Underemployment

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underemployment

The big news this morning is that unemployment has not risen, at least according to official figures, which show a 3,000 fall in unemployment in the last quarter of 2009, putting the overall number at 2.46m.

But this story in the FT tells a more interesting story, which not all the papers have picked up on. According to the Office of National Statistics, '2.8m people, almost a tenth of the UK workforce, are "underemployed" - working fewer hours than they would like because the work is not there.' That figure is up by 33 percent since the third quarter of 2007, and confirms what a lot of business people have told me – that the only reason this recession has not yet resulted in mass unemployment is because private sector workers have been flexible, realizing that their employers have little cash to go around and accepting fewer work hours and lower pay, instead of forcing layoffs.

But what will happen when the recession finally hits the public sector? There is simply no question that public spending is has to be cut after the general election (you just can't keep running a double-digit structural deficit* forever), and given that public sector wages and pensions consume about 25 percent of tax revenues, there is no way that public sector workers can emerge unscathed.

But while some job losses are inevitable, their extent will largely depend on whether public sector workers are prepared to show the same restraint as their private sector counterparts. Freezing recruitment, freezing pay, increasing employee pension contributions and restricting benefits are all sensible steps that would help reduce the need for job cuts – but will the left-wing union bosses accept them?

* By double-digit, I mean in percentage terms. As DK rightly points out in the comments, the structural deficit in money terms is well into triple-digit territory. (OK, as Tom Papworth says, it is actually in 12-digit territory... But you know what I mean!)