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Professor Geraint Johnes
Professor of Economics at Lancaster University
T 020 7976 3516
Professor Geraint Johnes

The latest underemployment statistics from Bell Blanchflower

Authors: Professor Geraint Johnes

04 February 2015

The latest figures on the Bell and Blanchflower underemployment series have now been produced and are reported below. The underemployment rate is constructed by adding to the unemployment count a full-time equivalent of the net number of hours for which workers who are currently working fewer hours than they would like to work are employed. Until 2008, the unemployment series and the underemployment series followed each other closely. Since then, the rate of underemployment has been consistently above the rate of unemployment. This means that the unemployment rate is no longer a sufficient measure by which to judge the extent of slack in the labour market.

The figures for the third quarter of 2014 show that, as unemployment has fallen, so too has the underemployment measure. While the gap between the two rates amounted to more than 2 percentage points in the first quarter of 2013, it is now reduced to a little under 1.5 percentage points. This suggests that the labour market is returning to normality - but slowly; the unutilised supply of labour is still markedly greater than the relatively low rate of unemployment might suggest. 

There are interesting differences by gender, age and ethnicity. While the unemployment rate is slightly lower for women than for men, the underemployment rate for women is higher. This suggests that women are particularly likely to be working part-time when they would like to work longer hours. 

Amongst young people, rates of unemployment are high - currently just above 15 per cent. But this group is particularly prone to underemployment - the underemployment rate is almost 24 per cent. At the Work Foundation, we have often spoken of the 'missing million' young workers - with many working part-time, it is no longer the case that a million young individuals are without work, but the full-time equivalent level of workkessness amongst this group still amounts to well over a million. This resource has the potential to deliver huge output gains for the economy.
Rates of unemployment are particularly high for young people in ethnic minorities, and, amongst these, particularly so for black youths. There was, however, a particularly marked fall in the unemployment rate for this group over the first three quarters of last year. But that fall has been accompanied by only a very slight dip in underemployment. The good news that these workers are finding jobs has to be tempered by the fact that many of them are looking to work longer hours.

Looking at ethnic minority workers across all age groups, both unemployment and underemployment rates are higher than for white workers. Indeed the underemployment rate for black workers remains above 20 per cent - though the unemployment rate is a little under 15 per cent.

In sum, the new data provide some encouragement that the labour market is moving in the right direction. The gap between unemployment and underemployment rates is getting smaller as the economy returns to health, but it is still substantial, and it would be rash to use the unemployment rate alone as a measure of labour market tightness.

Bell Blanchflower underemployment stats