estimates, and overlaps between unemployment and the JSA claimant count), the implementation of the ILO definition in different countries, and comparability issues, and the relevance of the "seeking" work criterion in areas where no jobs are available.
5.3.15 Including more administrative data on benefits within the framework . One of the major developments in recent years has been the change in focus of employment policy to have a stated aim of helping all benefit recipients who are able to work to move into employment. This is most noticeable through the development of the New Deal programme.
5.3.16 Alongside this, systematic improvements have been made to the collection of benefits data which focus on the individuals claiming benefit rather than on individual benefit claims. This led to the production of the Working Age Client Group analysis which counts the total number of people claiming a key benefit and analyses the data by the main group of the claimant:

Unemployed

Sick and disabled

Lone Parents

Others
This hierarchical system also allows analysis of combinations of benefit claims and removes double counting.
5.3.17 The principle of including more benefits data within the labour market statistics framework and Labour Market Statistics First Release received widespread support in the consultation exercise. Development work may be needed by DWP in order to ensure that the timing and frequency of availability of the key working age benefit data is improved and that this information can be included on a basis consistent with the labour market framework.
5.3.18 Linking LFS data with administrative data on claimants of JSA and Incapacity
Benefit . This work would need to be taken forward in the context of the developing
National Statistics policy on data sharing and data linkage. Although the Performance and
Innovation Unit have recommended that existing data should be exploited more, there are clearly concerns about confidentiality of information which need to be considered very carefully before any linkage can be undertaken. An alternative to linkage is to improve the quality of benefit data in the LFS: this is considered at 5.7.26.
5.3.19 Information on the economically inactive . Whilst it has been acknowledged that the monthly publication by ONS since 1998 of information about sub-groups of the economically active population was a major advance, it has become clear during this
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review that insufficient analysis has been undertaken of economic inactivity. As a result, some of the key concepts around inactivity are not well understood, and the range of available data is not widely known.
5.3.20 In response to this, ONS is preparing a series of analyses, beginning with a scenesetting piece explaining the relevant concepts, and looking at trends over time in key groups of the economically inactive, as well as the characteristics of these groups. The scene-setting analysis was published in the February 2002 issue of LMT, and is being followed by a series of analyses of different groups within economic inactivity during
2002-03 – ‘older men’ in June, then those with domestic responsibilities, and students. In addition to the LFS, other sources, including benefit data, is being drawn upon. This work is highlighting needs for more data about the inactive population, for example perceived barriers to working, in order to understand better the nature of potential labour supply.
Recommendations
5.3.21 It is recommended that:
R5: ONS should become more actively engaged with Eurostat, the OECD and the
International Labour Organisation (ILO) in order to play a more influential role in relation to work on the potential supply of labour, and the quality of work
R6: ONS should develop and implement an analysis and dissemination strategy relating to labour market attachment (including underemployment, unemployment and inactivity)
R7: More information from DWP on the working age population receiving benefits should be included within the labour market statistics framework and the Labour
Market Statistics First Release (see also recommendation 13)
R8: ONS should investigate the feasibility of linking LFS data with administrative data on claimants of JSA and Incapacity Benefit
Issue
5.4.1 Consultees were not specifically invited to comment on their interest in labour market dynamics, but views were expressed in response to explicit questions about stock/flows data and about making greater use of existing statistics. In general there was considerable interest in the provision of information to help assess labour market flows and dynamics.
Current position
5.4.2 ONS currently addresses demands for these types of information in three ways:
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
By providing net changes between different time periods in labour market elements
(such as employment)

By providing cross-sectional information and time series about dynamic concepts (such as redundancy and claimant count inflows and outflows)

By making available data which are inherently dynamic – the main examples being
JUVOS, the NES Panel Dataset and the LFS longitudinal data.
5.4.3 However, perhaps because of the absence of a labour market framework, we have never systematically considered the dynamic aspects of the labour market until now. In brief, ‘dynamics’ can be interpreted as the series of inter-related processes which lead to changes in levels of labour market indicators. For example, changes in unemployment reflect the balance between, on the one hand, changes in employment – the net effect of hirings and job separations – and changes in inactivity – the net effect of people entering and withdrawing from the labour force. Flows (of people, or of posts – see 4.7.7 above) are a component of labour market dynamics.
Responses
5.4.4 There was much interest, for all types of users, in new/improved time series data on flows from inactivity into employment, including deriving transition rates for such flows, and on gross flows between employment, unemployment and economic inactivity. There was also a need for information on redundancies. There was an interest in having certain information on labour dynamics on a sub-national basis.
5.4.5 Interest, again widespread, was also expressed in more information from cohort studies, essentially to inform policy development. These included (i) for a social analysis of household influences on individuals within the labour market, and life experiences and relationships across a range of variables, including skills and training, (ii) to show labour market transitions over employment, unemployment and inactivity, essentially to provide information on potential labour supply, or between work and non-work, (iii) to show changes in household circumstances, and (iv) to provide information on the effect of maternity/parental leave on employment for women.
5.4.6 A further suggestion was that, for social analysis purposes, labour market statistics should be re-assembled onto a synthetic cohort basis for cohorts of people defined by their years of birth. The time period for cohort information for these various areas was likely to vary from a few years to say around 20 years.
Discussion
5.4.7 Two groups of proposals will be developed for taking forward the work on labour market flows and dynamics.
5.4.8 Strategy for provision of data and analyses needed to meet different needs for flows and dynamics data . There are likely to be three key strands to such a strategy. First, users need a clearer understanding of the relevant dynamic processes – essentially, how the labour market operates, how it changes, how individuals change within the labour market
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and how and why they move in and out of the labour market, including the effects of changes in households or families on individuals.
5.4.9 The demographics of businesses are relevant here too – firms are ‘born’, have changing labour demand over a period of time, and some die. (Note that these concepts are analogous to supply-side demographic issues: individuals enter the labour market, their participation varies over time, until they leave the labour market). These sorts of issues are entirely consistent with the development of the framework and the way in which it is recommended that we promulgate it, in a Sources and Methods publication.
5.4.10 This is likely to include processes over a range of time-scales. For example, on the one hand there is interest in the way in which new jobs are formed, existing jobs are shared, workers are recruited, and in job separations – especially redundancies. There is corresponding interest in the way in which individuals’ earnings are affected by moves in and out of work, and there is interest in policy evaluation (eg assessing the impact of interventions such as the National Minimum Wage, or the New Deal programme). On the other hand there is interest in the transmission of characteristics relevant to individuals’ willingness and ability to supply their labour between generations – issues around the conditioning aspects on children of experiencing a wage-earner in the family. The longterm dynamic interactions between labour market supply and demand were touched upon in 4.7.7 too.
5.4.11 Secondly, we should catalogue the potential of the sources we have. For example,
JUVOS is relatively unused at present, but provides valuable information about flows into and out of JSA. Conversely the major cohort studies (such as the National Child
Development Study (NCDS) and the British Cohort Study (BCS70)) provide insight into longer term changes. We should be addressing the potential of linking datasets, such as
JUVOS and the LFS (though see 5.3.18, on wider – non-technical – linkage issues). And we should be considering the potential of developing existing sources to provide low cost information about dynamics – for example, the possibility of following up LFS respondents annually might be considered.
5.4.12 We should be considering the scope for widening access to DWP’s increasingly sophisticated longitudinal and cross-cutting databases, compiled using data available within DWP. We also need to consider the potential for extending the scope of these databases to include IR and other labour market data, and further to that the development of corresponding datasets, in other Departments, in related subject areas (such as education), with a view to eventually being able to link them all together to provide an over-arching cross-Departmental 'Cradle to Grave' database at some point in the future.
5.4.13 Thirdly, we need to build on our knowledge of the main barriers to the use of longitudinal data sources, because while cross-sectional sources can provide insights into some aspects of dynamics they will only ever present a partial picture – a full understanding of dynamics requires longitudinal data. We know that the barriers to using longitudinal data generally (in the social policy context) include the complexity of the data structures, the use of bespoke software systems, lack of understanding of, and methodological solutions to, data problems, and so on. So the strategy mentioned above should look at the relevance of these and other barriers in the context of labour market data sources and develop means of encouraging their mainstreaming.
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5.4.14 Response-error bias in the longitudinal LFS data . This specific proposal reflects (a) the fact that the longitudinal LFS represents such a rich source of data about the dynamics of labour supply – certainly sufficient to meet the specific needs for data expressed by consultees, and (b) the intractability of the data problem. ONS (and a number of other national statistical institutes) have worked for a number of years to understand this problem and to find a solution to it. Essentially the problem is that respondents make errors in reporting their activity status on the LFS. There is evidence that these errors
‘cancel out’ in cross-sectional data. But the effect on longitudinal data is likely to be that flows between states (for example from employment to unemployment) are biased upwards. However, we don’t fully understand the processes or the extent of the biases. As a result we have tended to concentrate on considering time series of flows.
Recommendations
5.4.15 R9: It is recommended that ONS should agree and implement a strategy intended to provide the data and analysis needed to meet different needs for flows and dynamics data, paying due attention to differing priorities and quality requirements
Introduction
5.5.1 This sub-section brings together proposals for improving sub-national data, ranging from needs at Country level down to small areas. The need for more detailed geographical information is included in a number of other proposals, for example labour productivity and vacancies (both within section 5.8). These have generally been cross-referenced here.
Specific needs for Scotland, Wales and Northern Ireland are considered as separate proposals.
5.5.2 In addition to the framework review, a separate consultation exercise on small area data took place in the context of the “work” domain of the Neighbourhood Statistics programme. A particular feature of the consultation was a proposal for a range of local labour market indicators. The consultation exercise sought views from, amongst others, the CLIP Labour Market Statistics sub-group and the Central Government Labour Market
Statistics User Group. Comments received were fed between the consultation exercise and the framework review. The main responses received are summarised in the following paragraphs. The various comments received in the two exercises have been translated into the specific proposals, given below, for improving the provision of sub-national and small area statistics.
Summary of responses
5.5.3 The responses from both the framework review and the consultation, mainly from local government and academic users, included widespread comments on the need to establish more local area labour market data, and to improve aspects such as timeliness, comparability and time consistency. Needs for specific variables are given below. A number of non-Government contributors felt that labour market data were more important
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at local, rather than national, level, and that too much emphasis was placed on national information and not enough on sub-national data, especially for small areas. In addition, there was a strong demand for the quality of local area labour market data to be improved.
5.5.4. It was felt that existing LFS sample sizes were generally far too small to meet small area needs, while data from the alternative Census of Population quickly became out of date. On process, users generally welcomed an approach that would allow the development of local area data to follow a more strategic, prioritised approach. Moreover, there was widespread agreement of the principle that the labour market framework should operate at the sub-national as well as national levels – see 4.6.7 – tempered by an acceptance that the provision of survey-based statistics in line with such a framework at increasingly small geographical areas was inherently problematic, because of sample sizes as well as the nature of ‘local’ labour markets.
5.5.5 Concern was also expressed that the weaknesses in existing sub-national data meant that some users, such as local authorities, Regional Development Agencies and local
Learning and Skills Councils, carried out their own surveys or had to undertake extensive and diffuse work to fill the gaps. On the issue of the costs of the provision of sub-national data, it was important to recognise that these would be less onerous at regional level (or just below) than for very small area coverage.
The proposals
5.5.6 Given the wide range and depth of views expressed and the limitations which obtain, it is clearly unrealistic to imagine that ONS will be able to meet any but a few key needs.
However, certain important developments are possible. The various proposals are considered below in three broad groups:

