What Is Employment?

Employees using 3D printer
Photo: Izabela Habur/Getty Images

Employment is at least one hour of work done in the past week by a person aged 16 or older. That's according to the U.S. Bureau of Labor Statistics (BLS). That person can be either a paid employee or self-employed. It even includes unpaid workers in a family-owned business, as long as they work at least 15 hours a week. The BLS also includes people who didn't work during the week if they were just temporarily absent, such as a vacation or illness).

The BLS does not count work done by residents of an institution. That includes prisons, jails, mental facilities, and homes for the aged. The BLS also does not count those on active military duty. In other words, employees must be members of the U.S. civilian noninstitutional population. 

Here is how employment fits into the total U.S. population.

U.S. population = Civilian noninstitutional population + Active duty military + Institutional population

Civilian noninstitutional population = Labor force + Not in labor force. The Labor Force Participation Rate is the labor force divided by the civilian noninstitutional population.

Labor force = Employed + Unemployed

Not in labor force = Three groups:

  1. People who would like work, but haven't looked for it in the last month. They include the  "marginally attached," who did look in the past year. They had school, ill health, or transportation problems that kept them from looking in the past month. They also include the  "discouraged workers." They look sporadically but don't believe there are any jobs for them. They are included in the Real Unemployment Rate.
  1. People who aren't looking for work. They include students, homemakers, and retired people.
  2. Anyone under 16 is not included in the labor force, even if they are working. 

Full Employment Definition

Full employment is when there is an acceptable level of unemployment. That's when there is no cyclical or structural unemployment.

There is only frictional unemployment, which is when people leave jobs to get better ones, to move, or for other positive reasons. For more, see Types of Unemployment.

The Definition of "Employment" Is Not the Same as "Employee"

The BLS counts independent contractors as employed, but the law and the IRS look at them very differently. If you are filing your taxes, or you are an employer, you need to be aware of the precise definition of each. This distinction is important. Many businesses lower costs by hiring independent contractors. They need to make sure they aren't treating them as employees.

According to Black's Law Dictionary, an employee is someone who is "a person in the service of another under any contract of hire, express or implied, oral or written, where the employer has the power of right to control and direct the employee in the material details of how the work is to be performed."

An independent contractor is one who "contracts to do a piece of work according to his own methods and is subject to his employer's control only as to the end product or final result of his work." (Source: Charles J.

Muhl, "What Is an Employee? The Answer Depends on the Federal Law," Monthly Labor Review, January 2002.) 

How Is Employment Measured?

Each month the BLS issues the critical Jobs Report. It's two reports in one. The first is the Establishment Survey, which reports on jobs. It surveys 160,000 non-farm businesses and agencies on their employment, wages, and hours worked. The BLS reports on which industries are growing and shrinking. It also tells you whether Americans are working longer hours or receiving higher salaries. 

The second is the Household Survey. It reports on the number of unemployed from a household survey. It also includes workers' age, sex, and race/ethnicity. The Household Survey has a more expansive scope than the Establishment Survey. It includes the self-employed, unpaid family workers, agricultural workers, and private household workers. The establishment survey excludes them. But it's not as accurate as the business establishment survey. That's because it has a smaller sample size. For more, see Current Unemployment Statistics.

Employment FAQ

Continue Reading...