Six years of ‘mass underemployment’ takes gloss off UK’s jobs miracle

The Office for National Statistics (ONS) has just published updated figures from the Labour Force Survey (LFS) on the number of UK workers who are underemployed and want to work more hours and the number overemployed who want to work fewer hours for less pay.   

As expected the number of underemployed workers – those who want to work more hours - fell by 116,000 in the year to Q2 2014 but the figure remains staggeringly high at close to 3 million (2.975 million, 9.9% of people in employment). On average each underemployed worker would like to work an extra 11.3 hours per week, though the desire for longer hours is far greater for part-time workers (22% of whom are underemployed) than for full-timers (whose underemployment rate is 5.4%). This in turn is the major reason why women, who are more likely to work part-time, have a higher underemployment rate (around 11%) than men (around 9%). Self-employed people also have a slightly higher underemployment rate (10.1%) than employees (9.4%). Perhaps unsurprisingly the incidence of underemployment is higher for workers in lower paid than higher paid occupations, since the low paid need longer hours to earn a decent weekly wage, and for younger people (around 1 in 5 16-24 year olds are underemployed).       

At the other end of the desire for work spectrum 2.9 million workers would be prepared to cut their hours for less pay (an average overemployment rate of 9.7%, which is roughly similar for both employees and the self-employed)). On average the overemployed would like to work 11.2 fewer hours but in this case its full-timers (with an overemployment rate of 11.4%) rather than part-timers (5.2%) who want to work less, with overemployment rates highest for professional and managerial workers (at around 13%).

The ONS notes that the underemployment rate has been higher than the overemployment rate since 2009 and thus concludes: “this means that there are more hours being desired by workers than hours workers want to work less. Therefore over the years following the recession there has been an increase in slack in the labour market for those in employment, but this has started to decrease since the beginning of 2013.

Despite the recent improvement, however, 2014 is nonetheless the sixth successive year in which the underemployment rate has been at 9.5% or above. Such a prolonged period of mass underemployment demonstrates the extent to which the very good headline employment and unemployment figures of recent years mask a substantial underlying shortage of work, the persistence of which takes some gloss off the UK’s supposed ‘jobs miracle’.

Unemployment didn’t reach the levels feared at the start of the financial crisis but the degree of subsequent pain inflicted on the labour market has been as severe as expected, it’s simply that the pain has been felt differently than in previous recessions. And with almost 3 million people underemployed alongside still almost 2 million unemployed the pain of work shortage and associated pay weakness is likely to continue well into 2015.