Improve Country data (that is for Scotland, Wales and Northern Ireland)

Improve local area data (except claimant count - see below)

Improve local area claimant count rates
5.5.7 Some other proposals relating to the need to improve small area data are included elsewhere in the report in sub-sections dealing with particular variables, for example from the ABI (5.7.3-8); in relation to time consistency (5.7.9-19); use of administrative data
(5.7.25-29); vacancies (5.8.3-9), labour productivity (5.8.10-16), projections of economically active population (5.8.27-30), and from the LFS and earnings reviews (5.9 and 5.10, respectively). These are also generally cross-referenced below.
Improve Country data
5.5.8 This section covers the need for improved labour market data for Scotland, Wales and Northern Ireland. All three Countries have a general need for more robust data in general – their relatively small populations tend to mean that survey data for their
Countries are based on fairly small samples – in order to be able to produce data as envisaged in the labour accounts proposal. But they each have specific needs too, based on the policy contexts of each of the devolved administrations. The majority of these
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specific needs pertain at the national level too (such as reconciled employment estimates for individual countries).
Scotland
5.5.9 The requests, some of which also appear in other proposals, cover:
(i) further information on skills and links with other parts of the labour market
(ii) (more information on gross flows for employment, and on flows between employment, unemployment and economic inactivity (see 5.4)
(iii) new information from the new vacancies survey (5.8.3-9),
(iv) more small area data for minority groups (see 5.9.18; 5.9.22-23), and
(v) information for activities which cut across the existing industry classification, such as for call-centres and e-commerce.
Wales
5.5.10 As background to the needs for Wales, three points were particularly relevant. First, the local authority level was considered the minimum for most needs, but small area data were needed in certain cases, as described below. Secondly, further needs will emerge as the work of the National Assembly evolves. Thirdly, an important feature is the extent to which the NAW would wish to consider financing any particular improvements, as is being done currently for the LFS and the ABI
5.5.11 The requests, some of which also appear in other proposals, cover:
(i) more information on workforce jobs, including improved data on the selfemployed, for Wales (quarterly), and for also NUTS3 (annually), and more industry analysis of service sector
(ii) more information on gross flows for employment, and on flows between employment, unemployment and economic inactivity (see 5.4)
(iii) a reconciliation of the WFJ and LFS series for Wales
(iv) new information from the new vacancies survey (5.8.3-9)
(v) earlier access required to IFR information
(vi) more industry and geographical data on productivity (5.8.10-16)
(vii) improved population estimates for grossing LFS (5.9.7-9)
(viii) more and improved information on ethnic minorities, often for small areas.
Northern Ireland
5.5.12 In respect of specific aspects of labour market statistics, needs were expressed for
(i) continuation of the work to extend earnings information to cover those below the PAYE threshold
(ii) improvement to the vacancy series in both GB and NI (5.8.3-9)
(iii) continuation of the work on the reconciliation of the employment data
(5.2.26-34)
(iv) more data on under-employment and over-employment (5.3.12)
(v) better reconciliation of the CC and ILO unemployment data (5.3.13-14)
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(vi) integration of measures of labour market slack with information on other benefits and the flows from employment and unemployment to benefit, and more (regional) data on the flows from unemployment to other benefits, to provide information on those with marginal and transitory attachment to the labour market (5.3.13-14, and 5.4)
(vii) while needs were to a large extent met by the existing LFS, some customers have requested that the sample be greatly enhanced.
It should also be noted that NI conducts its own business surveys and was planning to conduct an ABI.
Present position and discussion
5.5.13 Needs for information for each Country are considered as and when they arise. The extent to which such needs can be met will be considered in the light of developments of the framework, as well as issues as such as costs and priorities. Countries are asked to continue to raise particular issues with ONS.
Recommendation
5.5.14 R10: It is recommended that ONS should continue to pursue with the devolved administrations opportunities for improving the quality of labour market statistics, from all sources, for the constituent countries of the UK, bearing in mind the need for coherence and consistency.
Improve local area data (except claimant count - see 5.5.27-40, below)
5.5.15 The following paragraphs give information about other needs for sub-national data, particularly in respect of small areas, as expressed, mainly by Local Government and academic users. These are presented in four broad groups and are discussed, together, below.
Responses
5.5.16 New range of local labour market indicators This proposal relates essentially to needs for a range of local labour market indicators, as discussed in the small area consultation exercise. The indicators covered a range of variables including employment, unemployment and inactivity, and benefits. There was strong support for the establishment of these indicators.
5.5.17
Improve use of existing data There were various comments under this head, from a variety of users:
(i) more use of administrative sources and the Census of Population to improve small area data
(ii) support for the present ONS work to model estimates of ILO unemployment for small areas, and the need to consider implications for survey design
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(iii) the need for ‘micro-level’ data which users could then re-assemble for particular geographies
(iv) the desire, generally, for more timely small area data
(v) a concern that validation and quality checking of sub-national data was considerably less than what was undertaken for the UK estimates
(vi) concern that these kinds of problems with the labour market data would feed through to affect the quality of other statistics, such as the estimates of regional GDP.
5.5.18
Needs for new/improved small area data. As mentioned above, there were many requests, mainly from Local Government and academic users, for new or improved small area data. These covered hours; earnings (particularly low incomes); numbers and size of businesses; improvements to the data on local workforce employment from the ABI; minority groups (particularly single parents, disability and ethnicity); local area populations; migration and commuting flows and links with housing; and data to identify unemployment blackspots and city effects within larger TTWAs. Particular interest was expressed in information for Parliamentary constituencies and in being able to carry out analyses below local authority level in order to identify areas of high unemployment or low employment.
5.5.19 Other proposals for small area data . To complete the picture, this head records those specific proposals appearing elsewhere in the review which may also lead to some improvement in the provision of small area data. These are - improved ABI data (5.7.3-8), and the proposals for improvements to the LFS and to earnings data (5.9 and 5.10).
Present position and discussion
5.5.20 Within ONS, hitherto, the production of small area outputs has often been seen as a secondary process to that for national outputs, and the geographical classification systems are not as well understood as those for, say industry or occupation. Further, there is no structured approach to the development or prioritisation of work on local area labour market statistics, and this has led to a largely ad hoc development approach, which leaves large gaps in coverage, and a lack of strategic focus that would allow important issues to move forward. In these circumstances, little progress on key issues has been made, and whilst some projects, such as model based estimates of ILO unemployment for local authorities are moving forward, other needs such as estimates of employment at ward level emerge, with no agreed format for establishing relative priorities.
5.5.21 All of this has been changing. Over the past twelve months, ONS has started to impose some structure on the thinking required to move local area labour market statistics forward. The purpose of this has been twofold:

To establish a key set of local area labour market indicators that can feed into the
Neighbourhood Statistics Work domain

To use the established set of indicators to prioritise future development work in the area, including work designed to develop new indicators or fill existing gaps.
Local area indicators
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5.5.22 In the small area consultation exercise, the following set of basic indicators – to be supplemented by other more detailed indicators – was put forward to illustrate the type of structured approach that could be taken. Note that this is not a definitive list; it may be modified in the context of consideration of the labour market framework. For example, recommendation 12 at 5.5.40 relates to the proposed removal from the NS portfolio of small area claimant count rates, because of concerns about the biasing effects of commuting on the denominators. It is arguable that this is an issue for local area ILO unemployment rates too – albeit less of a problem because the numerator and the denominator are both residence-based – in which case there may be merit in presenting unemployment as a proportion of the working age population. Such consideration is consistent with recommendation 18 (5.7.24).
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A possible set of basic local area labour market indicators
ILO basis
Indicator
Working age employment rate
Numerator
Employed
Denominator
Population working age
Activity rate
Inactivity rate
Emp + Unemp
Inactive
Unemployment rate Unemployed
Benefit claimants Claimant count rate CC
Population 16+
Population 16+
Employed + Unemp
Population working age
Incapacity benefit rate
IB
Other benefits rates Benefit count
Population working age
Population working age
Jobs
Vacancies
Total working age benefit rate
Jobs density
Total benefits
Total jobs based in an area
Vacancies density Vacancies in area
Population working age
Population working age resident in area
Population working age resident in area
5.5.23 As mentioned above, users generally welcomed the proposed approach that would allow the development of local area data to follow a more strategic, prioritised approach.
There was also strong support for benefits data to be included as they were seen to provide a useful set of labour market indicators at local level, although these might usefully focus on ‘client’ groups - see 5.3.16 - rather than individual benefits.
Other needs
5.5.24 The consideration of how to attempt to meet other needs, stated above, has an added layer of complexity when the geographical dimension is factored in. As users have different purposes for which they require local area labour market data, and therefore have different requirements in terms of variables, they also have different requirements in terms of geography. For example, local authorities have a remit to provide information that fits with their system of local government boundaries, Local Learning and Skills Councils have to work within the boundary system that reflects their organisation, and labour market analysts outside these types of organisation may be more interested in local labour markets. The result of this is a complex inter-relationship between geographies and variables of interest.
5.5.25 However, certain developments are planned, including:
(i) to establish the key geographical area types for which the labour market statistics framework should be developed
(ii) to derive quality measures for all local area estimates
(iii) to make better use of information from the 2001 Census (see also 5.7.25-
29)
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(iv) to continue the work on the development of the model-based estimates of
ILO unemployment
(v) a programme of work to improve the quality of the ABI information (see also 5.7.3-8).
In addition, further consideration will be given to the extensive range of other requests for improving the small area data. However, as mentioned earlier, there are obvious constraints on achieving such improvements.
Recommendations
5.5.26 R11: It is recommended that ONS should develop an initial set of local labour market indicators at local authority level (in the first place) with other geographies to follow, and that the 2001 Census and other key sources of local labour market data are exploited to the maximum degree possible to populate this set of indicators particularly to meet the needs of Neighbourhood Statistics, on the basis of consultation with users.
Quality measures for all local area estimates should be produced as a matter of course, and made available to users alongside the estimates.
Improve appropriateness for claimant count rates for local areas
Issue
5.5.27 This issue concerns the long-running and widespread debate over the validity and fitness for purpose of the existing published claimant count rates. ONS is developing a modelling technique designed to produce unemployment rates for local areas on the basis of the International Labour Office definition. However, there is a parallel need to have local information about claimants of unemployment-related benefits.
Responses
5.5.28 There was almost universal support for the proposal to drop the current claimant count rate from the portfolio of National Statistics. Much of this support stems from the view that commuting patterns have a distorting effect on the existing claimant count rates for local areas. This means that the CC rate for an area with high unemployment rate and a large number of jobs could be similar to that for an area with a low unemployment rate and a small number of jobs.
5.5.29 The existing workplace-based claimant count rates received support from some central Government Departments, particularly DWP, citing the argument that having both the existing claimant count rate using the "workforce" as a denominator and ILO unemployment rate using the economically active population as the denominator provides more information than either measure on its own. It was also suggested that Ministers and
MPs, as key users of the data, should be consulted about any change (see paragraph
5.5.39).
Present position
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5.5.30 At present, ONS publishes claimant count rates using the residents of an area claiming benefit as the numerator and the "workforce" of the area as the denominator.
The "workforce" of an area is made up by adding together:

