Over ten per cent of Britain's possible labour is wasted

Combining underemployment and unemployment shows the output gap is much bigger than previously estimated.

Our own economics editor, David Blanchflower, has a new paper out today co-authored with David Bell of the University of Stirling, taking a deeper look at underemployment.

Increasingly, the issue is being understood as one of the major crises in the UK today. It explains how our unemployment rates have recovered far more quickly than GDP growth would lead us to expect, as well as providing a hypothesis about the UK's falling productivity levels (if full-time permanent workers have are more productive than part-time and temporary workers, then high underemployment would hinder the UK's productivity).

While it's usually better to be under-employed than unemployed (because the number of people who are actually better off on benefits is vanishingly small), it's no walk in the park. At best, underemployment results in wasted potential in the same way as unemployment, with people who could work more not having the choice. And working for one day a week is much less than a fifth as good as working for all five: you can't buy a weekly travelcard, meaning commuting costs more; you can't build up expertise or connections at work; and you spend the vast proportion of your income on essentials, leaving little left over after the bills are paid (a problem that also afflicts people in full-time employment, of course).

On top of that, as Jonathan Portes points out, underemployment is an issue which overwhelmingly affects young people (of whom 1 in 5 are already unemployed):

In 2012, 30 per cent of those aged 16 to 24 that did have jobs wished to work longer hours. This means that the labour market for the young is even more difficult than the raw unemployment rates imply. Even if there was an upturn in demand, employers would likely extend the hours of existing workers before taking the risk of hiring new young employees.

But the thing is, despite underemployment being such an important issue, we don't have any great way to measure it. The unemployment figures include statistics asking people in part-time and temporary positions whether they'd rather be in full-time permanent jobs, which is a good start, but it's an overly simplistic measure (what about part-timers who want to stay part time but have more hours?), and it fails to properly capture the interplay between un- and under-employment.

Separately, the annual Labour Force Survey asks respondents whether they are looking for more hours of work at the same pay, and how many hours they are actually working; but those measures are even harder to compare to the unemployment data, and are far too infrequent to be of much use.

That's where Blanchflower and Bell step in. By combining those two measures with the general unemployment rate, they have put together an "underemployment" index. They write:

Like the unemployment rate, it is expressed as a percentage. It can be thought of as measuring the ratio of net unemployed hours to total available hours assuming that the hours preferences of the employed at current wages are met.

If everyone who was employed was working exactly the number of hours they wanted to be, then the index would be the same as the unemployment rate. In fact, it can fall below the unemployment rate, in times when the majority of employed workers would rather reduce their hours – and that's how it was in the boom years. But once the great recession hit, the index diverged markedly:

It's an important measure, because it reflects not only the "external" labour market that most of us see – unemployed people hunting for jobs – but also the "internal" labour market: people with work, negotiating with their employers for more or less work. As a result, the authors write:

This index gives perhaps a broader estimate of the extent of underused capacity in the economy – the output gap – than a simple measure based on the unemployment rate.

The policy implications, they write, are clear. Taking a narrow view, the ONS needs to pick up the ball on this, and start publishing the data alongside the broad unemployment index. But in the broader sense:

There is very substantial spare capacity in the labour market; the implication being that if demand were higher, output could easily be higher, and it could be higher without exerting any significant upward pressure on real wages. So any further stimulus, whether fiscal or monetary, would not be inflationary. People want to work.

Looking at underemployment as well as unemployment confirms that the stagnation Britain has experienced is unlikely to be purely, or even mainly, structural. Stimulus is likely to lead to more employment, not more inflation; and so it should be done as soon as possible.

Staff in a dispatch centre package goods to ship. Shift workers are frequently underemployed. Photograph: Getty Images

Alex Hern is a technology reporter for the Guardian. He was formerly staff writer at the New Statesman. You should follow Alex on Twitter.

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Rarely has it mattered so little if Manchester United won; rarely has it been so special they did

Team's Europa League victory offers chance for sorely needed celebration of a city's spirit.

Carlo Ancelotti, the Bayern Munich manager, memorably once said that football is “the most important of the least important things”, but he was only partly right. While it is absolutely the case that a bunch of people chasing around a field is insignificant, a bunch of people chasing around a field is not really what football is about.

At a football match can you set aside the strictures that govern real life and freely scream, shout and cuddle strangers. Football tracks life with such unfailing omnipresence, garnishing the mundane with regular doses of drama and suspense; football is amazing, and even when it isn’t there’s always the possibility that it’s about to be.

Football bestows primal paroxysms of intense, transcendent ecstasy, shared both with people who mean everything and people who mean nothing. Football carves out time for people it's important to see and delivers people it becomes important to see. Football is a structure with folklore, mythology, language and symbols; being part of football is being part of something big, special, and eternal. Football is the best thing in the world when things go well, and still the best thing in the world when they don’t. There is nothing remotely like it. Nothing.

Football is about community and identity, friends and family; football is about expression and abandon, laughter and song; football is about love and pride. Football is about all the beauty in the world.

And the world is a beautiful place, even though it doesn’t always seem that way – now especially. But in the horror of terror we’ve seen amazing kindness, uplifting unity and awesome dignity which is the absolute point of everything.

In Stockholm last night, 50,000 or so people gathered for a football match, trying to find a way of celebrating all of these things. Around town before the game the atmosphere was not as boisterous as usual, but in the ground the old conviction gradually returned. The PA played Bob Marley’s Three Little Birds, an Ajax staple with lyrics not entirely appropriate: there is plenty about which to worry, and for some every little thing is never going to be alright.

But somehow the sentiment felt right and the Mancunian contingent joined in with gusto, following it up with “We’ll never die,” – a song of defiance born from the ashes of the Munich air disaster and generally aired at the end of games, often when defeat is imminent. Last night it was needed from the outset, though this time its final line – “we’ll keep the red flag flying high, coz Man United will never die" – was not about a football team but a city, a spirit, and a way of life. 

Over the course of the night, every burst of song and even the minute's silence chorused with that theme: “Manchester, Manchester, Manchester”; “Manchester la la la”; “Oh Manchester is wonderful”. Sparse and simple words, layered and complex meanings.

The match itself was a curious affair. Rarely has it mattered so little whether or not United won; rarely has it been so special that they did. Manchester United do not represent or appeal to everyone in Manchester but they epitomise a similar brilliance to Manchester, brilliance which they take to the world. Brilliance like youthfulness, toughness, swagger and zest; brilliance which has been to the fore these last three days, despite it all.

Last night they drew upon their most prosaic aspects, outfighting and outrunning a willing but callow opponent to win the only trophy to have eluded them. They did not make things better, but they did bring happiness and positivity at a time when happiness and positivity needed to be brought; football is not “the most important of the least important things,” it is the least important of the most important things.

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