Underemployment: the UK’s response to economic weakness

Why is the UK suffering an underemployment crisis?

Despite the UK economy being in recession in the first quarter of 2012, unemployment fell by 45,000 (and youth unemployment was down by 18,000). This is very welcome news. Throughout the last four years of recession, hesitant recovery and return to recession the UK’s labour market has performed remarkably well. The fact that 2.63 million people are unemployed is terrible news, but, if the pattern of previous recessions had held, that number could have been closer to 3.5 million. It’s bad, but it could have been a lot worse.

Companies and workers have found two alternatives to mass redundancies: cuts in real pay and increased part-time working.

Pay has failed to keep pace with prices for much of the last four years and the latest figures show regular earnings (excluding bonuses) increased by just 1.6 per cent over the last year, compared to consumer price inflation of 3.5 per cent.

Meanwhile, the 105,000 increase in employment in the latest quarter was more than fully accounted for by part-time workers, while the number in full-time employment fell by 13,000. Looking at the numbers differently, 90,000 of the 105,000 increase in employment in the last quarter was due to an increase in self-employment.

These are not new trends; they have been evident throughout the recession and recovery. The following table shows the change in employment over the last four years (i.e. comparing the first quarter of 2008, just before the recession, with the first quarter of 2012).

 

 

Change in employment (000s)

Total employment

-277

 

 

Employees

-544

Self-employed

307

Unpaid and on government programmes

-40

 

 

Employment – full-time

-744

Employment – part-time

467

 

 

Employees – full-time

-792

Employees – part-time

248

 

 

Self-employed – full-time

44

Self-employed – part-time

263

 

In round numbers, over this period total employment in the UK has fallen by close to 300,000. But the number of full-time employees is down by 800,000, while the number of part-time employees and the number of part-time self-employed people are both up by about 250,000.

We know there are many reluctant part-time workers because the Office for National Statistics asks those who are working part-time if they would prefer to be working full-time and 1,418,000 are currently saying "yes" – the highest number since comparable records began in 1992 and an increase of 700,000 over the last four years. Unfortunately, the ONS does not ask the self-employed if they would rather be working as an employee – but it is a fair bet that some of the recent increase in self-employment reflects people who would rather not be self-employed but have set up their own businesses because they cannot find a company to employ them.

The headline unemployment figures do not tell the full story of the UK labour market during the recession and recovery. As well as a large increase in unemployment, there has been a large increase in underemployment – people working fewer hours than they would like.

This represents lost potential output to the UK economy, as well as lost income and lower living standards for those who find themselves underemployed, but it is far better for the economy in the long-run for people remain in work than for them to lose their jobs. Once people are out of work, there is a risk they lose touch with the labour market and find it impossible ever to get back into employment (as happened to thousands in the 1980s).

It is not clear, however, why underemployment is replacing unemployment as the response to economic weakness. There is no evidence of a renaissance in industrial relations at the whole economy level, but it seems that in many companies employers and workers are getting together to agree that more part-time working and cuts in real pay are preferable to lay-offs. You could say that some workers have decided that they are better off "all in it together" then seeing some of their number lose their jobs.

There is, however, one sense in which the increase in involuntary working is bad news, and that is for the outlook for employment once the economy does start to grow at a healthy pace. When this happens, before they start to recruit new workers, companies will want to bring back into use the underutilised resources represented by underemployment. Meanwhile, workers who are working part-time involuntarily will want to return to full-time employment before they see new colleagues alongside them. There is a limit to the ‘all in it together’ sentiment, which means it is not likely to extend to those unfortunate enough to be unemployed.

At a macro level, the result is likely to be something of a "jobless" recovery. Stronger output growth, when it eventually arrives, accompanied by modest increases in employment – and stubbornly high unemployment – while part-time working falls and full-time working increases.

Rita Manso, 26, part-time worker and student, serves cocktails. Part-time work in bars, shops and clerical positions has risen in the "jobless recovery". Photograph: Getty Images

Tony Dolphin is chief economist at IPPR

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The economics of outrage: Why you haven't seen the end of Katie Hopkins

Her distasteful tweet may have cost her a job at LBC, but this isn't the last we've seen of Britain's biggest troll. 

Another atrocity, other surge of grief and fear, and there like clockwork was the UK’s biggest troll. Hours after the explosion at the Manchester Arena that killed 22 mostly young and female concert goers, Katie Hopkins weighed in with a very on-brand tweet calling for a “final solution” to the complex issue of terrorism.

She quickly deleted it, replacing the offending phrase with the words “true solution”, but did not tone down the essentially fascist message. Few thought it had been an innocent mistake on the part of someone unaware of the historical connotations of those two words.  And no matter how many urged their fellow web users not to give Hopkins the attention she craved, it still sparked angry tweets, condemnatory news articles and even reports to the police.

Hopkins has lost her presenting job at LBC radio, but she is yet to lose her column at Mail Online, and it’s quite likely she won’t.

Mail Online and its print counterpart The Daily Mail have regularly shown they are prepared to go down the deliberately divisive path Hopkins was signposting. But even if the site's managing editor Martin Clarke was secretly a liberal sandal-wearer, there are also very good economic reasons for Mail Online to stick with her. The extreme and outrageous is great at gaining attention, and attention is what makes money for Mail Online.

It is ironic that Hopkins’s career was initially helped by TV’s attempts to provide balance. Producers could rely on her to provide a counterweight to even the most committed and rational bleeding-heart liberal.

As Patrick Smith, a former media specialist who is currently a senior reporter at BuzzFeed News points out: “It’s very difficult for producers who are legally bound to be balanced, they will sometimes literally have lawyers in the room.”

“That in a way is why some people who are skirting very close or beyond the bounds of taste and decency get on air.”

But while TV may have made Hopkins, it is online where her extreme views perform best.  As digital publishers have learned, the best way to get the shares, clicks and page views that make them money is to provoke an emotional response. And there are few things as good at provoking an emotional response as extreme and outrageous political views.

And in many ways it doesn’t matter whether that response is negative or positive. Those who complain about what Hopkins says are also the ones who draw attention to it – many will read what she writes in order to know exactly why they should hate her.

Of course using outrageous views as a sales tactic is not confined to the web – The Daily Mail prints columns by Sarah Vine for a reason - but the risks of pushing the boundaries of taste and decency are greater in a linear, analogue world. Cancelling a newspaper subscription or changing radio station is a simpler and often longer-lasting act than pledging to never click on a tempting link on Twitter or Facebook. LBC may have had far more to lose from sticking with Hopkins than Mail Online does, and much less to gain. Someone prepared to say what Hopkins says will not be out of work for long. 

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