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Go Figure: How likely are you to lose your job?

  • 8 December 2011
  • From the section Magazine
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About 2.62 million people are unemployed. What's the chance of you becoming one of them? For his regular column, Michael Blastland finds out.

Unemployment is rising. People fear for their jobs. But what is the chance of becoming unemployed? Go Figure doesn't do crystal balls, but we can look at the most recent odds.

And here's the answer - about 1.5 in 100, on average.

That is, about 1.5% of people in work become unemployed every three months - for example, sacked, redundant, contract ended. This reached about 2% at the peak of the recession.

It's known as the hazard of unemployment. It's not routinely published but here's the data, unearthed for us by the Office for National Statistics (ONS).

Graph

The chart shows how much it has changed, and it looks as if the line really leaps around. And it did spike during the recession. But now look at the scale. The difference between now and before the recession is about 0.2 percentage points or so.

That's the increased chance of going from work to unemployment and it's equal to about one extra person in every 500 losing their job.

Is that a lot?

It is certainly less than the proportion of people sometimes reported to fear it. So as bad as job loss can be, are our fears of its likelihood exaggerated? Read on.

Bear in mind that about another 1.5% to 2% leave the workforce to become inactive, as it's called, every three months. This hasn't changed much either, it might even have gone down a smidgen.

So why is unemployment rising? Because here's the other side of the story - the chance of getting into work in the next three months if you are unemployed.

Graph

The orange line shows that the chance of finding work in the next three months if you are unemployed is about 20-25%, down from about 25-30%.

The blue line is the first chart rescaled. Together they compare the chance for any individual on average of either getting (orange) or losing (blue) a job.

And that's mostly why things are tougher. It's only partly the small rise in the chance of losing a job - it's more to do with the increased difficulty of finding one.

But see the techie note below*. Note too the seasonal variation.

So if the news says "200 jobs lost at Bloggs Bros and that's recession for you", actually it's not so very different from normal. What's changed is the chance of getting into work again.

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The chance of getting back into work is the problem

This is in part because of a growing working-age population. Normally, extra people in the workforce are soaked up by a rising number of jobs. Not at the moment.

Turn all these percentages into real people and you get another surprise. Because even though the chance of losing a job hasn't changed much, the total number who do leave work for unemployment or inactivity always was huge. It adds up to about four million people coming out of the workforce over the past year.

That is, the flow out of work is far bigger than the extra 175,000 who got stuck in unemployment over the past 12 months.

That's because there are also about four million who flowed back into work. Not enough to soak up the extra workers from a rising population, but still a huge number of people finding jobs.

For some, this immense turnover and flow in both directions might offer hope that unemployment is not necessarily a graveyard. It's experienced by millions every year, in recession or out. For the majority, unemployment is not a destination. This might be another reason to be more concerned about the exceptions.

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Because all this is no comfort if you're one of those who can't find a job or get back into one. And let's remember that these figures are averages. Some people are more likely to lose work than others - those with low educational qualifications for example. And some are less likely to find it than average.

One other little insight from those hazard calculations. The chance of getting into work if you are unemployed goes up and down during the year. There's seasonal fluctuation.

The good news is that the chance looks as if it picks up towards the end of the year. The bad news is that it looks as if it falls again soon after.

The hazard of unemployment is not an official statistic but it is calculated using the Labour Force Survey, which is where much of our official data on unemployment comes from. And there is a new series of experimental statistics that aims to capture labour market flows. You can read about them here, though hazard rates are not included and not routinely published.

*Obscure techie note: The hazard ratios in each direction are proportions of different numbers. That is, if 1% of employed people lose their job, it's 1% of about 29 million. But if 1% of unemployed go into work, that's 1% of about 2.6 million. So the two lines on one chart are not a good way of comparing the total numbers affected, just the chances for one person.

Even so, the change in the chance of finding a job adds up to far more people than the change in the chance of losing one - which is mainly why unemployment is going up. The percentages seem to me fine to compare on the same scale if we think of them simply as meaning the chance that it will happen to any individual on average.

Just imagine 100 unemployed people lined up. About 20 to 25 of them, on average, will be in work in three months. Now think of a hundred employed people lined up. One or two will be unemployed next quarter. That's probably the best way to think of the average risk if you're wondering, "will it happen to me?" Of course, circumstances in different jobs will vary. I've also tried to simplify things by not going into detail about the flows around inactivity, which I don't think affect the main point of the analysis.

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