From the TUC

Underemployment greater than overemployment

23 Jul 2010, by in Economics, Labour market

Last week the ONS published their excellent Economic and Labour Market Review, highlighting analysis that shows that since Jan – March 2009 underemployment levels have been greater than those for overemployment. In the first quarter of 2010 there were 2.81 million people classed as being in time-related underemployment, compared with 2.75 million people who were classed as being in time-related overemployment.

ONS have considered both under and over employment as they find there are economic incentives to reducing both: underemployment (where people would prefer to work more hours) reflects spare capactity in the labour market, which could add to economic output, while overemployment (where people would prefer to work fewer hours) can lead to decreased productivity as a result of worker fatigue and absence.

The analysis also considers the human concequences of both trends, showing that underemployment has similar effects to unemployment, negatively impacting on incomes, life satifaction, self-esteem and wider mental health. Over employment also brings negative effects – including poorer physical and mental health, increased family conflict and lower general wellbeing.

But while both over and under work have negative impacts, those affected have very different characteristics. Part-time workers, younger workers, people with low qualifications and people in ‘elementary’ occupations are far more likely to be underemployed. In contrast, overemployment is more likely to affect older workers, full-time workers and those in roles requring higher qualifications.

ONS’s analysis is an important reminder of the importance of looking more widely than unemployment rates when considering the state of the labour market. It is particularly striking that underemployment has hit the same groups as those who have been most likely to see higher rates of unemployment, meaning that “as the economy contracted, the income levels of the young and of people in low-skilled, low-paid occupations decreased at a more rapid rate than others in the working population, thus creating a larger income inequalitywithin the society.” A Government committed to fairness needs a strong strategy both to boost employment rates, and to ensure that those who are employed have enough work.