Employee jobs shown by employer surveys and DEFRA agricultural census to be present at workplaces in the area

Self-employment jobs shown by the LFS to be filled by people resident in the area

HM Armed Forces jobs based in the area - as supplied by MoD

Government trainees at workplaces in the area - as supplied by DfES

Claimants of unemployment-related benefits resident in the area
5.5.31 The denominators for these rates are therefore a mixture of residence-based and workplace-based components - but mostly workplace-based as employee jobs is the major component.
Discussion
5.5.32 ONS's argument is that it is necessary to drop these rates as National Statistics because the statistical basis of the workplace based rates is unsatisfactory. For areas which are not entirely or mainly self-contained labour markets, these rates inextricably confound the prevalence of claimants in an area with the extent of commuting - outwards from residences in the area and inwards to workplaces in the area. As a result, the workplacebased claimant count rates can be badly misleading as indicators of local labour market conditions.
5.5.33 Furthermore, ONS and users have a number of concerns about the quality of the denominator series more generally. For example:

It is difficult to assess the quality of the denominator series in total or in terms of the components. The series is a combination of estimates from surveys and data from administrative sources. Additionally, sampling errors are not available for the non-
LFS jobs data

The combination of workplace and residence concepts lacks geographical validity

There are concerns about the quality of the Government trainee administrative data
(see 5.2.20)

The numerators and denominators are inconsistent, with the numerator expressed in terms of the number of people (claimants) while the denominator is mainly jobs (plus claimants). Moreover the denominators for the most recent rates relate to the latest available mid-year, while the numerators are up-to-date. The denominators do not represent the population at risk of being unemployed.
Some of these issues are germane to the “jobs density” indicator, and will be assessed in the light of the quality assessment work described at Recommendation 11.
5.5.34 The parallel proposal was put forward by ONS that all information which the claimant count rates are intended to convey would be provided much more effectively - on
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a valid and much clearer and valuable basis - by compiling a number of separate measures for each area. These would include:
(a) a claimant count rate based on the number of claimants resident in an area as a percentage of the working age population of the area;
(b) a jobs density measure based on the total number of jobs in an area as a percentage of the working age population of the area.
5.5.35 It will be useful to look at an example of the use of the different local area measures. Figures for certain rates for three areas are given in the table below.
Existing claimant count rate (%)
Camden
2.3
York UA
2.2
Sutton
2.2
ILO unemployment rate (%)
Jobs to working age population ratio
JSA Claimants as a proportion of the working age population (%)
5.4
1.8
4.2
3.8
0.9
2.0 n/a
0.6
1.4
5.5.36 It can be seen that, for all three areas, the claimant count rates, based on the existing workplace denominators, are very similar. However, this near equality completely masks substantial differences in the labour markets of the three areas. Thus, taking the number of claimants in each area as a percentage of the working age resident population of the areas shows that Camden has double the proportion of claimants as York Unitary Authority and three times the proportion of Sutton. This picture is broadly compatible with the available
ILO unemployment rates for Camden and York.
5.5.37 Turning to the jobs ratios, the table shows that the number of jobs in Camden is nearly double the size of the resident working age population while in York it is a smaller proportion and in Camden a much smaller proportion. These ratios demonstrate, therefore, that there is substantial net inward commuting into Camden, substantial net outward commuting from Sutton and some net outward commuting from York. This is why the workplace based claimant count rates, which compound the prevalence of claimants in an area with the extent of net commuting, show misleadingly equal claimant rates.
5.5.38 It was felt that the provision of different local area measures would meet the objections raised in considering dropping the production of workplace-based claimant count rates. Nevertheless, it is worth recognising that data on the population of working age resident in an area also have quality issues related to them, for example that the denominators are over a year old while the numerators are up-to-date, as well as the current unavailability of National Statistics estimates of the working-age populations of parliamentary constituencies across the UK.
5.5.39 As mentioned above, Ministers and MPs are key users of local labour market information, and it would be essential to consult them before any changes were made to the currently available information. Relevant to this issue is the point that the House of
Commons Library has already calculated and made available on its website alternative residence-based claimant count rates for Parliamentary Constituencies because of their
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perception that workplace based CC rates at constituency level are misleading. The textual summary with the data includes the following paragraph, which is entirely consistent with the argument set out above.
"The unemployment rates given here differ from those published by
National Statistics (NS), which express the number of unemployed claimants as a percentage of the number of jobs plus the number of unemployed people in the constituency. As the NS rates can be biased by large-scale commuting, the Library believes that its residence based rates provide a better measure of local deprivation"
Recommendations
5.5.40 R12: It is recommended that ONS should consult as necessary on the withdrawal from National Statistics of workplace based claimant count rates for local areas below regional level – having demonstrated the statistical limitations of these rates – and their
replacement by residence based measures of both claimant count rates and jobs density.
5.6.1 This sub-section concerns ideas for improving the integrated first release and exploiting the potential of web-based publication, as well as other more specific ideas about dissemination.
Issue
5.6.2 This covers the way in which ONS's labour market statistics are disseminated to the public, including the need to exploit the potential of web-based publication. This latter point raises issues relevant to all statistics, not just labour market statistics.
Current position
5.6.3 Since April 1998, all monthly and quarterly labour market statistics have been released via a monthly integrated First Release 5 . This has been available on paper and, more recently, on the National Statistics website, as PDF files. Both national and regional
First Releases are produced.
5.6.4 The decision to present labour market statistics in an integrated form was welcomed by users at the time, although it inevitably represented a compromise of the principle of releasing statistics as soon as practicable. The predominance given to the desirability of coherence is described in the following extract 6 from the draft NS Protocol on Release
Practices:
5 Before then the LFS was released separately but at the same time as the labour market statistics release containing all the other series. Press briefings were held jointly. The increasing importance of the LFS as a source of headline data led to a review, including user consultation, which culminated in the change to an integrated release.
6 Section 5, “National Statistics will be released in an orderly fashion, as early as possible after compilation”, paras (j) and (k).
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“Statistics will be released as soon as practicable once they and any accompanying commentary or analysis are judged fit-for-purpose. There must be no opportunity – or perception of opportunity – for the release of unfavourable data to be withheld or delayed for political reasons”.
“An exception may be made where two sets of figures measure facets of the same issue, and simultaneous release would present a more coherent picture to users, as for example where export and import data are issued together in the UK Trade Statistics. In this case the release of one set of statistics may be delayed to coincide with publication of the other, provided users' wishes are taken into account. Such decisions on
‘bundling’ of releases will be taken by the relevant Departmental Head of
Profession, and if necessary by the National Statistician”.
5.6.5 Other dissemination channels include: the monthly Labour Market Trends, which includes analytical articles and historical time series of key data, and NOMIS. LMT is available via the website, but as with the First Releases it is only in PDF form which does not allow users to download tables or text to their own PC.
5.6.6 In addition, ONS disseminates a number of databases derived from the Labour Force
Survey, which are released at the same time as the relevant First Releases, and also results from the annual business surveys (ABI, NES).
Responses
5.6.7 Most of the external data users consulted wished to retain the existing composite release of all the labour market statistics in a monthly integrated First Release (IFR), on the grounds of the convenience of having related data at the same point in time.
5.6.8 On other aspects of presentation in the IFR, ONS has suggested dropping references to "ILO", simply referring to unemployment. There was a DWP proposal to modify the main tables to cover concepts of ‘Labour Force’ and ‘Workforce’, and to include unpaid family workers in the WFJ series. Other suggestions included - improvements to commentary; for more focus on changes; to standardise time-periods and ages used for denominators; to improve analysis of other benefits (see 5.3.15-17, for example); and for the headline employment series to be classified by bands of hours worked. Also for consideration is what should be published in the IFR on productivity (in the light of the new Productivity Release), and on earnings and labour costs.
Discussion
5.6.9 On the main issue of the integrated first release, technological developments suggest that the present practice should be reviewed. ONS's is developing a much improved, more easily navigable and searchable content-driven website supported by a contentmanagement system. Making each item of information available separately will allow users to pick up exactly the pieces of information they are interested in. The website will
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be viewed as a single pool of information to which users have access and from which a variety of products (paper or CD) can be created to meet specific demand. There will be automatic facilities for pages to be reformatted for printing.
5.6.10 Accordingly, other possible models have been put forward by ONS and others for assessment. For example, ONS could issue a separate website release of each series as soon as it is ready, coupled with press briefings when key data, for example, the LFS and
AEI series, were released. A monthly LFS-based First Release could use an alternative style for the textual description of the labour market designed to get the key messages across more effectively. A refinement of this might be to publish the First Release when each new element of data became available – in effect the First Release would be updated more frequently than monthly. A major gain from this approach would be an increase of up to two weeks in the timeliness of each month's LFS release, which would be advantageous in relation to the timing of the monthly MPC meetings. (More generally, interest in LFS estimates for individual months is discussed at 5.9.10; any such developments would certainly lead to the need to review the timing of the publication of
LFS data).
5.6.11 Another possibility, being considered in the National Statistics Quality Review of the LFS, is that methodological means could be used to compile and publish provisional
LFS estimates a full month in advance of the existing timetable. These estimates would be revised and finalised the following month. If the quality of such estimates could be shown to be sufficiently good, this approach would have the twin advantages of speeding up the availability of LFS results and of retaining the present integrated, coherent presentation of labour market statistics in the monthly publication.
5.6.12 As well as the timing issue, benefits of the greater use of the website include: (a) further material, such as explanatory briefing, articles and tables can be added when ready and links created between related documents; (b) the hyperlinking facilities of the Internet will allow separate sections of information to be linked together in a variety of combinations to suit different users; (c) new products (virtual by means of hyperlinking or on paper or CD) could be produced relatively easily to meet demand from specific groups of customers.
5.6.13 Detailed consideration of the contents of the First Release will need to reflect the proposed framework (see section 4.6.14, for example), addressing amongst others the issues outlined in 5.3 (especially Recommendation 6, on benefits data) and 5.6.8, including the issue of publication of data on labour productivity (see 5.8.15v).
5.6.14 Another issue of dissemination other than in the first release related to the need to provide more ‘social’ analysis of the labour market than at present. For example, there were proposals for:
 an annual (and perhaps a quarterly) publication, with a more enhanced social dimension, on the labour market, describing its structure and how it was changing, and with a ‘people’ focus (eg the elderly, single women, graduates)
 an annual publication on developments in the local labour market, in part as a means of improving the quality of the data through the improved visibility of the statistics, and
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 the need to improve the amount and frequency of labour market data made available relating to households (as well as to individuals) - it was suggested that information analysed by household, where the inter-relationships amongst of its members would largely determine behaviour, provided a further, and at times better, basis (along with individuals) for considering the effect of policy.
5.6.15 The above suggestions touch on thoughts already in existence in ONS as part of the ongoing development of greater analysis. The preparation of an annual “State of the
Labour Market” article setting out developments within the labour market will therefore be undertaken. The article will cover developments in the main areas of labour market interest - employment, unemployment, inactivity and earnings - getting into the detail of changes by a variety of social and demographic groups, including cohorts. Moreover, this should link these movements to other supporting data, for example redundancies, benefit data and labour disputes, as well as linking into external information on labour market prospects and other aspects of the economy. This should be aimed at informing
Government departments, the public and other users, looking to add value to the interpretation of labour market data.
5.6.16 ONS currently makes available twice-yearly a version of the LFS quarterly dataset intended for analysis at the household level. At the same time, a News Release is produced, containing information about workless households, for example. From time to time, ONS also publishes analytical articles about household labour market issues. And recently ONS has initiated an analytical project on the demographic factors affecting labour supply.
5.6.17 There are sound reasons to drop the term "ILO" from the description and discussion of unemployment in National Statistics outputs. ONS publish only one measure of unemployment for the United Kingdom following the definitional guidelines of the
International Labour Office (ILO), which are standard practice throughout the developed world. Using the unqualified term "unemployment" - alongside the terms "employment" and "economic inactivity" for related statistics also published by ONS following ILO
Guidelines - will help to clarify the fact that (ILO) unemployment is the official measure in the United Kingdom of this particular labour market phenomenon. Media descriptions of (ILO) unemployment as "the government's preferred source" might suggest - incorrectly
- that the definition of unemployment in the UK is in some way influenced by the government of the day, so clarification in this area would be consistent with the further building of public confidence in labour market statistics which this Review aims to promote.
5.6.18 The separate "claimant count" - which is a measure of the number of people claiming unemployment related benefits - will also continue to be published by ONS. The claimant count is valuable in its own right as a timely and inexpensive to produce, additional source of information for labour market assessment, but it is not a statistical measure of unemployment as such. As a 100% count of the number of people of working age claiming the Job Seeker's Allowance (JSA) social security benefit, the claimant count along with related statistics of numbers of people claiming other working age benefits - eg
Incapacity Benefit (IB) - is also important for assessing the scale of benefit dependency at national and local area levels among the population of working age.
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Recommendations
5.6.19
It is recommended that:
R13: ONS should develop and implement a strategy for the dissemination of labour market statistics which takes account of users’ data needs and ensures that the potential of web-based publication is applied fully to the dissemination of labour market statistics, including the possibility of releasing labour market data series on the website
as soon as they become available.
R14: ONS should continue to develop a package of labour market analysis and dissemination based on households.
R15: The term “UK unemployment” should replace the currently used term “ILO unemployment” in National Statistics outputs.
5.7.1. This sub-section brings together a range of issues under the broad heading of improving the use of existing data. The issues included are:

