Tayside and Central Scotland

Stirling and Dartmouth professors say "underemployed" should be recorded

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Image caption The report says many people want to work overtime but there is no demand for their services

A report by a University of Stirling professor and a former member of the Bank of England's Monetary Policy Committee has claimed the UK is suffering from "underemployment".

Prof David Bell and Prof David Blanchflower found economic pressures were making many consider extra work.

However, the economists found there was little demand for their services.

The professors said government statistics should be adapted to include this section of the workforce.

The report by Stirling University's Prof Bell and Prof Blanchflower, from the USA's Dartmouth College and an ex-member of the MPC, has been published in the National Institute of Economic and Social Research.

The pair are calling on the Office of National Statistics to publish regular "underemployment" statistics - just like the regular unemployment figures - to give a more rounded snapshot of the economic issues facing Britain.

Underemployment records

According to the report, the "underemployment index" has risen from 6.2% of the UK workforce in 2008 to 9.9% in 2012.

Over the same period, the unemployment rate rose from 5.8% to 8%.

Prof Bell and Prof Blanchflower said: "It is our view that this underemployment index should be published monthly by the ONS by rolling quarter alongside the unemployment rate.

"It is not a substitute but a useful complement.

"The United States already publishes five series on the extent to which labour market resources are underutilised, so there is precedent."

They added: "The benefit of our underemployment index is that it gives a somewhat different and potentially more accurate picture of labour market slack than the unemployment rate does, particularly in a recession.

"The data required to calculate it is already available in the monthly Labour Force Survey so producing it would be virtually costless."

Underemployment was found to occur at rates among the young and ethnic minorities.

Unfortunate correlations

The report found: "As with unemployment, it is the young and unqualified that are particularly prone to underemployment.

"This positive correlation is particularly unfortunate, since it suggests that the young unqualified unemployed have a particularly difficult route into employment since employers may choose to give their peers more hours before making new hires.

"This will extend the unemployment durations of the young, and thus increase the probability that they will experience long-term scarring effects of unemployment while young, such as future unemployment spells and reduced wages."

The report suggests the main driver of the demand for increased hours is likely to be falling real wages.

It found total hours worked in the economy have increased since the beginning of the recession, but a combination of slow-growing wages and price inflation averaging above 3% since 2008 has led to a reduction in the real value of take-home pay.

The professors' innovation is to produce a new index which combines both unemployment and underemployment.

It expresses the additional hours that the unemployed and underemployed are willing to provide as a share of total workforce hours.

The authors said: "Perhaps the most important finding we have is that there appears to be significant slack in the economy. People want to work."

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