The main source of information on the labour market is the European Union (EU) Labour Force Survey (EU-LFS). This survey collects information on the labour market situation and covers people aged 15 years old and above who live in private households. It excludes people living in collective households such as halls of residence, old people's homes, prisons or military barracks.
Labour market - basic definitions
In this article, you will learn what the labour market is, how it works and how people move between different situations in the labour market.
What is the labour market?
The labour market is a crucial part of the economy that deals with the supply and demand for jobs. It includes everyone who is working, everyone who is looking for work and the availability of jobs from employers.
Eurostat's statistics bring data together so we know how many people are working (in employment), how many are not working and how many people are looking for a job.
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Whenever you are looking for a job or even if you are already employed, you are automatically part of the labour market. This is an essential part of the economy that deals with the supply and demand for jobs. Employers represent the demand side, who are looking for people to hire who have the necessary skills and qualifications. Employees or job seekers are on the supply side offering their skills and qualifications in exchange for work and a salary.
Why is the labour market important
- economic indicators: By collecting data on the labour market, we can learn about employment levels – how many people have jobs, how many are unemployed, and how many are seeking jobs. This data helps us understand the health of the economy.
- policy making: Governments use labour market data to create economic policies. For example, if many people are unemployed, the government might invest in job training programs or set up more job centers to help people find jobs.
- news and media: Labour markets are frequently discussed in the media. We often hear about companies hiring or laying off workers. The media also cover issues like short-term contracts and part-time work, which affect work-life balance or are because full-time jobs are hard to find.
The labour market can be seen from many different angles and people are included in the labour market in various ways. For example, some people may work part-time or on temporary contracts, either by choice or by necessity. This highlights the diverse nature of the job market and the different employment situations people face.
Overall labour market data provides valuable insights into trends and challenges in employment, and helps to shape decisions at both Government and individual levels.
Labour Force Survey
The EU-LFS currently covers 34 participating countries: the member states of the European Union, 3 EFTA countries (Iceland, Norway and Switzerland), and 4 candidate countries (Bosnia and Herzegovina, North Macedonia, Serbia and Türkiye). This means that all these countries provide Eurostat with data from their national labour force surveys and contribute to the calculation of comparable figures across most of Europe.
The EU-LFS is the principal source of information for analysing developments in EU labour markets and to study different work-related phenomena such as employment, unemployment, labour force participation rate, hours of work, occupations and economic sectors of employment. It can also support socio-demographic analyses as information is collected and available by sex, age, education, household characteristics or region.
Labour market terminology
The EU-LFS is the largest European household sample survey providing quarterly and annual results. The people on the labour market are classified into three 3 main groups:
- employed (currently have a job [work for pay] even if they work for 1 hour per week)
- unemployed (without a job and actively looking for work and are available to start working within 2 weeks)
- outside the labour force (someone who is not employed and unemployed)
The employed and the unemployed people – those who are available and able to work for money – are collectively known as the labour force.
Not being part of the labour force does not mean you are doing nothing, it simply means that you are not working for pay nor actively looking for a job.
Within the EU-LFS, pupils (aged 15 years or over) and students may be considered as part of the labour force if they are seeking work, are available to work or are working at least 1 hour per week during the specific week the survey asks about (called the reference week). In recent years an increasing share of students have combined their studies with work – this may reflect, at least to some degree, changes in the ways that higher education is funded in some EU countries. For pupils and students living away from home during the week or during the whole term, their family home is usually considered as their usual place of residence.
The EU-LFS collects information on the situation for all people above 15 years old living in private households. Someone with a foreign citizenship, i.e. a person who is not a citizen of an EU country, will also be included if they officially live in the participating country. Cross-border workers – those who reside in one country and who commute to work in another country – are included in the survey of the country in which they have official residence.
What is the labour force participation rate?
The number of members of the labour force (the employed and the unemployed) is used to identify the labour force participation rate. This is the percentage of members of the labour force compared to the whole adult population.
During the labour force survey people aged 15 -89 are asked whether they were employed during the reference week. Those aged 15-74 are additionally questioned about unemployment. People aged 90 and over, as well as non-employed people aged 75-89, are classified as outside the labour force. Key labour market indicators are published for 20-64 age group, referred to as the working-age population.
Labour force participation rates can also be calculated for specific groups of the population. For instance, it is possible to calculate participation rates for men and women separately, or for specific age ranges (younger/older working age people). When calculating these types of participation rates, only the specific population sample is used. For example, when considering the participation rate for women aged 15-64 years old, the population considered will be the adult population of women (15-64 years old), and the members of the labour force will be a part of this same group of population.
Labour market flows
As already mentioned people can be either employed, unemployed or outside the labour force – but their situation is not static.
Life is constantly in motion and this can bring about changes in people’s activity status. For example, an unemployed person can find work and become employed. Or an employed person can decide to take a career break to care for a loved one, thus moving outside the labour force. All these movements are recorded as labour market flows and show the dynamic nature of the labour market. Monitoring these flows is important as they can be an early indicator of changing health of the economy.
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