Improve ABI data

Improve time consistency

Greater use of, and improve, derived statistics

Better use of existing information, such as from administrative sources and the Census.

Improve metadata
5.7.2 Some issues related to the above proposals will also be relevant to other parts of the report, for example the ABI developments and the better use of existing data lead to improvements to small area data. Main proposals of this kind are generally crossreferenced. In addition, the thrust of the issues related to the LFS and earnings are covered in 5.9 and 5.10, respectively.
Improve ABI data
Issue and responses
5.7.3 The issue here concerns the need to improve certain features of the ABI data, including information at the local area level, estimates of sampling variability, time consistency of the industry data, and the timeliness of the publication of the statistics.
5.7.4 Five main issues were raised, mainly by local Government and academic users.
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(i) Improve data at the local area level. Examples given related to employment (by industry) for Parliamentary Constituencies, and on numbers of businesses (by industry).
(ii) Establish estimates of sampling variability for ABI data . Error estimates were needed for aggregate date and also for component and sub-national figures.
(iii) Improve time consistency in ABI data, including industry series . One specific example given related to the AES data for 1991-95.
(iv) Improve timeliness of publication of the ABI data . There were a number of comments about the poor timeliness of the ABI data.
(v) Consider re-instating the periodic census. This suggestion was made because of the problems with the quality of the sub-national estimates of employment based on the ABI.
Present position and discussion
5.7.5 From April 2001, the ABI replaced the AES as the business survey source of information on employee jobs. ONS needed to undertake much work to establish a proper link between the new and old sources, and to provide retrospective data consistent with the new estimates. Much work was also needed to derive small area data from the ABI, using a top down approach, involving certain modelling, rather than the bottom up, direct measurement approach employed in the AES. The quality of the new figures are at least as good as the previous estimates. All this work had led to some delay in the provision of the new data coming from the ABI. Some outstanding problems on the linking between the
ABI and AES sources are currently being addressed in an inter-departmental working group.
5.7.6 In respect of the suggestions, ONS would consider what could be done to provide additional information at the local area level (item i) , but subject of course to issues of data quality. On estimates of accuracy (item ii), ONS was currently undertaking work into deriving quality measures for aggregate figures. The extent to which this could be continued below this level would be considered. Improvements to time consistency (item iii) will be addressed - this issue is also being considered in a separate proposal (5.7.19-
19). On timeliness (item iv) it should be noted that, in normal circumstances, the data should be available within 12 months of the reference year, and this has been achieved in respect of data for the 2000 survey.
5.7.7 Finally, on the suggestion to re-instate the periodic census (item v), ONS considers that a census would be prohibitively expensive, and impose an unacceptable burden on business. Once the developmental work mentioned above has been accomplished ONS will review with users whether further work is required to improve the quality of the ABI estimates generally (and the sub-national employment estimates, specifically). This may be taken forward as part of the Review of Workforce Jobs (see recommendation 4).
Recommendation
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5.7.8 R16: It is recommended that ONS should continue with work to improve the
quality of the ABI information.
Improve time consistency
Issue and responses
5.7.9 This issue concerns a key requirement of statistical data that series are consistent, one period with the next, and hence on a long-run basis. A related issue is the extent to which comparability, particularly for claimant count and ILO unemployment, has been affected by changes in labour market policy.
5.7.10 Responders to the review, both Government and non-Government, mentioned a number of series where lack of time consistency was deemed to exist, and where there was a need for continuous data. Consistency was regarded as crucial for use in economic forecasting and modelling, as well as for making proper comparisons, generally. Examples given, for individual series, where consistency was deemed not to exist were: (i) employment (eg unpaid family workers appear in the LFS-based estimates only from
1992, and problems with AES data for 1991-95), (ii) ILO unemployment (eg the consequences of mistakes in the routing of the questions in the CAPI questionnaire in spring/summer 1992), (iii) economic inactivity (eg discontinuities around the time of the introduction of the quarterly LFS in spring 1992), (iv) jobs by industry, where there are discontinuities between estimates from the AES and ABI, (v) for particular geographies
(eg where boundary changes were made, with one particular example being the dropping of LFS data for the old Councils in favour of the new unitary authorities) and (vi) for other components, such as ethnicity (eg consistency of changes between the Census and surveys).
5.7.11 Where long-run series could not be provided following a change to the series, responders suggested that it was imperative, as a second best solution, to provide data on the old and new bases.
5.7.12 Two other comments made were first the need for consistency, over time, in the approach used for grossing the LFS, and secondly that the movement of unemployed people on to sickness benefits has undermined the consistency of both the claimant count and ILO unemployed data. On the former, problems were identified with (i) discontinuities in the LFS, as a survey, over the period 1979 to 1992, and (ii) lack of consistency in the full LFS datasets for 1979-84 compared with subsequent years.
Present position and discussion
5.7.13 The need to establish consistency in labour market statistics can arise for a number of ways, in particular as a result of changes in definitions of variables, in classifications, or in survey methodology, or following changes in policy or in administrative systems. For labour market statistics, attempts are usually made to establish consistency, although this is often difficult. The general principle, for example where a classification change is made, is to produce data on the basis of the new classification, with consistent series on this new basis being compiled for earlier periods, as far as readily possible. In some cases, where
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long-run data could not be produced, data would be provided on the two bases for a short overlap period. A related alternative is to continue to provide information on the old basis, again for a period of time.
5.7.14 Particular examples where special effort had been made to achieve consistency were (i) the economic activity state data, mentioned at paragraph 5.7.10 above, and (ii)
LFS data on redundancies and on numbers of disabled people, both of which have been affected by questionnaire changes. In general, ONS has made significant attempts to maintain the continuity of key LFS data, balancing the need to modify the survey to maintain its relevance against identifiable impacts on continuity and a more general risk of inadvertently introducing discontinuities. Volume 1 of the LFS User Guide (pp75-94) provides more information.
5.7.15 Where consistency had not been achieved, the main reason, particularly for longrun data, is generally the unavailability of a ready approach for doing so, and the implied high resource cost of trying to make any such estimates.
5.7.16 In respect of the examples raised by users, ONS will be looking at the individual series to see what might be done. In some cases, for example where boundary changes occur, it may not be readily possible to compile past figures according to new geographies.
The issue of the need for consistency in the approach used for grossing the LFS, and the other issues related to the LFS, are all being dealt with in the context of the LFS review
(see 5.9).
5.7.17 Finally, on the issue of the effect of labour market policy changes, the likely impact of such changes on the claimant count data was made at the national level. For the ILO definition of unemployment, the point has been made in various publications that this definition is behavioural. Thus, if labour market or social security policies lead to changes in job search behaviour, for example, then one would expect the effects of change in activity to be reflected in the unemployment estimates. But this does not represent a discontinuity - rather a continuous measurement of changing behaviour.
5.7.18 In summary, ONS agrees in principle with the need to have consistent series.
However, as mentioned above, practicalities and cost need to be borne in mind in attempting to achieve this.
Recommendation.
5.7.19 R17: It is recommended that ONS should develop and implement a strategy to address users’ requirements for data which are consistent over time.
Make greater use of, and improve, derived statistics
Issue and responses
5.7.20 This proposal relates to the suggestion that more and improved derived statistics should be included in the published material. One important area, relating to CC rates, has been covered in 5.5.27-40.
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5.7.21 Various comments were made by Government and non-Government users about improving the use of derived statistics. Five examples, which are discussed below, were given:
(i) Greater use of ratios and percentages in published material . It was suggested that more use of these kind of derived statistics, relating actual data to particular populations, would improve the visibility and interpretative value of the published data.
(ii)
Include ‘population at risk’ variables in denominators
. It was suggested that, in calculating rates, the denominator should be the appropriate population (‘at risk’) relating to the concept of the numerator. One example given was in respect of unemployment rates for different ‘duration of unemployment’ groups, where, in respect of unemployment for, say, one year or more, the appropriate denominator is deemed to be total unemployed 12 months ago, rather than total unemployed at the current point of time. A further example was for benefits data, where age was considered to be a particularly relevant variable.
(iii) More use of denominators relating to population of prime working age . These were seen to be particularly beneficial for making international comparisons and comparisons over long periods of time.
(iv) Improve the quality of the employment and population data used in the denominators . A number of users questioned whether the information used in the denominator in the derivation of certain ratios was the latest information available.
A related point was that some lack of quality in the initial estimates often leads to relatively large revisions in the derived ratios, particularly for sub-national estimates.
(v) Improve the consistency of the data used in the denominators . Some examples were raised of ratios where the timing of the data as between numerator and denominator were not thought to be consistent, or where different denominators were used in different parts of the same table, for example, on the front page of
IFR.
Present position and discussion
5.7.22 LMD presents a range of derived statistics in its publications, including rates and ratios for totals and various components (including age and geography) of the three key variables of employment, unemployment and economic inactivity. The rates aim to use appropriate denominators, covering for example the working age, economically active or total population. The NOMIS database and other sources provide the means for users to compile other forms of derived statistics.
5.7.23 As mentioned above, two specific issues - CC rates for small areas and some new indicators for small areas - are dealt with elsewhere in the report (5.5.27-40 and 5.5.22-
26). On item (iv), the issue of improving the quality of the employment and population data was being addressed as a separate topic within the proposals for improving the LFS
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(5.9.7-9). In respect of the other issues raised above, ONS will pursue what might be done, as appropriate. If new rates were developed, it would be important that the concept was properly understood. The proposed “sources and methods” publication –
Recommendation 1 – provides an ideal opportunity to bring together this type of metadata.
Recommendation
5.7.24
R18: It is recommended that ONS should consider, further, the use of relevant derived measures in particular the quality of data used in denominators.
Better use of existing information, such as from administrative sources and the
Census
Issue and responses
5.7.25 This issue covers the need for making better use of existing information, such as from administrative sources and from the Census, for providing statistical information in its own right, and as a means of improving the quality of certain information collected in the labour market surveys.
5.7.26 There was general support for this proposal. Five particular examples were cited.
(i) Greater use of the administrative data for information on incapacity benefit . A number of users wished to see more information on incapacity benefit, particularly monthly data, and that DWP should give greater prominence to these kind of data.
(ii) Greater use of the administrative data for information on minority ethnic groups and disability, for regional and, especially, local areas . It was difficult to meet such needs, particularly for local areas, from the LFS, where the sample size meant that incidence of the particular event was small. The question was raised whether administrative sources could be exploited for these purposes.
(iii) Linking of administrative data and the LFS to improve quality of the claimant count information collected in the survey . It was well recognised that the estimates of the CC figures from the LFS understated the population figures. It was highly desirable to improve this situation, including the possible implications for the quality of other LFS variables. As an alternative to linking, it was suggested that the administrative information on CC should form part of the sampling frame for the LFS.
(iv) Use statistical models, for example to estimate ILO unemployment levels and rates for local areas . There was a need for ILO-based rates for small areas, to complement the CC rates. Sample sizes would not be adequate, so modelling of the estimates should be considered.
(v) Better use of the administrative and Census data to improve the quality of the grossing process for the LFS . A number of Government and non-Government
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users expressed concern about the quality of the population data used for grossing the LFS.
Present position and discussion
5.7.27 ONS has been considering a variety of ways of making more use of non-survey data, including each of the specific topics raised in 5.7.26, both to improve the quality and relevance of labour market data per se, but also as part of the development of
Neighbourhood Statistics. For example, on (i) Recommendation 7 suggests that the labour market statistics First Release be developed to include more DWP information on the working age population receiving benefits. For item (ii) - using administrative sources for data on ethnic groups – ONS will explore the availability of suitable data not least in the context of Neighbourhood Statistics, but mindful of the need to use standard classifications as well as of potential differences between survey and administrative data.
5.7.28 Work is in hand on item (iii) - the use of linking between administrative data and the LFS as a means of improving the quality of the survey’s CC information. This aspect is covered in 5.7.30-34. On (iv), modelled small area estimates of ILO unemployment were produced for consultation with local authorities during February 2002. There has also been progress on item (v) - better use of the administrative and Census data as a means of improving the quality of the grossing process for the LFS. Again, this aspect is covered within the proposals for improving the LFS (5.9.7-9). The suggestion that CC administrative data be used as part of the sampling frame for the LFS has been remitted to the LFS Quality Review (see 5.9.17).
Recommendation
5.7.29 R19: It is recommended that ONS should make better use of existing information, such as from administrative sources and from the Census, both as data
sources in their own right and to improve the quality of other data
Improve metadata
Issue and responses
5.7.30 This issue relates to the need to provide adequate descriptive material on all aspects of the labour market statistics, covering their concepts and definitions; coverage and collection practices; method of compilation, including imputation and seasonal adjustment procedures; accuracy; timeliness; and how they are published and disseminated, including interpretation, information on sources and contact points.
5.7.31 There were a number of comments, from both Government and non-Government users, on the need to improve metadata. Six particular examples were mentioned:
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(i) WFJ and LFS employment . A clearer explanation was needed of the two methods of deriving estimates of employment, based on employer and household surveys, in particular how they could be reconciled, how comparisons over time might best be made, and some estimate of error in the WFJ data;
(ii) CC and ILO unemployment . Again, a clearer explanation was needed of these two sources of ‘unemployment’, in particular how they relate to each other, and how comparisons over time might best be made;
(iii) Role of the claimant count . There was a need to restore credibility in CC data, and to explain how CC and other labour market variables complement the individual focus of the LFS;
(iv) Comparisons over time and between areas . There was a need for adequate explanation when changes were made to series, for example as a result of the use of a new definition or a new classification, or when geographies were changed;
(v) Accuracy of data . More information was needed on the accuracy of data, particularly that coming from business surveys, and often at District or ward level;
(vi) Bring metadata together in one place . Advantages were foreseen in having a single repository covering all aspects of metadata related to labour market statistics.
Present position and discussion
5.7.32 ONS includes descriptive material in all regular publications containing labour market statistics, in particular in the regular Integrated First Release, Labour Market
Trends, and in the LFS quarterly supplement. The NES publication includes a comprehensive description of survey design, content and response rates. In addition, key statistics are described in ad hoc documents such as on how employment and unemployment are measured, and in a range of similar publications which constitutes a series of LFS User Guides. A wide range of metadata is also included on the National
Statistics website, for example in relation to low pay estimates, and on the NOMIS database
5.7.33 Two particular features of the presentation should be mentioned. First, in respect of item (v), estimates of sampling variability are given for much of the main LFS data, and work is in hand to produce similar error estimates for information obtained from business surveys. Secondly, advice on the particular features of the data and how they might best be used is also given in response to ad hoc requests for statistics.
5.7.34 On the other matters raised, the issue of the reconciliation of the employment data is being considered in paragraphs 5.2.26-34, and similar work is being addressed for the
CC and ILO unemployment data. Item (iv) is being covered in the sub-section on time
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consistency (5.7.9-19). Finally, for item (vi), the possibility of a “Sources and Methods” publication for labour market statistics is being considered as part of the proposal on the framework (see 4.8).
Recommendation
5.7.35 R20: It is recommended that ONS should review and improve the quality and coherence of metadata provided about labour market statistics.
5.8.1 This sub-section brings together a range of issues under the broad heading of provision of new or improved information. The issues included are

