What is the 'Employment-To-Population Ratio'

The employment-to-population ratio is a macroeconomic statistic that indicates the ratio of the labor force currently employed to the total working-age population of a region, municipality or country. It is calculated by dividing the number of people employed by the total number of people of working age. For example, if 50 million people are employed in an area with 75 million people of working age, the employment-to-population ratio is 66.7%. Calculated by:

Employment-To-Population Ratio

BREAKING DOWN 'Employment-To-Population Ratio'

Compared to other metrics, the employment-to-population ratio is not as affected by seasonal variations or short-term fluctuations in the labor market. As a result, it is often considered to be a more reliable indicator of job shrinkage or growth than the unemployment number in particular.

Limitations of the Employment-to-Population Ratio

The employment-to-population ratio does not include the institutionalized population, such as people in mental hospitals and prisons, as well as people in school, studying for a career. It also doesn't take into account black market labor, an absence that makes the ratio seem lower than it should be.

The employment-to-population ratio also fails to account for people who are over or under the working age but are still working. These workers may be counted in the employed part of the ratio but may not be included in the total number of people of working age, meaning their employment inaccurately increases the ratio. Additionally, the number of hours worked are not taken into account, and as a result, the ratio does not discriminate between part-time and full-time workers.

How the Employment-to-Population Ratio Compares to the Unemployment Rate

Surprisingly, the employment-to-population ratio does not directly relate to unemployment figures. For example, in October 2014, the employment-to-population ratio was 59.5%, but the unemployment rate was only 3.5%. Together, these numbers only account for 63% of the population, raising the question of what happened to the other third of the population.

The discrepancy between these two numbers exists because the unemployment number does not indicate the number of people without employment. It only indicates the number of unemployed people who are looking for jobs.

For example, people who have retired early and people who have decided to go back to school to further their job prospects are not taken into account in the unemployment figure. However, their absence from the workforce is nodded to in the employment-to-population ratio. In addition, people who really want a job but have given up on the quest to find one are also not included in the nation's unemployment number.

RELATED TERMS
  1. Unemployment Rate

    The unemployment rate is the percentage of the total labor force ...
  2. Accounting Ratio

    A way of expressing the relationship between one accounting result ...
  3. Working-age Population

    The working-age population in a region is the range of ages considered ...
  4. Full Employment

    Full employment is a situation in which all available labor resources ...
  5. Activity Ratios

    Accounting ratios that measure a firm's ability to convert different ...
  6. Disguised Unemployment

    Disguised unemployment is unemployment with low productivity ...
Related Articles
  1. Personal Finance

    Where Unemployment Hits Hardest

    A look at the demographics of unemployment, and what that means for workers around the nation.
  2. Financial Advisor

    How Labor Force Participation Rate Affects U.S. Unemployment

    While a falling unemployment rate sounds like a good thing, it can actually be indicative of people leaving the labor force because they can't find a job.
  3. Investing

    Financial Ratios to Spot Companies Headed for Bankruptcy

    Obtain information about specific financial ratios investors should monitor to get early warnings about companies potentially headed for bankruptcy.
  4. Investing

    Ratio Analysis

    Ratio analysis is the use of quantitative analysis of financial information in a company’s financial statements. The analysis is done by comparing line items in a company’s financial ...
  5. Investing

    Dynamic Current Ratio: What It Is And How To Use It

    Learn why this ratio may be a good alternative to the current, cash and quick ratios.
  6. Investing

    Useful Balance Sheet Metrics

    These metrics can help you better understand the information found on balance sheets.
  7. Personal Finance

    Understanding Natural Unemployment

    Natural unemployment is often defined as the lowest rate of unemployment an economy will reach.
  8. Insights

    The True Unemployment Rate: U6 Vs. U3

    Learn how to distinguish between the U-3 and U-6 unemployment rates, and explore which rate provides a truer picture of unemployment.
RELATED FAQS
  1. Which financial metrics are best for analyzing companies in the chemicals sector?

    Learn about some of the key financial metrics that investors and market analysts commonly use to evaluate companies in the ... Read Answer >>
  2. What role does ratio analysis play in valuing a company?

    Learn about the role of ratio analysis in determining company value, including some of the most common ratios used by modern ... Read Answer >>
  3. How can a company quickly increase its liquidity ratio?

    Discover what high and low values in the liquidity ratio mean and what steps companies can take to improve liquidity ratios ... Read Answer >>
  4. What is considered a good PEG (price to earnings growth) ratio?

    Learn about the price/earnings to growth (PEG) ratio and understand what investors and market analysts consider a good ratio ... Read Answer >>
Hot Definitions
  1. Receivables Turnover Ratio

    Receivables turnover ratio is an accounting measure used to quantify a firm's effectiveness in extending credit and in collecting ...
  2. Treasury Yield

    Treasury yield is the return on investment, expressed as a percentage, on the U.S. government's debt obligations.
  3. Return on Assets - ROA

    Return on assets (ROA) is an indicator of how profitable a company is relative to its total assets.
  4. Fibonacci Retracement

    A term used in technical analysis that refers to areas of support (price stops going lower) or resistance (price stops going ...
  5. Ethereum

    Ethereum is a decentralized software platform that enables SmartContracts and Distributed Applications (ĐApps) to be built ...
  6. Cryptocurrency

    A digital or virtual currency that uses cryptography for security. A cryptocurrency is difficult to counterfeit because of ...
Trading Center