Unemployment and changes of government

There is a common perception that when a government leaves office, unemployment is higher than when they entered.  We look at historic data to see how accurate this claim is.

ILO unemployment and the claimant count

Based on the ILO definition of unemployment (the UK’s headline measure of unemployment), at each of the three changes of government since 1974, the unemployment rate was higher when the governing party left office than when they entered.

140709 ILO unemployment

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However, the number of people claiming unemployment benefits was lower when Labour left office in 2010 then when it entered government in 1997 – which was not the case for ILO unemployment.

Why does the claimant count differ from the ILO measure?

The ILO measure is based on international guidelines for measuring unemployment and is the preferred measure in the UK.   It is calculated from the Labour Force Survey, a quarterly survey of around 100,000 people. Individuals are counted as unemployed if they are out of work but (i) have been looking for work in the past four weeks and (ii) are available to start work in the next two weeks.

The claimant count on the other hand is purely an administrative count of the number of people claiming Jobseeker’s Allowance (JSA). There are many people (especially young people) who are defined as unemployed by the ILO measure but who do not claim JSA – for example, because they are ineligible or simply choose not to claim.

Trends since 1922

Figures for ILO unemployment only go back to 1971, but we can look further back in time using administrative data on people registered as unemployed (in fact various administrative sources can provide unemployment data back to 1881, discussed in depth in an ONS article). Looking at unemployment data over a long period does however raise issues of comparability and consistency.

Data up to 1948 is based on the number of people who had signed the register at the employment exchange on the day of the count or were known not to have found work since the last signing day.  Both insured (those who were covered by the National Insurance Acts of that period) and uninsured people signed the register but the “unemployment rate” was calculated using only the insured unemployed. The rate shows the number of insured unemployed people as a percentage of the total number of insured people.

The coverage of unemployment insurance widened progressively during the 1920s and 1930s. Universal insurance was introduced with the National Insurance Act 1948.

A second dataset covers 1948 to 1974. During this period, registration was a precondition for claiming benefits. Rates for this period show the number of registered unemployed as a percentage of the number of registered unemployed plus the number of employees.

The current claimant count figures have been re-worked for the period from 1971 onwards to complete the chart below:

140709 people registered as unemployed

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The Conservative Governments of 1922-24 and 1937-39 both left office with the “unemployment rate” lower than when they entered. When they left office in January 1924 unemployment had fallen by 0.7 percentage points to 11.9% and in 1939 it had fallen 2.8 percentage points to 7.9%.

The National Government of 1924-1929 saw the rate fall by 1.2 percentage points to 9.6% while under the 1931-37 National Government the rate fell from 21.9% to 10.7%.

A minority Labour Government came to power in December 1923 and when they left Government in October 1924, the rate had decreased from 11.9% to 10.9%. And as mentioned above, when Labour left office in 2010 the claimant count rate was 4.4% compared to 5.4% in 1997, even though unemployment was higher in 2010 on the ILO measure.

The unemployment rate spiked in the year following the end of the Second World War but then fell sharply. This can be attributed to soldiers returning to the UK following the war and being discharged by the armed services.

Conclusion

So is it true that Governments leave office with an unemployment rate that is higher than the one they inherited?

In recent decades – yes; for all Governments since 1974 the ILO unemployment rate has been higher when they have left office than when they entered (although the claimant count was lower in 2010 than in 1997).

But looking further back, the administrative data suggests that during the inter-war years some Governments did leave office with unemployment lower than when they entered.

Author: Aliyah Dar