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The problem of underemployment

We had the latest unemployment figures released this week which made good reading – at least on the surface. The number of unemployed people fell by 35,000 over the quarter to February 2012 to reach 2.65 million. This meant that the unemployment rate fell to 8.3% from 8.4% on the quarter according to the Labour Force Survey findings.

1.4 million UK workers are in part-time jobs because they cannot find a full-time one

But, there were still 1.61 million people claiming Jobseeker’s Allowance in March 2012, which was an increase of 3,600 on February.

What tends to go unnoticed in the figures is the level of underemployment in the UK.  Underemployment can include situations where people with high level training or skills, such as graduates, are working in a job which does not require those skills, such as behind a bar. However, these numbers are not easily quantified.

What is measured in the figures is the number of people who have to work part-time although they would prefer to work full-time if they could find a full-time job. This measurement in the UK has been increasing steadily and is now of major significance.

In the quarter from December 2011 to February 2012 there were 1,400,000 people working part-time because they could not get a full-time job. This was an increase of 89,000 compared to the previous quarter. The total amounts to 18% of all part-time workers and nearly 7% of all those in employment.

Also, a survey published yesterday by eurostat shows that there are 8.6 million workers in the EU27 who wish to work more hours and are therefore considered to be underemployed. These accounted for 20.5% of part-time workers and 4% of total employment. This was a slight increase on the previous year.

Not only does underemployment carry a social cost, in terms of the psychological and social impact on workers who cannot work as much as they would wish, but there is also an economic cost. Underemployment should be added to unemployment to see the true loss to the economy. Although the underemployed might not qualify for any welfare benefits their inclusion into the equation does mean that the economy is working further inside its Production Possibility Frontier and therefore below its potential capacity.

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