At 5.5%, the UK has one of the lowest unemployment rates in Europe. However, this apparent success is masking the prevalence of underemployment in the UK economy. Underemployed workers can be seen as those individuals who have a job (thus not unemployed) but are being underutilised. The Office of National Statistics (ONS) estimates that in 2014 around 10% of the UK labour force wanted to work for longer hours (known as visible underemployment). Also seen in the UK is a second type of underemployment: individuals are overqualified for their jobs and have underused skills. The labour force survey does not collect data on this second type of underemployment but according to the Chartered Institute of Personnel and Development; 58.8% of graduates had jobs which did not require a degree.
Underemployment exists because it is preferable to unemployment. Individuals find accepting part time work or a lower skilled jobs can potentially provide a better source of income compared to pure unemployment, and of course it is often the case that it is easier to get another job if you are already working. Increases in underemployment similarly to unemployment are often in response to changes in the demand for labour; during times of lower economic activity there is an increase in both full-time workers moving to part time work and skilled workers willing to accept lower skilled jobs. Studies by The Institute for Public Policy Research (IPPR) have actually shown that the number of people accepting part-time jobs since they could not find full time jobs significantly increased during the 2008 recession. Nevertheless, these are not the only reasons for increases in underemployment; automation and technological change can mean your skills are no longer needed, businesses may only need additional labour at particular times of year or particular times of day and increases in the minimum wage can make underemployment more attractive in comparison to unemployment.
In the short run, underemployment is certainly more desirable than unemployment; the wider economy sees increased spending compared to unemployment and there are reduced pressures on the welfare system which can possibly prevent further benefit cuts in times of high austerity. However, the real problem is trying to prevent short-time underemployment from turning into long term underemployment. When workers are stuck in lower skilled and lower paid jobs than they might expect and when individuals forced to work less hours than they might like, they feel undervalued. This reduces morale and has a direct impact on business productivity. Whatever the cause of underemployment, the effect on individuals is real: they have less disposable income, slower (if any) career progression and generally a lower quality of life.
Any solution must focus on encouraging business to boost career progression and upward movement of workers to prevent skilled workers being trapped in low paying, low skilled positions and to prevent workers being pushed into indefinitely part-time careers. Ideally, when economic activity increases these skilled workers as well as those skilled workers entering the workforce should compete for the best positions and part-time workers they could be given a priority over new full time workers. Unfortunately this is rather optimistic: workers may lose unpractised skills over time and anyway, if part-time workers or skilled workers take up positions instead of those entering the workforce then underemployment is just going to be the same as before. Although it is tempting to view this more equitable redistribution of underemployment towards new-entrants into the workforce as a positive, money has just been spent giving these workers skills which are then not used and money has to be spend re-training older workers: no business given the option would choose to do the latter.
Ultimately, most underemployment is either part of the business cycle or just a normal part of a particular industry and like unemployment, it is difficult to escape from. Although it is hard to find direct solutions; improving the rights of these workers as the Government has attempted to do (with legislation against ‘exclusivity’ clauses in zero-hours contracts), is a very respectable course of action to take.