Most people don't know how the official unemployment rate is calculated and most are surprised when they find out.

The government, via Statistics New Zealand, conducts a survey called the Household Labour Force Survey. Citizens are recruited into the survey and must participate for two years. Every three months they are phoned and questioned about their work habits and those of other household members. Through the questions it is ascertained whether or not the participant (and any other adult members of the household) is employed. At any given time 15,000 households participate.
The current official unemployment rate gleaned from the survey is six per cent.
The unemployment rate is not a reflection of people registering at Work and Income. If it was, the number would be considerably higher. For instance, at June 2009, 310,000 working-age (18-64 years) people were receiving a benefit of some kind. That represents around 12 per cent of the working age population; that's about one in every eight people.
There is good reason to assert this figure is a better representation of the true unemployment rate. Regardless of the reason, somebody is reliant on welfare when they are unable to support themselves through paid work or other means – they are not employed.
It would also be a fair suggestion to add to this figure those people who are long-term ACC claimants. During the year to June 2008 there were around 108,000 people claiming weekly compensation from ACC; 23,000 had been receiving compensation for one year or more. If last year's figures are similar, that would add another one per cent to the 12 per cent who are on benefits. Perhaps an accurate unemployment rate hovers around 13 per cent.
Certainly there is nothing scientific about these rough calculations, but they serve to show that an unemployment rate of six per cent is not telling us a great deal about the ratio of dependent working-age people to non-dependent.
(Prior to the creation of the HLFS, the only source of information about unemployment was the census, or the number of unemployment benefits claimed. It is rather sobering to take a look at what those figures looked like in the mid-1960s.
Just over 5100 males were unemployed on census night in 1966. Most of the unemployment must have been a temporary affair, however, given that throughout the sixties there were only ever a couple of hundred people on the unemployment benefit.
In 1965 there were only 28,000 people receiving working-age benefits – the majority, a widow's benefit. There was no ACC. The population was around 2.6 million.
Fewer than 30,000 dependent people then, compared to over 300,000 today; a 10-fold increase with less than a doubling of the population.
How the world has changed. New Zealand's modern benefit system reminds me of the famous quote, "Build it and they will come."