From the TUC

Underemployment and the ‘want work’ level

18 Feb 2010, by in Labour market

Unemployment has been quite stable since last summer, with another small fall in today’s figures. As Nicola has reported, the results so far have been nowhere near as bad as most people expected at the start of the recession. It isn’t surprising that many people ask whether the unemployment figures tell the whole story – how much ‘hidden unemployment’ is there?

What would ‘hidden unemployment’ mean? In the labour market statistics, everyone of working age is given one of three labels: employed, unemployed or ‘economically inactive’. Obviously, unemployed people aren’t hidden, but some people counted as employed or economically inactive can be.

Firstly, there are employed people who don’t have as much paid work as they’d like – the ‘underemployed’. In the past I’ve looked at this issue by using the labour market figures for the number of people who are working in part-time jobs, but only because they can’t find full-time employment. These numbers are worryingly high – in today’s figures one part-time worker in seven is involuntary – and the level of involuntary part-time work has been rising during this recession:

Graph: involuntary part-time work in the recession

The proportion of part-time workers who are involuntary is now roughly the same as it was during the 1990s recession; the level is a little lower. This is a common pattern for recessions, and instinctively it makes sense – when the labour market is tough some people find that their employer switches to short-time working; others lose their full-time job and can only get a part-time replacement.

But this is only an approximate measure of underemployment. An important article in the latest edition of the Office for National Statistics’ Economic and Labour Market Review points out that it seriously underestimates the amount of underemployment. Firstly, the Labour Force Survey relies on respondents to decide whether they are in part-time work and some people working 40 hours a week classify themselves as part-time, while others working 16 hours a week classify themselves as full-time. Secondly, someone in a full-time job can be underemployed if they are willing and able to work longer – though it is usually accepted that only people working below a threshold amount of hours should be included in measures of underemployment.

The ONS has been collecting statistics on people who are in employment but –

  • want an extra job, or
  • want to move from their current job to another job with longer hours, or
  • want extra hours in their current job.

These figures now go back to 2000, and they include the number of underemployed people (the level) and the proportion of all those in employment that are underemployed (the rate):

Underemployment, 2000 – 2009

Underemployment
level (millions)

Underemployment
Rate (%)

2000

2.2

8.0

2001

1.9

7.0

2002

1.9

7.0

2003

1.9

6.8

2004

1.9

6.6

2005

1.9

6.6

2006

2.0

7.0

2007

2.1

7.3

2008

2.3

7.7

2009

2.8

9.9

So underemployment has risen during the recession (by about 700,000) and one worker in ten is underemployed. But one of the interesting things about these figures is the permanent level of underemployment they reveal – even when the economy is running at full employment in most parts of the country we have almost 2 million underemployed people, and the rate has never gone below 6.6 per cent.

You’re only classified as unemployed if you’ve been looking for a job recently and can start work at fairly short notice. People without jobs who can’t tick these two boxes are classified as ‘economically inactive’, and that’s the other place to look for ‘hidden’ unemployment. It’s easy to shorten ‘economically inactive’ to ‘inactive’ but I try to remember not to because it is a category that includes a lot of people who work hard but for no pay, like carers and people looking after their families.

It also includes a lot of people who would dearly like a job, but for one reason or another haven’t been able to look for a job recently or can’t start just at present. That’s why the labour force survey asks people who are economically inactive if they want a job. People who aren’t used to the labour market statistics are often surprised by the numbers who say ‘yes’ in answer to this question – out of about 7 million working age economically inactive people, about 2 million say they want jobs. Again, this number has been rising recently:

Graph: Want Work Levels

The recession has increased the number of economically inactive people who want work by a third of a million, but again, one interesting aspect of this story is the level of suppressed demand for work even when we have full employment.

If you add the number of unemployed and the number of economically inactive people, you have a total of 4.8 million people who don’t have a job but would like one, this is about 1.1 million more than the level in January 2008 (1.6 million unemployed, 2.1 million want work economically inactive), that’s a significant increase, but I’m still struck by how high the level is during the ‘good’ times.

One Response to Underemployment and the ‘want work’ level

  1. Fighting the structural causes of involuntary idleness (also by Robin Hood Tax) | pratichesociali
    Mar 17th 2010, 1:36 pm

    […] The figures for involuntary idleness make for stark reading. If you add together the number of unemployed people (2.5 million) to the number of people who are classed as economically inactive, but who want work (2.3 million), you get a total of 4.8 million people who are forced to be idle (in the narrow sense of not having a job). Add to that 2.8 million people who are underemployed (who would like an extra job, a different job with longer hours, or more hours in their current job), and it’s clear that involuntary idleness is endemic. Perhaps most shockingly, during a decade and a half of growth since the last recession, involuntary idleness never dropped below 3.7 million, and underemployment never fell below 1.9 million. […]