Is underemployment the new unemployment?
The number of Scots in employment but who want to work more hours is just as important an economic indicator as those out of work. The rapid rise in this number is both a cause and a result of economic weakness. And yet the phenomenon is ill-understood.
That is why the inquiry launched today by Holyrood's Economy, Energy and Tourism Committee into the rising tide of Scottish underemployment should be welcomed. According to the TUC, about 270,000, or more than one in 10, Scottish workers are underemployed. That represents a 39% jump in the underemployment level in four years. It is part of a wider UK story. Predictably, these figures are dominated by part-time workers, around one-quarter of whom would work more hours if they were on offer. The young, women, the self-employed and those in low-wage occupations are most likely to be in this position.
Half a job is better than none. That is certainly one view. It helps the individual stay in touch with the labour market and enables the employer to sustain employment and skills through the downturn. It is a phenomenon that has helped keep down the unemployment head count as workers accept part-time contracts in preference to redundancy and the unemployed take part-time work because it is all that is on offer. But, though it may help Scotland get by while the economy recovers, if allowed to become permanent it would be damaging.
It damages the economy through reduced productivity. It can also damage the individual's future career prospects and it certainly puts a strain on many household incomes, in the face of rising food and utility prices. For one particular group of workers, underemployment has been little short of disastrous. Since last April low-income households have only qualified for tax credits (which are worth up to £3870 a year), if they jointly work 24 hours a week, with one partner working at least 16. Before April one partner working 16 hours was enough to qualify. The households caught in this trap are desperate for more hours but, in a tight labour market, they have difficulty getting them. It means some of these parents are better off giving up work.
It will be interesting to see how far a committee chaired by a Conservative (Murdo Fraser) will go in criticising this perverse incentive created by the Coalition Government. More generally, it is easier to analyse the phenomenon of spiralling underemployment than solve it, without increasing unemployment.
Certainly, Scotland needs a strategy for addressing underemployment. That should include ensuring there are adequate training opportunities for part-time workers. In that context, big cuts in part-time college courses are a mistake. Ultimately, it means a strategy that focuses on the quality, rather than simply the quantity of jobs created by economic policy. This is a complex areas with no easy answers but a widening gap between work-rich and work-poor households is not in this country's interests.
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