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The concepts of employment and unemployment are derived from the theory of the supply of labour as a factor of production. The production referred to is in turn defined as those goods and services included in the System of National Accounts. For this reason, unpaid housework and volunteer work are not counted as work by the survey, although these activities need not differ from paid work, either in purpose or in the nature of the tasks completed.
While the logical and precise unit of measurement of total labour supply is person-hours, the conceptual terms of reference for the survey require that individual members of the population be classified as employed, unemployed, or not in the labour force. Accordingly, persons who are supplying services in the reference period, regardless of the quantity supplied, are classified as employed while those who provide evidence that they are offering their labour services to the market (again regardless of quantity) are classified as unemployed. The remainder of the population, those neither currently supplying nor offering their labour services, are referred to as persons not in the labour force.
The concepts and definitions of employment and unemployment adopted by the survey are based on those endorsed by the International Labour Organisation (ILO).
Employment: Employed persons are those who, during the reference week:
Unemployment: Given the concept of unemployment as the unutilized supply of labour, the operational definition of unemployment is based primarily on the activity of job search and the availability to take a job. In addition to being conceptually appropriate, job search activities can, in a household survey, be objectively and consistently measured over time. The definition of unemployment is therefore the following.
Unemployed persons are those who, during reference week:
Persons are regarded as available if they reported that they could have worked in the reference week if a suitable job had been offered (or recalled if on temporary layoff); or if the reason they could not take a job was of a temporary nature such as: because of own illness or disability, personal or family responsibilities, because they already have a job to start in the near future, or because of vacation (prior to 1997, those on vacation were not considered available). Full-time students currently attending school and looking for full-time work are not considered to be available for work during the reference week. They are assumed to be looking for a summer or co-op job or permanent job to start sometime in the future, and are therefore not part of the current labour supply.
Note that in the above definition there are two groups for which job search is not required: persons on temporary layoff and persons with a job to start at a definite date in the future. Persons on layoff are included among the unemployed on the grounds that their willingness to supply labour services is apparent in their expectation of returning to work. A similar argument is applied for persons who will be starting at a new job in four weeks or less.
Finally, for the purposes of measuring job search as part of the identification of the unemployed, the LFS uses a four-week search period although the reference period for identifying the employed is that of one week. The justification for the difference is that delays inherent in job search (for example, periods spent awaiting the results of earlier job applications) require that the active element of looking for work be measured over a period greater than one week if a comprehensive measure of job search is to be obtained.
Not in the labour force: Persons not in the labour force are those who, during the reference week, were unwilling or unable to offer or supply labour services under conditions existing in their labour markets, that is, they were neither employed nor unemployed.
Note on international comparisons: Most industrialized countries, including Canada and the United States, subscribe to guidelines established by the International Labour Office for defining and measuring labour market status, including unemployment. However, the guidelines are, by design, rather imprecise, so that individual countries can interpret them within the context of their own labour markets. As a result, unemployment rates are not strictly comparable across all countries. The LFS has investigated in detail the measurement differences between the US and Canadian unemployment rates. The results show that measurement differences account for about a fifth of the gap between the US and Canada unemployment rates.
A labour force status classification (including employed, unemployed, and not in the labour force) is assigned to each respondent aged 15 and over, according to their responses to a number of questions during the interview. The following decision table illustrates how the classification is derived.