Economic Issue
of the Day
Philippine Institute
for Development Studies
S u r i a n s a m g a Pa g -a a ral
Pangkaunlaran ng Pilipinas
Vo l . X I N o . 1 ( J a n u a r y 2 0 1 1 )
Am I in the labor force?
Definition and measurement of basic concepts
L
abor force statistics is one of the important tools policymakers use to gauge how well (or worse) the economy is
performing. A low labor force participation rate, for
instance, may mean that persons in the economy would rather
do other activities than work. A high unemployment rate may
be an indication that fewer households have sources of income,
thus constraining personal consumption. Both instances point
to possible economic problems, especially in the long run. A
timely reading of such indicators may provide policymakers with
enough leverage to respond to these economic problems. But,
first, where do these labor force statistics come from? More
importantly, what do they mean and how are they measured?
(Photo: Jane Alcantara)
Am I in the labor force?
Think of a neighborhood as an economy. Persons in an economy
aged 15 years old and over are said to be part of the working age
population (WAP)1 while those who are less than 15 years old
are not2 (NSCB 2007). During a specified reference period, say
“past week,” those members of the working age population who
are either employed or unemployed are said to be persons in the
labor force (LF). Those members of the working age population
who did not look for work during the reference period because
of (a) age, i.e., either too young or too old; (b) retirement/
permanent disability; (c) household or family duties; (d)
schooling; or (e) other reasons are not counted as part of the
labor force.
The labor force participation rate (LFPR) is simply the
proportion of the working age population in the labor force, i.e.
LFPR = LF / WAP, usually expressed in percentage. Before
computing the LFPR, however, one must first define who the
members of the employed and the unemployed populations are.
Counting the employed population is more straightforward than
counting the unemployed. Given a reference period, those
persons in the working age population who: (a) have either a
job or business, even for one hour; (b) have either a job or
business but are temporarily not at work; or (c) are expecting to
assume employment or operation of a business within the next
two weeks are considered as employed (E). The employment
rate (ER) is the ratio of the number of persons employed to the
total labor force, i.e., ER = E / LF, usually expressed in percentage.
To be part of the unemployed population, on the other hand,
a person can be described by two simultaneous parameters in
addition to the age criterion. A person is said to be unemployed
(U) if during the reference period:
1. He (she) is without work or has no job/business; AND
2. He (she) (a) is looking for work or has taken steps to find a
job or establish a business; OR (b) is not looking for work because
of the following reasons:
i. He (she) believes there is no work available.
_____________________
1
Other countries may have different age criterion to be part of the
working age population
2
It is worthy to note, however, that a person not in the working age
population may actually be working or is looking for employment.
Economic Issue of the Day
LABOR FORCE
Vo l . X I N o . 1 ( J a n u a r y 2 0 1 1 )
ii. He (she) is awaiting results of a previous job application,
or is waiting for rehire or job call.
iii. He (she) suffers from temporary illness or disability.
iv. Bad weather.
The unemployment rate (UR) is the proportion of the labor
force that is unemployed, i.e., UR = U / LF, likewise typically
expressed as a percentage.
New unemployed: the ILO concept
The above definition of the unemployed is commonly referred to
as the Philippine concept of unemployment. Since April 2005,
however, the Philippine Statistical System has adopted a revised
definition of unemployment following the full definition prescribed
by the International Labour Office (ILO),3 thus the moniker ILO
concept. The Philippine concept partly subscribes to the ILOprescribed definition.
The ILO concept has two distinguishing features from the
Philippine concept. One, in addition to the two conditions that
must be simultaneously met in the Philippine concept, a working
age individual must likewise be currently available for work.
Operationally, this means that an individual must be both
available and willing to take up work within two weeks given a
reference period. Two, in reference to condition (2.b.i) of the
Philippine concept—i.e., if the person has not looked for work
during the reference period because he (she) believes that work
is not available—he (she) must however have looked for work at
least once in the past six months to be considered unemployed.
A reference period for job searching of discouraged workers is
not included in the Philippine concept.
Because the ILO concept is more stringent than the
Philippine concept, one expects lower unemployment and labor
force participation rates when using the former. This newly
adopted official definition is closer to what is deemed as
conceptually correct definition of the unemployed.4 Table 1
presents statistics on the labor force using the Philippine and
the ILO concepts.
Who counts?
After knowing how labor force statistics are measured, the next
logical question is “Where do these statistics come from?”
Table 1. Selected labor force statistics ('000), Philippines
2009Q4
Working age population (WAP)
In the labor force (LF)
Employed (E)
Unemployed (U)
Not in the labor force (NLF)
Philippine
Concept
ILO
Concept
59,705
39,455
35,478
3,977
20,251
59,705
38,197
35,478
2,719
21,508
Source of basic data: Labor Force Survey (LFS) public-use file, National
Statistics Office (2009). Figures may not add up to total due to rounding.
Representatives of the National Statistics Office (NSO) collect
data by interviewing a subset of the population and ask questions
about what occupations members of the interviewee’s household
did during the reference period “past week.” NSO enumerators
do this in January, April, July, and October of every year although
not necessarily interviewing the same subset of the population
each round.
Although not every Filipino is interviewed, the NSO ensures
that the statistics generated are statistically representative of
the whole population, a process that may be likened to preparing
a glass of orange juice—one does not need to drink all of the
liquid to know that it is too sweet. One just needs to ensure that
the juice is mixed well, and that enough sample is tasted. N
References
National Statistical Coordination Board (NSCB). 2007. NSCB Resolution
No. 14, Series of 2007. Approving and adopting the official concepts
and definitions for statistical purposes for the labor and employment
sector. Retrieved on 15 February 2011 from the NSCB database.
National Statistics Office (NSO). 2005. Technical Notes on the Labor
Force Survey (LFS). Retrieved on 23 June 2010 from the NSO
database.
Pascua, C.M. 2005. Who are the unemployed in the Philippines? (How
to identify them using the new official definition of unemployment.)
Statistically Speaking by Dr. Romulo A. Virola. Retrieved on 23
June 2010 from the NSCB database.
_____________________
3
Embodied in Resolution No. 1 of the 13th International Conference of
Labour Statisticians, 1982.
4
See C.M. Pascua (2005) for a more detailed exposition.
The Economic Issue of the Day is one of a series of PIDS efforts to help in enlightening the public and other interested parties on the concepts
behind certain economic issues. This dissemination outlet aims to define and explain, in simple and easy-to-understand terms, basic concepts as they
relate to current and everyday economics-related matters.
This Issue was written by Michael Ralph M. Abrigo, Research Specialist, at the Institute.
The views expressed are those of the author and do not necessarily reflect those of PIDS and other related agencies and sponsors. N
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