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Introducing new measures of underemployment

This page introduces a new underemployment measure to be added to the suite of labour market statistics available from the Household Labour Force Survey: March 2013 quarter onwards.

It looks at the concept of underemployment and explains some of the characteristics of underemployment and why this measure is useful.

Underemployment in New Zealand
Definition of underemployment
Examples of underemployment and inadequate employment
Underemployment rate and the percentage of part-timers who are underemployed 
International underemployment rates 
New Zealand women have a higher rate of underemployment than men 
Underemployment compared with unemployment 
Youth most likely to be underemployed 
Similar underemployment rates by ethnicity 
Workers in retail trade and accommodation have highest rate of underemployment 
Labourers and community and personal service workers most likely to be underemployed 
More information 

Underemployment in New Zealand

The underemployment measure identifies people with a job who face a partial lack of work. It is useful to look at the underemployment rate in combination with the unemployment rate; together these two measures provide a more comprehensive view of how much potential labour there is readily available in the labour force. Compared with other OECD countries, New Zealand has a high underemployment rate but a lower unemployment rate.

Changing and increasingly flexible labour markets and the rise of non-standard employment have seen underemployment issues take on increasing importance. In New Zealand the main contributing factor to a high underemployment rate is a high ratio of part-time to full-time workers within a group.

  • For every one underemployed man there are two underemployed women, primarily because there are more than twice as many women who work part-time than men.
  • Young people are mainly employed in part-time jobs and are likely to be underemployed.
  •  Industries and occupations with high underemployment rates are those dominated by part-time workers.

Definition of underemployment

The labour force is split into two groups; those with a job (employed) and those without (unemployed). Underemployment enables us to look at the grey area of employment where people have a job yet as they face a partial lack of work have similarities to unemployed people.There are different types of underemployment such as time-related, skill-related, and income-related inadequate employment (see Examples of underemployment and inadequate employment for more information). The focus of the new Household Labour Force (HLFS) measure is on time-related underemployment as defined by the International Labour Organization (ILO), see Resolution concerning the measurement of underemployment and inadequate employment situations.

The ILO defines the underemployed as those employed individuals who in the reference week:

  • worked less than a specified threshold of hours (usually part-time), and
  • would like to work more hours, and
  • were available to do so.

In the HLFS, underemployment is when a part-time worker is willing and available to work more hours than they usually do. It is limited to part-time workers so that we can exclude other inadequate employment situations that may lead to a person wanting more hours of work (such as low hourly earnings).

Prior to the change of definition in 2013, the HLFS measured underemployment as part-timers who wanted to work more hours. It did not differentiate between those available and not available to work more hours. New questions were added to the HLFS in 2004 so that the full ILO definition could be used. By using the ILO definition, we have a more accurate measure of true underemployment that is internationally comparable. The addition of the availability constraint to the definition of underemployment allows for the distinction between people who ‘voluntarily’ worked less hours than their preference in the reference week and those who didn’t.

The definition of underemployment does not require a person to be actively looking for more hours. However, it is useful to look at the share of underemployed who are actively trying to get more hours as it can help us understand how willingness is expressed in terms of action. The HLFS shows that seven out of ten underemployed people are actively seeking more hours. There is no difference between the proportion of men and women actively seeking more hours.

See figure 1 for a diagram of how underemployment is defined.

Figure 1

 Diagram showing how the underemployment measure is defined.

Examples of underemployment and inadequate employment

The following examples illustrate different types of underemployment and inadequate employment.

 
 A closer look at the types of underemployment
  • Jack wants to work more hours but currently juggles the 20 hours he already works with childcare and some voluntary work he does on the weekends. Given his current commitments, he is not available to work more hours. Jack is ‘voluntarily’ working fewer hours than preferred.
  • On the other hand, Pete only works 5 hours a week. He is currently looking for a new job with more hours because his job doesn’t offer him enough work even though he is available to work more hours. Pete is 'involuntarily' in part-time work, he is time-related underemployed.
  • John wants to and is able to work more hours as he has trouble making his mortgage repayments on his current salary. But since he usually works 35 hours a week he is not classified as time-related underemployed. John is in income-related inadequate employment – he wants to work more hours because his hourly rate is not very good, rather than because he works a low number of hours.
  • Jane works 12 hours a week. Like Pete, she works quite a small number of hours but Jane is currently studying to become a teacher and has two children at home to look after. She has enough on her plate at the moment and doesn’t want to work any more hours, although she does wish she was paid more. Jane is classified as a ‘fully employed’ part-time worker – since she doesn’t want more work she is not in time-related underemployment. Also even though she wants to earn more she is not in income-related inadequate employment because the main reason why she doesn’t earn more is that she doesn’t work enough hours.
  • Like Jane, Sandy only works 12 hours a week and does not want any more hours. However, since Sandy only wants to work 12 hours a week, her job choice is limited. The cleaning work that she is currently employed to do does not let her use any of her IT qualifications. She is currently on the lookout for any jobs that would put her IT skills to better use. Sandy is in skill-related inadequate employment.

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Underemployment rate and the percentage of part-timers who are underemployed

The underemployment rate is the number of underemployed people as a percentage of all employed people.

In addition to the underemployment rate it can be useful to look at the percentage of people in part-time work who are underemployed. This measure gives a different perspective on underemployment by removing the effect the proportion of full-timers and part-timers has on the underemployment rate. For example, an industry could have a low underemployment rate yet also have nine out of ten part-time workers underemployed. If an industry is dominated by full-time workers the underemployment rate on its own does not highlight all underemployment issues in the industry.

