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Ian Brinkley
Economic Advisor
Ian Brinkley

Under-employment in the UK today

Authors: Ian Brinkley Senior Economic Advisor

16 December 2015

The labour market figures released this morning (December 16th) show a labour market in rude health. Unemployment is down again, employment is up, real wages are growing – albeit more slowly than in the past. The OBR forecasts five years of steady improvement to come. 

However, in this blog we focus on under-employment.  This is a wider measure than the unemployment rate of how much spare capacity there is in the labour market by also taking into account those who say they want to work more hours less those who say they want to work fewer hours. The figures have been kindly updated by Professor Bell at Stirling University.

The measure confirms that there is significantly more “slack” in the labour market than shown in the unemployment rate. In the third quarter of 2015 the ILO unemployment rate averaged 5.3 per cent, and the under-employment index averaged 6.4 per cent. 

It is clear that most companies can still get the labour and hours they need without paying more. The recovery in pay growth we saw over the Summer is fizzling out, with annual growth in regular pay dropping below 2 per cent in the private sector.

The new figures are revealing about the distribution of employment opportunities and the availability of hours. The unemployment rate for women at 5.1 per cent is slightly lower than for men at 5.3 per cent in 2015Q3. But once under-employment is factored in the position is reversed – the under-employment index for women was 7.1 per cent compared with 6.3 per cent for men. Under-employment clearly affects women more severely.

The young also suffer greatly – the unemployment rate for young people under 25 was 14.6 per cent, but the under-employment rate was 20.9 per cent. Many young people clearly have a great desire to work, but are unable to get all the hours they would like.

Equally startling are the differences by broad ethnic groups. Professor Bell gives estimates for all those of white ethnicity where the unemployment rate is 4.7 per cent and the under-employment rate 5.4 per cent. For those of Asian ethnicity the figures are 9.3 per cent and 12.5 per cent. For those of Black ethnicity they are 13.8 per cent and 18.2 per cent. In other words, under-employment among those of Black ethnicity is 3.4 times greater than under-employment among those of white origin, measured by the under-employment index. Some of these results are shown in Chart 1 below.


Source: estimates by Professor David Bell from the Labour Force Survey

The index also shows us that under-employment is at the aggregate level not becoming an entrenched feature of the UK labour market. Under-employment closely follows the ups and down of the economic cycle, and is now approaching pre-crisis levels in line with the unemployment rate. This is shown in chart 2 below.


Source: estimates by Professor David Bell from the Labour Force Survey

The return towards pre-crisis levels is broadly true for both men and women, black and white, old and young. The very high rates of under-employment we see today among young people and non-white workers and the higher incidence of under-employment among women are not therefore products of the recession but a return to long-standing pre-crisis levels. This shown in chart 3 below. For a significant share of the workforce the problem remains not just finding a job but finding one that offers enough hours of work. 


The unemployment index is available from 2001Q2 to 2015Q3 on The Work Foundation’s website