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The scourge of underemployment

JUST as half a loaf is better than none, underemployment appears preferable to unemployment.

But, as today's meaty report from Holyrood's Economy, Energy and Tourism Committee demonstrates, it is both a cause and an effect of Scotland's stuttering economy.

Underemployment takes many forms: the cleaner whose hours are cut in half without notice; the shop assistant on a "zero-hours" contract; the self-employed IT worker only able to find a few hours' work a week; or the "overskilled" graduate stuck doing bar work. The report estimates more than 250,000 workers in Scotland, more than 10% of the workforce, want more work. Without it, many live in poverty. (The figures are marginally higher than the UK average.)

Underemployment explains what is known as "the productivity conundrum", whereby unemployment has remained lower than expected but productivity has fallen. Enforced underemployment is bad for the economy and deficit reduction because it means the tax take is reduced and more households qualify for tax credits.

There are two views of the phenomenon. Some regard it as cyclical: a handy means of avoiding redundancy payments and retaining staff and their skills until the economy picks up. However, as this report shows, there are worrying signs that underemployment is becoming entrenched in the UK economy. Even before the 2008 crash, underemployment was running at two-thirds of the current level and by 2011 was higher than in any EU country except Ireland.

The danger is that this is not a temporary phenomenon but the way of life for thousands who only ever move from one insecure, unskilled, minimum wage jobs to another, never escaping poverty. Women are disproportionately represented in the group, partly because men have been displacing women from part-time work and partly because the high cost of childcare in Scotland forms a barrier to work. And it is a feature of particular sectors dominated by female employment, such as tourism, care work and retail. The young also feature strongly among the underemployed as do certain geographical areas, such as Dundee, reflecting a lack of demand in the labour market.

It is easier to analyse this issue than tackle it. Certainly, as the report suggests, the forthcoming procurement bill could be used by Scottish Ministers to ensure no company operating zero-hours contracts wins public sector contracts. Secondly, if the underemployed are ever to escape the revolving door of minimum wage, insecure, part-time work, interspersed with periods of unemployment, they need marketable skills. In this context, large cuts in Scottish part-time further education courses simply does not make sense. Thirdly, rather than calling for research into Scotland's prohibitively expensive childcare, we need measures to tackle the issue now, not at some time in the future. In England all councils had a legal obligation to provide good affordable childcare as part of Sure Start, while provision in Scotland has remained patchy at best.

There is also a case to answer here for the Department of Work and Pensions, whose answer to issues like the so-called bedroom tax and cuts in the level of and eligibility for tax credits is to tell workers to "just work a few more hours". For many thousands of workers in Scotland the riposte is: "We would if we could". Of course, a return to economic growth would help tackle underemployment, though past experience suggests employers only start taking on labour when growth reaches about 2%. Meanwhile, underemployment is not merely a symptom of a sluggish economy but also a cause of it.

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