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Professor of Economics at Lancaster University
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Professor Geraint Johnes

Underemployment figures show labour market slack remains

Authors: Professor Geraint Johnes

25 November 2014

In recent months, we have published a regular series of data on underemployment in the UK - the Bell Blanchflower Index. These data have suggested that the extent of underemployment rose markedly during the recession and has remained substantial since.

Now the Office for National Statistics (ONS) has released further information on the extent of underemployment. Around 10 per cent of workers employed in the UK are working fewer hours than they want. This rises to about 20 per cent for those working in elementary occupations; there is also very significant underemployment in the sales and customer service occupations and in caring, leisure and other services. For those who are underemployed, the average extent of underemployment is staggering - some 11.3 hours per week. Clearly many workers who would like to work full-time have access only to part-time work.

Underemployment is not a phenomenon confined to employees - self-employed workers may also be able to work fewer hours than they would like. The extent of underemployment amongst this group increased particularly sharply with the recession. While, at the beginning of the last decade, underemployment amongst the self-employed was around 2 percentage points lower than that amongst employees, the two groups now have virtually identical rates of underemployment. This reinforces the view that much of the growth in self-employment since the recession has been linked to increasing insecurity in the labour market, the position of many of the new self-employed being somewhat tenuous.

There is relatively little regional variation in the incidence of underemployment. It is highest in the North East, at 11.5%, and lowest in the East of England, at 9.2%.

The ONS data also provide information about overemployment - people who would like to work fewer hours than they do. Around 10 per cent of workers fall into this category, with concentrations in managerial and professional occupations. Health professionals, senior businesspersons (such as CEOs), and senior officers in protective services (including defence) are particularly affected.

The net level of underemployment (that is, underemployment minus overemployment) amounts to around 900,000 hours per week. This is tantamount to about one percentage point extra on the unemployment rate. While this figure is somewhat lower than the Bell Blanchflower estimate (largely because ONS use a more restrictive definition of underemployment), it confirms what we have known for some time: the unemployment rate is no longer a sufficient measure of labour market slack, and there remains scope for the labour market to improve further without generating significant wage pressure.




External link to ONS website External link to ONS website