Improve information on vacancies

Improve information on labour productivity

Need for information on labour cost indices and labour price indices

Improve information on self-employed

Establish projections of economically active population by age.

Develop time-use data.
5.8.2 Some issues related to the above proposals will also be relevant to other parts of the report, for example in relation to sub-national needs. Main proposals of this kind are generally cross-referenced.
Improve information on vacancies
Issue and responses
5.8.3 This issue relates to the need for improved information on vacancies, including for particular components and geographies. Vacancies are a distinct element of the labour accounting system described above (see 4.6-4.7), as they constitute employers’ unmet demand for labour.
5.8.4 As background, for many years the only official information on vacancies was the
Jobcentre series, which related to vacancies notified to Jobcentres. These were thought to cover around one third of all vacancies, nationally, but with this proportion varying by area, as well as by type of job and industry. A year or so ago, in response to strong user demand, ONS embarked on establishing a new survey aimed at covering all vacancies.
The new survey, which was essentially enterprise-based, would, at least initially, provide
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only national data without any component detail. The first results would be presented in an article, probably by mid 2002.
5.8.5 There were three issues raised in respect of the Jobcentre vacancy series:
(i) how these data might best be used in the context of the new series on vacancies, in particular whether the series could be ‘cleaned up’ and improved, for use at local level.
(ii) the publication of the Jobcentre series - ONS stopped publication, as a statistical series, in the 12 September IFR; the information is now released by DWP as an administrative series. ONS’ decision was taken on the basis that the introduction of Employer Direct, a major change which involved transferring the vacancy taking process from local Jobcentres to regional
Customer Service Centres, had affected the data since May 2001. There were suggestions both in favour of and opposed to the idea of re-instating the series in the IFR
(iii) the position of the series for Northern Ireland, which has been suspended since March 1999 as a result of a discontinuity identified during the introduction of a new computer system for processing vacancies to local offices of the Department of Employment and Learning (DEL).
5.8.6 While welcoming the new survey, users generally expressed an interest in detailed information on vacancies, for example for Scotland and Wales and for smaller geographies, and by components such as pay level, skills, industry and occupation, the location, duration and terms of the vacancy, and where they were advertised. The new information was seen as adding to the knowledge of demand in the labour market and to economic developments, generally.
Present position and discussion
5.8.7 ONS was already aware of some additional needs for information on vacancies, and had been giving some initial thought to what might be done. Fuller consideration of what amounts to quite detailed requests will follow the assessment of the results of the new survey. Of the suggestions, the most ready improvements may be in the provision of information for Scotland and Wales. Other requests will require the collection of new data, and these will need to be carefully considered.
5.8.8 In respect of the GB Jobcentre series, ONS and Employment Service are continuing to monitor and review the data with the aim of re-instating the series as soon as possible.
Indeed, ONS are working with DEL to try to restore the publication of vacancy figures for the UK as a whole.
Recommendation
5.8.9 R21: It is recommended that ONS should continue to improve the quality and range of survey and Jobcentre data on vacancies, in particular to restore the Jobcentre data as soon as practicable, and to resolve issues of dissemination.
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Improve information on labour productivity
Issue and responses
5.8.10 This issue related to the need to improve the availability of information on labour productivity – the relevance here being that labour market statistics essentially provide the input to the denominator. The related issues of labour costs and labour prices are covered in the next sub-section.
5.8.11 A number of comments were received in the review, mostly from Government users and the Bank of England.
(i) Component series . There was much interest amongst responders in the need for consistency between the numerator (output) and the denominator (labour input) in the labour productivity calculations. Labour input could be measured in terms of employment (or jobs) and actual hours worked (including non-paid hours), with the latter being the preferred measure for the productivity calculations.
Contributors suggested that, despite difficulties in measuring hours, further thought should be given to how best to extend and improve the use of such data in the productivity calculations. Finally, it was suggested that the productivity data would be further improved by better integration of the LFS with the national accounts.
(ii) More detailed data . Needs were expressed for more information (a) by industry, (b) by industry and geographical detail, for Wales, (c) at regional level and below, generally, for informing competitiveness studies, and (d) for the public sector. These new data were seen as important for informing policy.
(iii) Linking productivity with skills, competitiveness and low-paying industries .
The linking of productivity with these variables was considered important in developing policies for improving labour productivity. One suggestion was in respect of LFS information on educational attainment (as a proxy for skills), where data were not published, but available on request. Publication would promote the usefulness of the data.
(iv)
Derive ‘pure’ productivity measures
. The existing aggregate productivity data included the effect of changes in numbers of people in different jobs. There was also a need for series in which the compositional effect of such changes was removed.
(v) Publication of the new data . The new information on labour productivity was being published in a press release just after the quarterly national accounts. It was for consideration whether the information should also appear in the Labour Market
Release. There was also a similar issue related to the position on unit labour costs.
5.8.12 In addition, towards the end of last year, a separate small-scale consultation exercise was undertaken by the ONS Productivity team to seek views of users on developing work on productivity. The main areas of interest mentioned included - developing information on skills and productivity; the use of quality-adjusted labour input;
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education satellite accounts; multi-factor productivity; regional productivity; and international comparisons.
Present position
5.8.13 ONS has given considerable priority to introducing new and improved measures of productivity, including improving the consistency of the data as between the output and labour input data. Certain new data were introduced on the ONS website in April 2001; then, in September 2001, a new quarterly press release, bringing all old and new data together, was introduced. The new information made available included new quarterly measures of output per hour at constant prices (for the whole economy and some breakdown for manufacturing), and annual figures of current price output per hour and output per job for regions in the UK. A second major development related to research on service sector productivity, which had culminated in an article in Economic Trends in
February 2002, which gives a limited number of new series, on an experimental basis.
5.8.14 Following these major advances, further improvements were in hand, incorporating the results of the consultation mentioned in paragraph 5.8.12, above. First, a review is being undertaken of the methodologies for measuring public sector productivity. Secondly, further work is in hand to improve the use of the hours worked measure. Thirdly, ONS was looking at wider aspects of productivity, in particular extending the concept of labour productivity to embrace also the contribution of capital. A particular feature of the work will be to consider using data from the ABI for the labour input element.
5.8.15 Responses to the specific requests from the review spelt out above are given below:
(i) Component series . Some further, small improvements to the consistency between numerator and denominator may be possible. First, as discussed in paragraphs 5.2.35-40, consideration should be given to establishing a separate definition for employment which is relevant to the national accounts. A second, related development, also mentioned in 5.2.35-40, would involve deriving information on hours which were in accordance with the national accounts definitions. This would involve obtaining data consistent with the extended coverage of the new employment definition, and also incorporating full estimates of non-paid hours, including for unpaid voluntary work. Although the impact of these is likely to be small, perhaps de minimis, particularly on data which relate to changes, ONS will give further thought to these issues. Finally, the issue of better integration of the LFS with the national accounts is being remitted to the LFS review (see 5.9.27).
(ii) More detailed data . On the needs for more detailed data on labour productivity,
ONS will examine the provision of further industry detail and the detail requested for Wales, and for regions and below. Given that employment data are generally available in some geographical detail, the provision of estimates will depend in large part on the availability of value added figures, and the consistency between the two sets of data. As mentioned above, ONS is undertaking work on measurement of labour productivity for the public sector.
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(iii) Linking productivity with skills, competitiveness and low-paying industries . As specifically requested above, ONS will consider the publication of appropriate LFS data. Other analyses of existing data may also be possible, and ONS is happy to consider specific requests from users.
(iv)
Derive ‘pure’ productivity measures
. It seems that an alternative series of this kind, which excludes compositional effects of changes in the numbers in different industries, could be compiled by the use of a fixed pattern of weights. ONS will discuss this requirement with HM Treasury, from whom the request came.
(v) Publication of the new data . Prima facie, there would seem to be merit in retaining productivity data in the IFR, as part of the full range of labour market data. This and the related issues will be considered in the development of a strategy for the dissemination of labour market statistics (5.6.19).
Recommendation
5.8.16 R22: It is recommended that ONS should consider, further, the need to improve the quality of productivity data, for example increasing consistency in the information used to derive estimates and focusing more on hours as the measure of labour input, as well as providing additional information on labour productivity, and also to resolve issues of dissemination.
Need for information on labour cost indices and labour price indices
Issue and responses
5.8.17 A need was expressed for information on labour costs, particularly non-cash costs.
Present position and discussion
5.8.18 ONS is currently working on both Labour Cost Indices (LCI) and Labour Price
Indices (LPIs). An LCI attempts to measure what its name suggests - the costs incurred by business in its use of labour - so it not only encompasses wages and salaries, but also benefits in kind, recruitment costs, training etc. An LPI (and the US Employment Cost
Index) tries to measure the price of a standardised unit of labour, and in a sense is akin to an RPI for labour. So it is based on a basket of jobs, where the job characteristics are held constant – controlling for changing employee attributes such as age, responsibilities, industry, tenure, hours and so on.
