One of the terms that may interest you the most to see if a country has a good employment index or not is the activity rate. Its formula is easy to calculate but you must be clear about the concepts of all the indicators that come into play.
Now, do you know what the formula for the activity rate is? And what do we mean by this? Here we tell you everything you should know about her. Find out!
What is the activity rate
If we go to the RAE (Royal Spanish Academy), and look for this term in it, the dictionary gives us the following definition:
«Indicator expressed as a percentage that measures the intensity of employment and the productive capacity of a country, being the quotient between the active population and the population of active age».
It is a macroeconomic index that is used to measure the percentage of people who are active (economically speaking) according to the total population. The latter can be taken based on the autonomous community or based on the country, hence the data to be used in the formula differs.
However, we must take into account what is called an economically active person. In this case, and according to the ILO (International Labor Organization), these would be both employed and unemployed people. Taking into account that:
Employed people are those who have a job, and therefore are part of an economic activity. Here it is not divided between full-time and part-time workers, but all of them would enter.
Unemployed people are those who do not have an occupation, and who are also actively looking for a job (if they do not do so, they would be considered inactive people).
However, it is also necessary to know what people of working age are. These are those people who are 16 years of age or older and, therefore, can already work, regardless of whether they do so or not. In other words, a 16-year-old would already fall within this group, but he does not mean that he is active to work (or to look for work).
Why is the activity rate important?
Now you have a little more idea of what the activity rate is. But maybe you still don't see how important it should be. In this case, this data is an indicator of the indices of the economy of a country or a territory.
In addition, on many occasions the activity rate formula changes. And it is that they do it by active population dividing between men and women, young and old, level of studies... Which helps to establish the best employment policies for that area.
It is also a value that indicates whether there is an active population greater than the unemployment there may be, that is, how many people out of 100 are capable of having a job or actively looking for it.
What is the activity rate formula?
When calculating the activity rate, there is a formula. However, this takes into account the population of working age, or over 16 years of age. Which one is that? It would be the active population.
And this is obtained by adding the employed population and the unemployed population.
In other words. Imagine that in a country there are 13 million employed population and 5 million unemployed population.
According to the active population formula, both would have to be added. That is to say:
Active population = Employed population + Unemployed population
PA = 13000000 + 5000000
PA = 18000000
With this data, we now need to know the population of working age, that is, people over 16 years of age.
This is obtained by adding the active and inactive population. Assuming that we have 31 million inactive, the formula would be as follows:
Working age population = Active population + Inactive population
PET = 18000000 + 31000000
PET = 49000000
Now we can give you the activity rate. Its formula is the following:
Activity rate = (Active population / Population of working age or over 16 years) x 100
TA = (18000000 / 49000000) x 100
TA = 0,3673 x 100
AT = 36,73%
In other words, out of every 100, 36,73 have a job or are actively looking for one.
Who publishes the activity rate data
If you ever want to know the data for Spain in terms of activity rate (and other variables), then you should go to the National Institute of Statistics (INE).
To do this, a quarterly survey is carried out, the Active Population Survey (EPA), with a selection of families (in total, some 65000 families, which would be 180000 people) to obtain information on the labor market (as well as on other variables).
Activity Rate Formula Example
Let's go with another example so you know how to calculate it in case you can't find the data.
You have a employed population of 17 million. For its part, the unemployed is 4 million and the inactive is 11 million.
The first thing you need to know is what the active population is, that is, the sum of the employed and the unemployed.
PA = 17 million + 4 million
PA = 21 million.
Now we need to know what the working-age population is, more specifically PET.
This population is obtained by adding the active population and the inactive population. In other words:
PET = Active population + Inactive population
PET = 21 million + 11 million
PET = 32 million.
Now that you have the active population and those of working age, we calculate the activity rate:
TA = (Active population / Population of working age) x 100
TA = (21 million / 32 million) x 100
TA = 65,62%
In other words, out of every 100 people, there are 65,62 who have a job or are actively looking for it.
As you can see, the activity rate formula is easy if you have the data you need. And above all, it can help you see if a country is productive in terms of employment (or being active looking for work) or not. Have you ever understood the activity rate?