Stressed, depressed and working less: why it’s time to stop ignoring underemployment

On July 19 the Australian Bureau of Statistics (ABS) put out some very impressive numbers. They showed unemployment falling to just 5.4% — a five-year low. That afternoon the Prime Minister and Treasurer fronted the press, smiling to talk about those figures. You know when the PM wants in on a press conference that he reckons it is good news.

But what of Australian underemployment? Neither Morrison nor Turnbull so much as whispered the word. No journalists asked about it.

Do we ignore underemployment because it seems unimportant? If so, that is not the case. A new paper from the UK shows underemployment is strongly correlated with depression.

“The probability of being depressed rises especially rapidly for the underemployed, for men and especially so for underemployed women,” say the researchers, David Bell and David Blanchflower, in a working paper circulated by the US National Bureau of Economic Research. “The more that actual hours differ from preferred hours, the lower is a worker’s wellbeing.”

This research matters urgently in Australia. Australia’s underemployment rate has recently hit record highs.

While the underemployment rate might look reasonably modest as a proportion of the labour force (8.4% in the most recent data), by the ABS definition you can only be underemployed if you have a part-time job. One-third of part-time workers are underemployed. Which is huge.

To be underemployed is to want more hours at work. And wanting more hours at work is only becoming extremely common as part-time work rises.

The gender lens

Underemployment is far worse for women, because women are far more likely to work part-time. This is something we seem to have been ignoring for a long time. It is curious to note that underemployment has a major talking point only now that it is affecting men to the extent that it affected women in the early 1990s.

The next graph shows the gap between the male and female underemployment rates, and also shows why underemployment has become such a focus — it is now far more prevalent than unemployment.

Also, unemployment and underemployment are no longer so well correlated. From 2003 to 2013 they tracked mostly alongside each other, but since then unemployment has fallen and underemployment has risen.

Is this driving high rates of depression? The correlation found by the researchers is not outright proof of causation, but spurious correlation looks unlikely in this case. This is not an unexpected or counter-intuitive finding.

Adding heft to the finding, the paper also cites previous research (Dooley, 2000) that found “controlling for prior depression, shifts from adequate employment to underemployment resulted in significant increases in depression”.

Missing the point?

Economists are focused on underemployment. We’re interested in the way it reduces people’s spending power, why it might be happening, and the role it has on wages. Many smart people think rising underemployment explains why wages growth has been so bad recently. But are we missing a huge and immediate effect?

Is underemployment hammering Australian wellbeing against the anvil of workplace flexibility? As part-time employment tightens its grip on our nation, it will be vital to monitor if the underemployment rate rises or falls.

Remember that part-time work is not inherently bad. Rising part-time and flexible work can be a tremendous force for good, keeping people who can’t do a traditional 40-hour week attached to the labour force. Bell and Blanchflower, the researchers introduced at the start of this piece, found plenty of evidence of reduced wellbeing among people who wanted to do fewer hours at work but couldn’t (although it was worse to be underemployed).

“Note that a one-hour desired increase in working time has approximately the same negative effect on happiness and anxiety as does a one-hour desired reduction in working time. However, life satisfaction and seeing life as worthwhile are much more sensitive to those who wish to increase their hours, than those who seek a reduction in hours,” they wrote.

Part-time work is only beneficial to an individual as long as it is voluntary, and they get the hours they want. This should be the kind of part-time work we cultivate.

Data on the black dog is a black hole

It is highly likely that underemployment is raising rates of depression in this country, but it would be exceedingly hard to find out. Statistics on depression are an absolute scandal. The National Survey of Mental Health and Wellbeing was last conducted in 2007. A tsunami of change has hit our economy since, and we have no comprehensive idea of the effect.

Meanwhile the government pumps out little-used data sets on all sorts of odd topics. It’s time depression got some attention. After all, if you can’t measure it, you can’t manage it. Managing it needs to be a national priority.