5.8.19 In the UK, developments are moving forward on both fronts, under the aegis of an
ONS/Eurostat contract. Work on the LCI will be undertaken to allow ONS to meet the requirements of the draft European Regulation concerning the construction of a quarterly
LCI. The work will take the AEI as its base, but will build on that to, for example, take it from a per capita measure to one based on a measure of hours worked. The draft
Regulation requires all member states to produce an index for Q2 2003, which effectively sets our timetable.
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5.8.20 Work on the LPI will see ONS conduct a further study into the feasibility of producing something from existing sources. Alongside that we will look for an industry willing to co-operate in the development of an LPI, which will allow us to look at the practical issues associated with this concept - it will also allow us to construct some up-todate estimates of the costs or both ONS and contributors involved with this work.
Recommendation
5.8.21 R23: It is recommended that ONS should work with Eurostat to compile quarterly labour cost indices in 2003, and should assess the feasibility and costs of producing labour price indices.
Examine need for new/improved data on self-employed
Issue and responses
5.8.22 This proposal covers the need for new or improved information on the selfemployed.
5.8.23 There were three main comments on the need to improve information on the selfemployed:
(i) As a component of both the WFJ and LFS employment aggregates . The estimate was based on the LFS, but data often showed erratic movements, while it was unclear how far the impact of recent changes in the rules and regulations on selfemployment, for example, for fiscal purposes, might be affecting the data.
(ii) For national accounts estimates of ‘mixed income’ . These estimates are based on IR information on self-employment income. Such income, with an annual value of about £45bn., represents about 5 per cent of GDP. The IR information provides the annual figures, although firm data are not available until a few years after the period to which they relate. Quarterly estimates are based on movements in numbers of self-employed and in operating surplus and compensation of employees. Reflecting this rather weak approach and the delay in obtaining good annual data, ONS national accountants would welcome some improvement in methodology, for example a specific survey to collect income data from the selfemployed.
(iii) Other information on the self-employed . Three other requests were for improved information (i) on occupation, (ii) in respect of second self-employed jobs, and (iii) for improved and more detailed industrial information to meet better
EU needs for short-term statistics. The treatment of second self-employed jobs in the LFS needed to be examined.
Present position and discussion
5.8.24 There are over three million people classified as self-employed in the UK. The principal source of data for labour market purposes is the LFS, with some information being collected in the Population Census. Information on working proprietors is collected
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in the ABI. The other source of information is the Inland Revenue, where the data are based, essentially, on the administration of the taxation system.
5.8.25 In respect of all three needs, ONS had been giving some very preliminary thought to the possibility of the introduction of a business-based survey of the self-employed.
However, consideration was necessary of practicalities and the likely burden on businesses, and a full costed case would need to be made. Further, it would need to be established that no other source was suitable.
Recommendation
5.8.26 R24: It is recommended that ONS should consider, further, how best to meet the important needs for data related to the self-employed .
Establish projections of economically active population by age
Issue and responses
5.8.27 This proposal concerns the ONS work to establish projections of the economically active population, by age, nationally and sub-nationally.
5.8.28 There was general support for this work which was vital for (local) planning purposes. A particular need was expressed for information down to the levels for NUTS2
(37 areas) and NUTS3 (133 areas). It was also suggested that similar projections should be made for the population of working age, which might be of particular interest to employers.
Present position and discussion
5.8.29 ONS was currently preparing such projections, reflecting the latest population projections and the revised LFS data for recent years. The intention is to produce national projections first, which would serve as a benchmark for any subsequent sub-national projections.
Recommendation
5.8.30 R25: It is recommended that ONS should continue existing work to publish upto-date national projections of the economically active population, and consider commissioning work on sub-national projections consistent with the national figures,
incorporating the views and expertise of local authorities.
Develop time-use data
Issue and responses
5.8.31 This proposal concerns the need for information on how non-work time is spent by economically active and economically inactive individuals, and within households.
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5.8.32 Government and non-Government users mentioned a variety of potential uses for time-use data, including - the relationship between paid and unpaid work; in relation to the national minimum wage; as an important component of assessing the work/life balance, for example the quality of life and how individuals organised their working lives and how this fitted in with non-work activities; and to provide more information on the potential availability of labour resources. The information also has some use within the national accounts, including possibly for the hidden economy, and as a check on the quality of LFS data on hours worked.
Present position and discussion
5.8.33 Between 2000 and 2001 ONS commissioned a national Time Use Survey (TUS) on behalf of a consortium of government departments and the Economic and Social Research
Council (ESRC). Results were published in mid 2002.
Recommendation
5.8.34 R26: It is recommended that ONS should establish links across government and with the ESRC to develop a programme of analysis of time use data, to explore various
labour market issues as well as the coherence of such data with that from other sources.
5.9.1. The responses to the review included a number of comments about variables which are collected in the LFS or about the LFS itself. This sub-section brings together these suggestions in the form of a list of proposals for improvements to the survey. The list also includes, at the end, other proposals affecting the LFS which are dealt with elsewhere in specific sub-sections in the report.
5.9.2 It is recommended that all these proposals be taken forward in the LFS Quality
Review, currently in hand, and due to be completed by mid 2002.
Clarify goals of the LFS
5.9.3 It was felt that the LFS is a complex survey which seeks to meet many objectives, some of which may conflict. It was important to be clear on the survey’s objectives, for a number of reasons. Some users felt that pressure on the LFS questionnaire had increased in recent years to a point where the survey burden threatened to impact upon response rates. Hence there is a clear need to review the relevance of the information being collected on the LFS against possible alternative sources (and also to prioritise the needs for the information being collected). This is particularly important given emerging pressures for additional information (see 5.9.18). It is also important to have a clear view of the objectives of the LFS in order to inform the process of sample optimisation.
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Extend LFS coverage to the non-household population
5.9.4 The LFS surveys individuals living in private households; in addition information about students who live in halls of residence is collected via their parents’ households, and a separate sample is drawn to ensure coverage of individuals living in NHS accommodation. It does not cover people living in local authority homes, large hotels or residential homes though; in fact it excludes just over 1% of the total population.
5.9.5 This is a concern for many users who want LFS estimates which relate to the entire population. A specific issue raised was whether penal institutions should be included. The issue of the definition of the coverage of the employment data is raised in 5.2.30.
5.9.6 As a first step in exploring possibilities, ONS has recently conducted a pilot Survey of Communal Establishments in order to identify the main methodological considerations involved in extending the sample coverage of the LFS. Results from this pilot survey were published in Labour Market Trends in March 2002.
Improve methodology for grossing the LFS
5.9.7 LFS sample data are grossed up to be representative of the population in terms of age, sex and location, using a range of population data produced by National Statistics.
5.9.8 A number of users, particularly from within government, were concerned that revisions to population data inevitably lead to the need for revisions to be made to LFS data. At the same time some users expressed reservations about particular features of the grossing methodology, such as the accuracy of estimates for different countries within the
UK, and whether grossing should be at the level of the individual (as at present) or the household.
5.9.9 ONS is committed to taking on board the population estimates which will be produced following analysis of the 2001 Census data. This, together with investment in the re-engineering of the systems and processes used in the production of labour market statistics, will provide an opportunity to make significant improvements to the quality of
LFS grossing.
Modify time-period used in survey
5.9.10 Many users would find it helpful to have LFS estimates which relate to individual months, rather than three-month averages. There is no intrinsic reason why these should not be produced, but they tend to be highly volatile - see “Monthly Publication of up-todate quarterly data from the Labour Force Survey, Labour Market Trends, February 1998 - especially the estimates of monthly change in, for example, employment and unemployment.
5.9.11 ONS is considering the possibility of producing reliable monthly data using trend analysis techniques, in preference to a fundamental redesign of the sample.
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5.9.12 Note that consideration may also need to be given to a monthly series from the employer survey.
Improve industry classification
5.9.13 Users are keen to know a range of information about the characteristics of the employed population, including the hours worked, their occupations, and the industry they work in. However, whilst people are able to give a good description of their occupation, there is less reason for them to know the details of the type of industry of their employer.
This is compounded by particular rules, for example that the industry of a company which produces many goods or services is deemed to be that which generates most sales revenue.
5.9.14 Users want more precise estimates of the numbers of people working in different industries. Whilst this is difficult to obtain using traditional methods, it may be possible to exploit technological developments, for example by holding a sub-section of the Inter-
Departmental Business Register (IDBR) on interviewers’ computers, and hence establishing a link to the respondents’ employer and hence industry during the interviewer.
Mapping software might help locate the particular employer.
Improve quality of benefits data
5.9.15 Many respondents do not know which state benefits they receive, and accordingly the estimates of numbers of recipients of Jobseekers’ Allowance, Incapacity Benefit and so on from the LFS are inaccurate compared with the administrative data.
5.9.16 This problem extends across all household surveys, to differing extents – indeed, even the Family Resources Survey (FRS), which is designed in large part to collect just this sort of information, under-estimates the numbers on certain benefits.
