How big a problem is underemployment?

Penny Cook has asked her part-time employer for more hours but has been refused

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Are you working part-time when you would prefer to be working full-time?

If so, you are one of the underemployed - and you are not alone.

The number of people in this situation - known as involuntary part-timers - has doubled in the past four years to 1.4 million, because of the two recessions the UK has gone through since the onset of the international banking and financial crisis.

"Underemployment normally rises in recessions because part-time work is second best for people who want full-time work," says Len Shackleton, a professor of labour market economics, and fellow at the Institute of Economic Affairs (IEA).

"From the point of view of employers, it enables them to get work done without the commitment to full-time employment."

But is it a bad thing, simply adding to the misery and economic waste of the 2.51 million currently counted as completely unemployed?

Or is it a good thing, a sign of a flexible economy that can adjust in difficult times to provide part-time jobs that are better than no job at all?

Who is underemployed?

On Wednesday, the ONS publishes a special study of people who are underemployed.

The basic facts are already published each month as part of the unemployment statistics.

In the three months from July to September 2012, the Labour Force Survey (LFS) counted 1,411,000 people who said they were working part-time because they could not find a full-time job.

And as a proportion of all part-time workers, the involuntary ones have risen in that time from 9.5% to 18%.

There is a big difference between men and women. Only 13% of part-time female workers wanted to work full-time, compared with 31% of men.

The TUC recently published its own analysis and is worried that underemployment may become entrenched, rather than just a passing phenomenon.

Its view is that if you add the involuntary part-timers to those other workers who simply want, or need, to work just a few more hours in their current jobs, then underemployment has risen by a million since 2008, to stand at 3.3 million.

On this count, the underemployed make up 11% of the entire workforce, suggesting the employment crisis in the UK is much worse than the bare unemployment figures suggest.

"While any job may be better than no job at all, the TUC is concerned that underemployment is becoming an ever more permanent feature of the labour market with more and more people not working and earning enough to get by on," it said.

Good or bad?

The willingness and ability of potentially redundant people to move into part-time work is probably the main reason why unemployment has not risen as high as some economists predicted it would, when it became obvious the UK was heading into recession.

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People took jobs well below their skill level and status”

End Quote Alastair Hatchett Incomes Data Services.

"People who lost jobs got new jobs much faster than in previous recessions," says Alastair Hatchett, of Incomes Data Services.

"Because of the financial horror of this recession when it started, of banks collapsing and the worry about personal finances, people took jobs well below their skill level and status, and many took part-time jobs to keep the family income going.

"Many people were frightened their savings were going to go, the banks were going to collapse and it might be Armageddon."

The rise of the underemployed is not just a UK phenomenon.

In the US, their numbers have risen to 8.6 million since 2007-08, at the same time as the number of full-time jobs has dropped by nearly 6 million.

Some economists argue that international comparisons reveal a relatively high level of part-time work is in fact a good thing, boosting overall levels of employment rather than eroding it.

They point out that in Europe, economies with a high percentage of part-time work have the highest levels of overall employment, while those countries with low levels of part-time employment, such as in southern Europe, also suffer from low overall levels of employment.

Potential remedies

Andrew Sissons, at the Work Foundation, points out that of the half-a-million new jobs created in the UK in the past two years, about 70% have been part-time.

Commuters Men are much more likely than women to count themselves as underemployed

"We have seen a big fall in jobs in construction and manufacturing, and a big increase in employment in retail, healthcare and professional services, and some of these areas are more associated with part-time work.

"Another factor that might be behind the growth of underemployment may be that employers have wanted to find ways to keep wages reasonably low.

"One of the features of the economy since the recession is that the number of jobs has been reasonably strong, but the amount people have earned has fallen," points out Mr Sissons.

Eamonn Butler, of the think tank the Adam Smith Institute, is not sure that everyone who claims to be underemployed would really rush back to a full-time job if given the choice.

But what should be done to help those who do really want full-time employment?

He says the answer is quite simple: do away with restrictions, such as the minimum wage, which discourage some employers from taking on new staff.

"When you take on a full-time worker, you really take your life in your hands - it is a really big deal to give somebody a job," he says.

"You have got all the various employment regulations, and paternity and maternity leave and all these sorts of things, so a lot of employers probably prefer part-time workers, who are just there on an hourly rate, and you can part company with them a lot easier than someone on a full-time contract."

Temporary phenomenon

Underemployment is not just confined to those in part-time work.

Start Quote

When you get a genuine recovery going... I would definitely expect this underemployment will fall”

End Quote Prof Len Shackleton Institute of Economic Affairs

The ONS has previously reported that the number of temporary workers who cannot find a permanent job has risen from 350,000 to 655,000 - up from 25% of all temporary workers to 41%.

Add them to the involuntary part-timers and on this combined count it seems there are at least two million workers in the UK who do not have as much work as they want.

Will the situation improve if the economy pulls out of recession and starts growing again?

Prof Len Shackleton is sure it will.

"When you get a genuine recovery going, full-time work begins to grow faster than part-time work, so I would definitely expect this underemployment will fall," he says.

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