Introduction

Economic participation, employability, and unemployment are fundamental concerns for local and regional economic development. They determine whether communities can access the full potential of their workforce, whether individuals can secure meaningful livelihoods, and ultimately whether local economies can grow and prosper. For practitioners working in economic development, understanding these concepts and how to address related challenges is essential for building inclusive, resilient communities.

This guide explains what economic participation, employability, and unemployment mean, why they matter for local economies, the key principles underpinning analysis of these issues, and the range of interventions available. It also provides practical examples from the UK and internationally to illustrate effective practice.

Defining Key Terms

Economic Participation

Economic participation is concerned with the economic status of an individual—whether they are in work, unemployed but actively seeking work, or neither in work nor actively seeking work. Generally, it is common to use International Labour Office definitions:

Economically Active People: Adults who are actively engaged in the economy and are in, or are seeking work. This includes people of working age who are either in employment, or are unemployed but actively seeking work and available for work. The activity rate is the proportion of a population engaged in economic activity.

Unemployment: According to the International Labour Organisation definition, this is where anyone aged 16 years and over is without a job, wants a job, has actively sought work in the last four weeks and is available to start work in the next two weeks, or is out of work, has found a job and is waiting to start it in the next two weeks. The unemployment rate is the share of economically active adults (those in work or actively seeking work) that are unemployed.

In the UK in December 2024, the working-age population (16-64) was 41,845,200. Of these, 32,834,000 (78.5%) were economically active, with 31,578,000 (75.5%) in employment and 1,256,000 (3.0%) unemployed. The remaining 9,011,200 (21.5%) were economically inactive for various reasons: being a student (2,432,700), looking after family/home (1,665,800), long-term sick (2,543,400), retired (1,157,500), or other reasons.

Employability

The term 'employability' has evolved significantly since the early twentieth century. Whilst in the 1960s it referred almost exclusively to medical disabilities and related barriers to employment, since the late 1990s it has been extended to cover wider issues and more diverse target groups.

Employability is most broadly defined as an individual's ability to gain initial employment, maintain employment, move between roles within the same organisation, obtain new employment if required and (ideally) secure suitably and sufficiently fulfilling work (Hillage and Pollard, 1999).

The extent to which an individual can attain these goals is governed by four related components:

• The employability assets of the individual (personal skills and attributes)

• The presentation of these assets to prospective employers

• The deployment of these assets to attain further opportunities

• Contextual factors, such as social and family circumstances, local labour market conditions, and employer attitudes

Employability becomes an issue requiring action when individuals have significant barriers to entering work. These may relate to social, economic, household, discriminatory, or psychological conditions an individual faces, which may be multiple. Low employability or new barriers may lead to unemployment, joblessness, economic inactivity, or insecure attachment to the labour market.