Underemployment has risen and it’s young people paying the price
Over the past five years one of the major issues in the Australian economy has been the rise of underemployment given it is strongly linked with the ongoing weak growth of wages. The latest Household, Income and Labour Dynamics in Australia (Hilda) survey undertook a deep dive into the makeup of the underemployed. And while the news is generally bad for younger workers, the good news is that, for most, underemployment is not a longterm situation.
Underemployment first really became an issue after the 1990s recession – where the rates of underemployment soared for both men and women, reaching levels that would not be surpassed for over 15 years:
But while it is unsurprising that underemployment rises in time of recession, the rise over the past few years has been perplexing – especially as unemployment was generally falling.
The latest Hilda survey has sought to investigate who is being affected by this rise in underemployment and whether or not it is an issue that has long-term consequences for workers.
Not surprisingly, it found that young workers are much more likely to be underemployed – 31% of workers aged 15-19 and 20% aged 20-24 are underemployed, whereas no other age bracket sees more than 9% of its workers in such a position:
Now a big reason for this is that younger workers are more likely to work part-time, and given underemployment is mostly part-time workers seeking more hours (as opposed to fulltime workers who are working less than they would like), generally when you have more part-time workers, you will have more underemployed.
But the Hilda data shows that even among part-time workers, younger employees are more likely to be underemployed. Nearly half of all 20- to 24-yearolds working part time are underemployed compared to only around 30% for those part-time workers aged 35 to 54:
This relationship is not so clear when we look at the education level of workers. While those with a year 12 or lower equivalent level of education are more likely to be underemployed, that is mostly due to their working in parttime employment. Among part-time workers, they are only slightly more likely to be underemployed than those with advanced diplomas or bachelor degrees:
The Hilda survey also found that underemployed workers are somewhat ironically more likely to be working multiple jobs than others. Just over 8% of all workers work multiple jobs, however 10.9% of those who are underemployed do so.
Among occupations, those working as labourers, in sales, and in the community and personal services sectors were more likely to be underemployed than you would expect given their overall representation in the workforce.
Around 9% of all workers are in sales, yet they account for 21% of all underemployed. Similarly 9.9% of all workers are labourers, but they make up 20.2% of all underemployed:
The Hilda survey also confirms the belief that underemployed workers have less job security than other workers. While just 7% of full-time and 40% of part-time workers are employed on a casual basis, 57% of underemployed workers are on such an employment arrangement:
The good news from the Hilda survey is that underemployment is not a life sentence. It found that just 36% of underemployed remain so a year later. But while it is good that nearly twothirds of underemployed people are able to move out of that situation, the reasons for leaving underemployment are not universally positive.
The Hilda survey found that 14% of the underemployed workers leave the workforce – although 9% still want to work. But of the 49% of underemployed who a year later consider themselves to be fully employed, only around half are so because they have increased their hours. The rest are no longer underemployed because they have in effect given up getting more hours and have decided to be content with the number of hours they work.
While the survey found that around 58% of those who moved from underemployment to full employment due to an increase in hours did so while staying with the same employer, it also found that “the relative likelihood of achieving preferences through increased hours is highest for those who change employers” – because few underemployed workers change jobs unless it is leads to more hours.
A massive 80% of those who remained underemployed did so while staying at the same employer – and almost all of those who left underemployment because they had given up looking for more hours were those who stayed with the same employer.
And while the odds of leaving underemployment are generally good – the longer you remain underemployed, the less likely you are to do so. The Hilda survey found that “one year following entry into underemployment, 53% will be fully employed and within three years that rises to 73%.
But after then there is very little rise in the number of underemployed moving into full-employment status – in effect you have three years to get off underemployment or you are stuck.
The Hilda survey provides a good insight into the situation of underemployment. And to an extent it provides a bit of caution to the general doom around the topic. While clearly younger workers are more likely to be underemployed both than other workers and than in the past, the good news is that for most workers, underemployment is a temporary state.
The concern is whether the level of people leaving underemployment will be due to people getting more hours or because they have decided to give up hoping to get more hours. Should the latter be the case going forward, that would suggest that work overall is becoming less secure and in all likelihood is seeing a rise in casual work across part-time work – even among those not seeking more hours.
But while the Hilda data does suggest most within two or three years do exit underemployment, the data also suggests that the best chance for workers who have been underemployed with the same employer for more than two years is to look for more hours elsewhere.
Greg Jericho is a Guardian Australia columnist