Work and Pay

Unemployment is down, but what about underemployment?

  • Published: Feb 19, 2014
  • Author: Tom MacInnes
  • Category: Work and Pay

Today’s labour market statistics are a little unclear at first glance - unemployment was down on the quarter, but higher than last month, while earnings are rising faster, but still below inflation.

Putting to one side the month on month changes, one of the things they allow us to do is look at 2013 as a whole. And it was clearly a better year than those preceding - unemployment fell, employment rose, both in terms of the number of people and the proportion of the workforce in work.

One of the indicators we have been tracking since the recession began is “underemployment”. There are now a few definitions of this (see for instance, David Blanchflower in today’s Financial Times), but they are all trying to get at the same thing – beyond the simple measure of unemployment, how many people lack the work they want?

The measure we use takes unemployment as its starting point. We then add those who are economically inactive but would like a job. This group is not defined as unemployed because they are either not looking for work or not available to start work in the next couple of weeks. We break this group up into students and non students - most students will be classified as economically inactive, but some would like paid work. The final group we include are those in part time work wanting a full time job.

The graph below allows you to look at all four groups together or one at a time by clicking on the categories at the top.  The figures in the graph are for the final quarters of each year. 

To view this graph on a mobile click here

If we look at the total, the number of underemployed people peaked in 2011, fell a little in 2012 and more in 2013, now standing at just over 6m. This is mainly due to falling unemployment – remove this series and the last three years look flatter. Unemployment has fallen quite steadily quarter on quarter since peaking in 2011, and the slight rise in the last month still leaves it much lower than a year ago.

The number of non students who were inactive but wanting work has remained quite flat throughout the recession and its aftermath. Though quite a large number – around 1.8 million people – it only rose slightly in 2008, and has fallen back only slightly since. The number of inactive students wanting work is around 530,000, compared to 370,000 a decade ago. Today's figure is slightly lower than the 2009 peak, but the trend has been generally upwards both before and after the recession. 

However, if we look just at the number of people working part-time wanting a full-time job, this has gone up slightly in each of the last two years. While the bigger increases were between 2008 and 2011, in the second half of 2013 the number of people in part time work wanting a full time job was higher than at any time in the last twenty years.

In itself, this is quite interesting, and not entirely expected. Many people, ourselves possibly included, thought that unemployment would fall slowly at first as the part time workers increased their hours. This isn’t what happened, or at least to the extent it did happen, those who increased their hours have been replaced in part time work by other people who themselves would like more hours.

Whether this number remains so high is therefore unclear. But add this to the high number of people now classed as “self-employed”, the big increase in work among the over 65s, and the fall in employment among under 25s, what becomes clear is that the labour market post-recession looks very different from its pre-recession version.

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