5.9.17 ONS and other government departments consider that the most likely solution to this problem is by using the LFS in conjunction with administrative data, although consideration should be given to the use of administrative data on benefits as part of the
LFS sampling frame. However, it is also recognised that there are a range of issues to do with data confidentiality that need to be resolved before any data linking can be taken forward. Such issues are high priority for National Statistics.
New or improved data
5.9.18 Needs were expressed, by both Government and non-Government users, for a range of new or improved information from the survey, covering earnings, skills, employability, quality of work, minority ethnic groups, disability, single parents and religion. Other requests for new/improved data are covered in specific sections elsewhere in the report, in particular for self-employed (5.8.22-26), hours worked (including non-paid) (see 5.2.36), labour costs (particularly non-cash) (5.8.17-21).
Improved data for small areas
5.9.19 In recent years, interest has grown in labour market data for local areas. In response to this, a National Statistics partnership project by DfES, DWP and ONS was launched to
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augment the quarterly LFS so that a minimum sample size was achieved in each Local
Education Authority (LEA) in England. This boost, called the Local Labour Force Survey
(LLFS), was combined with the annual LFS Local Area Database, and the first results were published in November 2001.
5.9.20 From March 2001, the LFS sample was also boosted in Wales as a National
Statistics partnership project by the National Assembly for Wales and ONS. The results will be published as part of the annual LFS results in the Autumn of 2002.
5.9.21 There is still a very strong demand for data for small areas, and ONS would in principle support further collaboration and enhancements to local LFS data.
Sample size limitations
5.9.22 Despite the LFS sample size and the boosts described above, it is too small to provide reliable estimates for small population groups – such as those living in particular
(small) geographic areas, or those with certain characteristics – for example, unemployed
Indian men aged 20-24 with degrees living in the North.
5.9.23 However large the sample, there inevitably comes a point where it cannot be subdivided beyond a certain point, as estimates are based on too few cases to be representative. The approach being tested to address this problem is a statistical technique called synthetic estimation. ONS has recently released experimental estimates of unemployment for small areas for quality assurance by users (5.7.27).
Better education of the potential of the LFS
5.9.24 A number of suggestions were made that more analytical use should be made of the
LFS information, and further education of its potential was needed.
Treatment of students and HM Forces in the LFS
5.9.25 Consideration should be given to the treatment of students in the LFS, in relation to the Census, and also of how the estimates were made of the numbers in HM Forces. Both issues would tie in with the proposal to extend coverage to the non-household population
(see 5.9.4-6).
Time consistency of the LFS data
5.9.26 It was important to ensure that data from the LFS were consistent over time.
Paragraphs 5.7.9-19 have discussed the issue largely in terms of individual series. In respect of the LFS as a survey, there was a need (i) to address discontinuities over the period 1979 to 1992, and (ii) to explore the possibility of establishing full LFS datasets for
1979-84 consistent with information for subsequent years. However, the historical nature of some of the data will clearly limit what might be achieved.
Improved linkages with the national accounts
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5.9.27 Various parts of the report have discussed the linkages between the LFS (and also employers surveys) and the national accounts (see 5.2.35-40). Better linkages will, amongst other things, lead to some improvement in the national accounts estimates.
Proposals affecting LFS covered elsewhere in the report
5.9.28 Many of the proposals included elsewhere in the report will, to a greater or lesser extent, involve or have some impact on the LFS, in particular for labour attachment (5.3) and metadata (5.7.30-35).
Recommendation
5.9.29 R27: It is recommended that a number of specific concerns relevant to the coverage, timeliness and relevance of the LFS should be remitted to the team currently
conducting the LFS Quality Review.
5.10.1 The responses to the review included a number of comments on earnings and the inquiries collecting earnings data. Although not treated as a main-line variable in the framework review (earnings were covered in the Distribution of Earnings Review), the comments were recorded. This sub-section brings together these comments in the form of a list of proposals for improvement to the earnings information.
5.10.2 It is recommended that all these proposals be taken forward in the ONS Quality
Review on the Distribution of Earnings, currently in hand, and due to be completed by mid
2002.
Improve consistency of earnings data over surveys
5.10.3.
This group of issues relates to suggestions, largely from Government users, in the framework review on the need to improve consistency and comparability (i) between earnings and output/employment data, and (ii) between the different surveys collecting earnings information - NES, MWSS and LFS. The latter was a particular recommendation of the Turnbull/King review of the AEI, and is currently underway. The main need for consistency between the different kinds of data was to ensure that consistent figures of unit wage costs and average earnings per hour could be derived. In respect of the different earnings surveys, an appropriate degree of consistency between the surveys would enhance the value of the data.
New/improved data on earnings
5.10.4 There were six broad requests, mainly from Government users, for new or improved data on earnings. These were:
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(i) for more information on the distribution of earnings, particularly in the context of improving the projection of data on public finances
(ii) for more information on low pay (eg in relation to the national minimum wage)
(iii) for more NES data at district level
(iv) for new and improved data on labour costs (including non-cash costs), to relate to output, and on labour prices
(v) that information on net earnings should be collated and published alongside gross earnings, as the impact of tax credits on net earnings is likely to be an increasingly important component of the labour market
(vi) for the derivation of a ‘pure’ earnings rate, that is excluding compositional effects. It should be noted that this last item has been taken forward in a separate study. ONS expect to publish an article in the autumn of 2002 showing the results of this work.
Recommendation
5.10.5
R28: It is recommended that a number of specific concerns relevant to the coverage, accuracy and relevance of earnings data should be remitted to the team
currently conducting the Distribution of Earnings Quality Review.
5.11.1 This final paragraph in this section gives a number of proposals which are largely peripheral to the scope of the review as they cover a range of management and organisational issues. ONS will consider these as appropriate.
Further survey integration . To consider whether any benefits might ensue from integration of surveys directed at the labour market for example certain individual labour market surveys, such as the DTI Workplace Employee Relations Survey, or surveys on health or safety, or on skills, with the mainline LFS or employer surveys.
Revisions policy . To consider the need for a consistent revisions policy as between labour market statistics and the national accounts. The key interface between the two data sets is probably in respect of the labour productivity calculations, where use is made of certain hours and employment data from the labour market surveys, and output from the national accounts. Concern was expressed that different revision policies might lead to inconsistencies in the data.
Location in ONS of Labour Market Division. The main labour market statistics were considered to be key economic statistics. It was felt by the Treasury contributor that relocation of Labour Market Division in the Economic Directorate, alongside national accounts and business statistics, would bring about the kind of benefits that had been evident from the earlier bringing together in ONS of national accounts and business statistics. On the other hand, the distinguishing feature of the labour market statistics area
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of work is that both the sources used and the analyses carried out have a strong social and a strong economic dimension.
Location of collection and processing of labour market data . To consider whether problems arose in ONS with the collection and processing of labour market data being undertaken in different parts of ONS
Co-ordination across Government Departments . There was a need for more co-ordination of the work affecting labour market statistics across Government Departments to achieve best outcomes.
ONS role in assessing external estimates . There was a suggestion that ONS should have a greater role in making quality assessments of estimates made by external consultants, in part to try to ensure some degree of consistency.
JUVOS . JUVOS was considered to be very useful, but was deemed to be to expensive. It was suggested that access should be free and online.
Relationship between Central Government and Local Government and the wider community . Strong views were expressed by Local Government and academic users that
(i) Central Government should have a better understanding of Local Government and wider community needs for labour market data, and (ii) ONS should establish improved partnerships with local government and with the wider community. It was suggested that one benefit of the improved relationships with LG might be to improve official statistics, using local data and knowledge.
Miscellaneous data needs . Three other comments were: compile tourism satellite account; ensure consistent GDP data by area; and interest in the impact of exchange rate fluctuations at regional level.
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6.1 Introduction
6.1.1 This final section of the report presents a few concluding remarks about the review and covers the key issue about how the work is now taken forward.
6.2 Acknowledgements and lessons learned
6.2.1 The successful conclusion of the review, to cost and virtually to time, reflects a number of factors. In particular, the review team would like to thank those who responded to the request for comments on the review. In addition, the team acknowledges the guidance provided by the steering group and the ready co-operation of others in ONS and elsewhere who contributed to the review during its various stages.
6.2.2 Lessons have been learnt from the review process, and these have been fed into the operational and other arrangements for reviews, generally.
6.3 Taking the work forward
6.3.1 The task of implementing the recommendations in this report is the responsibility of
Labour Market Division in ONS. LMD will, within three months of the publication of the report, prepare an action plan for taking the work forward, and will oversee its proper and quality-assured implementation. The work programme will be established within existing
ONS LMD resources. The implementation work will be pursued through the Labour
Market Theme Group and will involve contributions from Departments and other users.
The way in which the work will be accomplished will depend, in part, on developments in other areas, including what has emerged or what will emerge from other reviews.
6.4 Publication of report
6.4.1 The report has also been published on the ONS website. Any comments on the report should be addressed to Richard Laux (richard.laux@ons.gov.uk).
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111