International underemployment rates

In the latest international data available, New Zealand has a relatively high underemployment rate in comparison with other OECD countries ranking 21st, just above Germany. The UK and US had lower underemployment rates than New Zealand although both these countries have much higher unemployment rates. Australia has the highest underemployment rate out of the OECD countries, while their unemployment rate is lower than New Zealand.

Figure 2

 International comparison of underemployment and unemployment rates

Note: We used 2009 data, as this is the latest underemployment data available for most countries. Both New Zealand and Australia have 2012 data available, however the picture does not change from that seen in 2009. We calculated each country’s underemployment rate with employment as the denominator. The definition of time-related underemployment does differ slightly from country to country as does the definition of employment.

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New Zealand women have a higher rate of underemployment than men

Women have had both a higher rate and level of underemployment than men since the HLFS underemployment series began in 2004. This indicates that a number of women in part-time employment are involuntarily working the hours they do. Contributing to the higher level of underemployment is the fact that there are more women in part-time employment than men. However the share of male part-time workers who are underemployed is higher than for females.

As a result of the recent recession the highest peak in underemployment for both men and women was in September 2009. However women had an equal peak of 6.5 percent recently in June 2012.

Figure 3

 Underemployment rate by sex

Underemployment compared with unemployment

Underemployment and unemployment both measure excess labour capacity.

The graph below shows the underemployment rate and the unemployment rate in New Zealand following a similar pattern in recent years, with the unemployment rate consistently higher than the underemployment rate. Since the recession the unemployment rate and level has remained high compared to pre-recession levels, whereas underemployment dropped initially and has now continued at a new level, averaging just over 4 percent over the past few years.

Figure 4

Underemployment and unemployment rates

Prior to 2009, women have had very similar underemployment and unemployment rates. This indicates that underemployment is of equal importance to unemployment when considering contemporary female labour market issues. Since December 2009 a gap has formed between the two female rates. Unlike women, men have always had a gap between the unemployment rate and the underemployment rate which has widened since the recession ended in March 2009.

Figure 5

Female underemployment and unemployment rates

Figure 6

Male underemployment and unemployment rates

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Youth most likely to be underemployed

Most age groups experienced a rise in underemployment during or immediately after the recession, with all age groups still not quite back down to levels seen prior to the recession.

As with unemployment, youth (15–24-year-olds) have the highest underemployment rates compared with other age groups. Since the HLFS underemployment series began in 2004, the rate for 15–19-year-olds has consistently been just over double the 20–24-year-olds’ rate. The share of employed youth who are working part-time is large. This highlights that a lot of youth who do have a job are unable to get work that gives them enough hours.

In contrast, part-timers make up a large share of those aged 60 years and over (60+) who are in employment, yet very few of them are underemployed.This indicates that unlike youth, most part-timers aged 60+ choose to work part-time, rather than doing so because they cannot get more hours.

Table 1 shows underemployment rates, by age groups, for the December 2012 quarter.

Table 1  

Underemployment rate by age group
December 2012 quarter

 Age group  Underemployment rate  Share of workers who are working part-time
 (%)
 15–19  20.2  63.9
 20–24  6.7  25.3
 25–29  3.5  12.9
 30–34  2.8  15.3
 35–39  3.5  20.0
 40–44  2.9  19.2
 45–49  3.6  18.6
 50–54  3.6  15.9
 55–59  3.2  18.9
 60–64  3.6  26.7
 65+  2.8  44.8
Source: Statistics New Zealand

Similar underemployment rates by ethnicity

While all ethnicities have similar underemployment rates, Māori typically have the highest rate of all ethnicities, while Europeans have the lowest.

Europeans have the lowest underemployment rate even though they have the largest proportion of workers in part-time work – with one in four Europeans in work in a part-time job.

Table 2 shows underemployment rates, by ethnicity, for the December 2012 quarter.

Table 2 
Underemployment rate and unemployment rate by ethnicity
December 2012 quarter
Total response ethnic group  Unemployment rate Underemployment rate Share of workers who are part-time
 (%)
European 5.5 4.0 23.4
Māori 14.8 7.0 22.8
Pacific peoples 16.0 5.1 18.1
Asian 8.0 4.6 16.7
Source: Statistics New Zealand

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Workers in retail trade and accommodation have highest rate of underemployment

Since 2009, the retail trade and accommodation industry group has consistently had the highest rate of underemployment in the HLFS – with one in ten workers underemployed. Large shares of people employed in this industry group are part-timers – most industries with a high proportion of part-timers have high underemployment rates.

Labourers and community and personal service workers most likely to be underemployed

Occupations that have a large proportion of part-time workers compared to full-time workers tend to have a higher rate of underemployment. Labourers and community and personal service workers have a high proportion of part-timers and these occupations each make up approximately one-fifth of all underemployed people.

More information

The new underemployment rate will be available in Infoshare and on table 11 in the HLFS information release from the HLFS March 2013 quarter release onwards. The Infoshare series is an unadjusted breakdown of the underemployed by sex and includes the underemployment rate as well as other variables that are useful to look at in conjunction with underemployment. The series will be updated every quarter.

For more information contact:

Michelle Smith or Sophie Flynn
Wellington: 04 931 4600
Email: info@stats.govt.nz

Published 11 April 2013 

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