Appendix 1
COMPOSITION OF REVIEW TEAM AND STEERING GROUP
A1.1 The review was sponsored by Barry Werner (Director, ONS Labour Market Division
(LMD)). The work was undertaken by a review team comprising:
Ken Mansell (ex-ONS - Project Manager)
Richard Laux (ONS LMD - Team Leader)
Craig Lindsay (ONS LMD)
Helen Ganson (ONS LMD)
Graham Winter (ONS LMD)
Charles Lound (ONS Methodology)
Graham Thompson (ONS LMD - Secretariat)
Note: Graham Winter left ONS in November 2001 and was not replaced on the team.
A1.2 The work was overseen by a steering group comprising key players from ONS, and users from within and outside Government. The members of the steering group were:
Karen Dunnell (Director, Social Directorate - chair)
Barry Werner (ONS Labour Market Division)
Ole Black (ONS Employment, Earnings and Productivity Division)
Amanda Rowlatt (ONS Economic Analysis and Satellite Accounts Division)
Marta Haworth (ONS Methodology Group)
Chris Kelly (HM Treasury)
Bill Wells (Department for Work and Pensions)
Sarah Black (Scottish Executive)
Ann Simpson-Hawkins (Department for Work and Pensions)
Ray Thomas (Open University and Secretary of Royal Statistical Society Official
Statistics Committee).
Graham Thompson (ONS Labour Market Statistics - Secretariat)
Note: Elaine Drennan (Scottish Executive) replaced Sarah Black in December
2001, and Iain Bell (DWP) replaced Ann Simpson-Hawkins also in December.
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Appendix 2
THE CONSULTATION PROCESS AND DEVELOPMENT OF THE RESPONSES
A2.1 This appendix describes the consultation process used in the review, outlines some main features of the responses, and explains how these responses were translated into the proposals discussed in sections 4 and 5 of the report. The list of those who responded is given in appendix 3.
The consultation process
A2.2 The consultation process sought views in two ways - through meetings or correspondence. In all, 21 people were approached for a meeting and 26 for a written response. Those in the latter group were also offered a meeting. All potential contributors were sent a copy of a questionnaire, which included an explanatory note about the review.
The questionnaires were despatched in July, requesting a response by 21 September.
Meetings were held mainly in September-October.
A2.3 Comments were requested on the issues set out in the questionnaire, and also on any other aspects which were within scope of the review. It was suggested that responses might be made public, unless confidentiality was specifically requested.
A2.4 The explanatory note set out the key features of the review, including outlining what was meant by a framework, and describing the scope of the work. In respect of the scope, it was stressed that, given separate reviews were in hand or planned for other labour market statistics, and in order to keep the review to a manageable size, a limited range only of quality aspects were to be considered in this review. Thus, while a number of detailed statistical issues would be identified, not all would be dealt with in the review. Those outside scope were to be noted in the final report, to be covered in the separate reviews or addressed as appropriate.
A2.5 In practice, the review focused mostly on issues of concept, definition, coverage
(including gaps), appropriateness (including data linkages), time consistency, and presentation and dissemination. Aspects such as collection arrangements (including costs and burden on business), estimation methodology, reliability (including revisions), and timeliness were not pursued in depth, but key issues were noted for the report.
Some features of the responses
A2.6 The questionnaire used in the review invited comments on individual variables, such as employment or unemployment, and also under the broad heads of government policy and external needs. Suggestions related to particular variables received under these heads have been incorporated, as appropriate, into the specific proposals for improvement, as mentioned below.
From responses to proposals
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A2.7 The establishment of the proposals (other than relating to the framework) involved first translating the suggestions in the responses into separate, individual proposals, and then combining these into the more composite proposals which are discussed in the main paper. A number of the proposals will appear in more than one of the groups. Generally, these have been cross-referenced.
A2.8 In order to bring some consistency and objectivity into the development of the proposals, the review team utilised certain criteria, in particular - practicality; cost (broad assessment only); risk; consistency with National Statistics; and breadth of support. The end-product of this approach was the set of proposals considered in section 5.
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Appendix 3
LIST OF PEOPLE WHO PROVIDED INFORMATION
A3.1 This note gives the list of people (i) with whom meetings have been held and (ii) who have provided written comments.
A3.2 Meetings were held with –
Karen Dunnell (Director SD)
Barry Werner (ONS LMD)
Ole Black (ONS EEPD)
Amanda Rowlatt (ONS EAD)
Marta Haworth (ONS MG)
Chris Kelly (HM Treasury)
Bill Wells (DWP)
Ray Thomas (Open University).
Sarah Black (Scottish Executive)
Ann Simpson-Hawkins (DWP)
Graham Jenkinson (–ONS NAD)
Ian Knight (ONS SSD)
Ian Bond (Bank of England)
Paul Bland (DTI)
Steven Marshall (National Assembly for Wales)
Jill Tufnell (CLIP - local authority chairperson)
David Webster (Glasgow City Housing Dept)
House of Commons Library
A3.3 Written comments were received from –
Barry Werner
Bill Wells (DWP)
Ray Thomas
Graham Jenkinson (–ONS NAD)
Ann Blake (ONS LMD)
Paul Bland (DTI)
Joanna Selden (LPC)
Fiona Hepper (NI)
Peter Haslett (CBI)
Paul Wallace (The Economist)
Peter Elias (University of Warwick, Institute of Employment Studies)
Anne Green (Institute for Employment Research, University of Warwick)
Alex Morton (South Lanarkshire Council)
Monica Threlfall (Loughborough University)
Ivan Turok (Dept of Urban Studies, University of Glasgow)
David Webster
House of Commons Library
Mrs Katherine G Abraham (Bureau of Labour Statistics, US Dept of Labour).
Eurostat
ILO
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Appendix 4
GLOSSARY OF TERMS AND ABBREVIATIONS
ABI
AEI
AES
Annual Business Inquiry. ONS’s main survey for collecting structural business statistics across the whole economy
Average Earnings Index
Annual Employment Survey. The earlier source of annual employment data
BoE
- now replaced by the ABI
Bank of England
CC Claimant Count
CLIP Central/Local Information Partnership
DEFRA Department for Environment, Food and Rural Affairs
DfES Department for Education and Skills
DTI
DWP
Department of Trade and Industry
Department for Work and Pensions
ESA European Union System of National Accounts
ESRC Economic and Social Research Council
GDP
HMT
Gross Domestic Product
Her Majesty’s Treasury
IDBR Inter-Departmental Business Register. ONS’s register of businesses used as a basis for sampling and for estimation.
IFR Integrated First Release. The monthly labour market statistics first release
ILO International Labour Office
JSA Jobseekers Allowance
JUVOS
LFS
LMD
LMS
LMT
LPC
MoD
Joint Unemployment/Vacancies Operating System
Labour Force Survey
Labour Market Division
Labour Market Statistics
Labour Market Trends. ONS’s monthly publication for labour market statistics.
Low Pay Commission
Ministry of Defence
MPC Monetary Policy Committee
MWSS Monthly Wages and Salaries Survey
NAD
NAW
National Accounts Division
National Assembly for Wales
NES
NMW
NOMIS
NS
New Earnings Survey
National Minimum Wage
National Online Manpower Information Service
National Statistics
Nomenclature of Units for Territorial Statistics. The European Union’s
NUTS geographical breakdown for regional statistics.
OECD Organisation for Economic Co-operation and Development
ONS Office for National Statistics
PID
TTWA
WFJ
Project Initiation Document
Travel to Work Areas
Workforce Jobs
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The definition and coverage of the statistics of employment and jobs
Appendix 5
A5.1 This appendix considers the need to establish (i) a definitive position on the coverage of employment data, in terms of geography and the work boundary, and (ii) consistency in coverage between the employment/jobs data from the LFS and employer survey sources.
The issue was mentioned in annex B at 5.2.30.
Present position and discussion
A5.2. For labour market statistics, the economic territory is largely determined as the UK geographical territory. The work boundary, as defined at present, relates essentially to the conventional activity of individuals living in households, augmented by certain information for unpaid family workers, for those living in institutions and for HM Forces.
A5.3. As set out in the main paper, the two existing concepts of jobs and employment are defined as follows:
(1) From the employer surveys, the
‘workforce jobs (WFJ)’
series is equal to: employee jobs plus self-employed jobs plus HM Forces, plus Government-supported trainees
Within the above definition, the information on employee jobs relates to “….. people who are employees …. based in the UK”. Only the information on employee jobs comes from the employer surveys: the estimates for self-employed are derived from the LFS, and figures for HM Forces and Government-supported trainees from administrative sources.
The employee jobs figures are broadly in line with the ILO concepts.
(2) Based on the LFS,
‘LFS employment’
is equal to: employees plus self-employed plus Government-supported trainees plus unpaid family workers
Here, figures for all components, which are essentially based on ILO definitions, come from the LFS. For employees, the ILO definition relates to “Anyone (aged 16 and over) who does at least one hour’s paid work in the week prior to the interview, or are temporarily away from work (eg on holiday) ….….”. The figures include two elements of the institutional population - HM Forces living in households, and those living in NHS accommodation.
A5.4. There are some obvious gaps in and differences between the two series, in particular in respect of second (or more) jobs (included in WFJ but not LFS) and the institutional population (included in WFJ, but not fully in LFS), and the omission of certain jobs from
WFJ, particularly as a result of inadequate coverage, either businesses not being covered or jobs not being recorded.
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A5.5. The paragraphs below suggest how ‘new’, comprehensive and consistent labour market employment series might be determined, according to the existing geographic boundary - essentially the UK geographical territory.
The new, extended coverage of employment/jobs.
A5.6. It is suggested that new, comprehensive and consistent definitions of employment/ jobs be established as follows:
(1) From the employer surveys, the
‘new workforce jobs (NWFJ)’
series might be defined as employee jobs plus self-employed plus HM Forces plus Government-supported trainees plus unpaid family workers
(2) Based on the LFS,
‘new LFS employment (NLFS)’
might be defined as employees (covering households, institutions and all HM Forces in UK) plus selfemployed plus Government-supported trainees plus unpaid family workers
A5.7. The main changes, compared with existing definitions, would involve:
 for NWFJ: adding estimates for unpaid family workers
 for NLFS: adding estimates for employees living in institutions not currently covered
(ie for other than people living in NHS accommodation, and students and HM Forces living in households).
A5.8. In moving towards a comprehensive and consistent definition of employment, it should be noted that work is in hand in ONS to extend the LFS coverage to include the institutional sector in full, as appropriate (see 5.9.4-6), and to add in the unpaid family workers series to the WFJ figures. It would also be important to ensure that consistency is achieved, as between the two series, in the resulting estimates for HM Forces, and in the figures for Government-supported trainees and unpaid family workers.
A5.9. There would be a need to derive series on the new bases for earlier years on a consistent basis.
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