The case for an inwork progression service

The case for an inwork progression service

1 Contents 1. Introduction 2. Underemployment in the UK 3. Individual characteristics 4. Industry 5. Recommendations

2 Summary of findings Scale of underemployment: Almost 1 in 10 working people in the UK want to work more hours at their current rate of pay. This rises to almost 1 in 5 part time workers. The difference between underemployment and unemployment rates is now at its greatest since at least 2000. This suggests that while the economic recovery has helped people remain and move into work, around one in ten people are not working the number of hours they would like. This demonstrates why the government is right to develop an in-work progression service. Location: Underemployment varies across the UK, with someone living in Wales most likely to be seeking additional hours and someone in Northern Ireland least likely to. Age and gender: We find that young people are most likely to be looking to work additional hours, with underemployment decreasing with age. Underemployment rises significantly among women in their late 30s and 40s, perhaps suggesting that women struggle to return to their desired number of hours after becoming a parent. Disability and health conditions: Disabled people are more likely to be underemployed and someone is substantially more likely to be underemployed if they have a health condition such as a learning difficulty or speech impediment. Family situation: The likelihood of being underemployed is substantially greater if someone is a lone parent, and underemployment is greatest among female lone parents with dependent children. Underemployment is lowest among married couples with no children. Ethnicity: People with Chinese, Indian or white Irish/British ethnicity are least likely to be underemployed, while people of Bangladeshi ethnicity are most likely to be underemployed. Education: Generally, the higher the level of education someone has makes it less likely they will be underemployed. Industry sector: Underemployment varies hugely between sectors, with those working in the accommodation and food service industry almost six times as likely to be underemployed than someone working in the electricity and gas sector. Social mobility: The composition of the household as someone grows up also appears to have an impact on underemployment. A person has an increased chance of being underemployed if they grow up not living with their family.

3 1. Introduction Underemployed workers are those people in employment who are working fewer hours than they wish. The Government intends to establish an in-work progression service, making the UK one of the first countries in the world to attempt a large scale programme to support low paid people to increase their earnings. To help inform the design of this in-work service, this report analyses the latest Labour Force Survey information to better understand the profile of the underemployed. This report defines underemployment as those who would like to work longer hours, at current basic rate of pay, given the opportunity. Unless otherwise stated, all the data on underemployment in this report is from the October-December 2015 Quarterly Labour Force Survey. 1 The data was analysed by Reed in Partnership using the UK Data Service. The sample is weighted to ensure the estimates are representative of the whole population and compensates for differential non-response among different sub-groups. Policy drivers The Department of Work and Pensions intends to establish an in-work service to assist individuals on Universal Credit on low incomes to increase their income. The UK will be one of the first countries in the world to attempt a large scale in-work progression programme. By the time Universal Credit is fully rolled out, the Government anticipates they will be working with one million more claimants who are in work. 2 The support will be offered to low-paid claimants to increase their earnings to the earnings threshold, which is equivalent of 35 hours per week at the National Living Wage. They will be encouraged to increase earnings by Increasing their hours Receiving a pay rise in their current job Moving to a new job at more hours or increased pay Reed in Partnership supports the Government s stated aim of assisting low-paid claimants to progress in work and the concept of an in-work service. We hope this report will be a useful addition to the discussions around this policy priority. 1 Office for National Statistics. Social Survey Division, Northern Ireland Statistics and Research Agency. Central Survey Unit. (2015). Quarterly Labour Force Survey, July - September, 2015. [data collection]. UK Data Service. SN: 7842, http://dx.doi.org/10.5255/ukda-sn-7842-1. 2 www.publications.parliament.uk/pa/cm201516/cmselect/cmworpen/549/54904.htm#_idtextanchor010

4 2. Underemployment in the UK 2.1 Scale of underemployment While the unemployment rate in the UK is around 5.1%, the rate of underemployment is considerably higher. 3 Data from the Labour Force Survey shows that more than almost a fifth (19.5%) of part-time workers would like to work additional hours at the current basic rate of pay. In contrast, only 5.9% of full-time workers are seeking additional hours. Across all working people, around one in ten (9.5%) are looking for more hours of employment. The Labour Force Survey also details how many additional hours people would like to work: Almost nine in ten people who said they would like to work additional hours (88%) said they could start to do so within two weeks. Almost one in four (24.6%) underemployed workers would like to work between one and five hours more per week. Over a third (41%) of workers seeking additional hours would like to work between five-anda-half and ten hours more. Around a quarter (23.6%) of underemployed workers are seeking between ten-and-a-half and twenty more hours. 3 http://ons.gov.uk/ons/taxonomy/index.html?nscl=unemployment+rates#tab-data-tables

5 How many extra hours would you like to work per week? 15.5-20 hours 10.3% 20.5-25 hours 2.6% 25.5-30 hours 2.5% 31+ hours 1.9% 1-5 hours 24.6% 10.5-15 hours 13.3% 5.5-10 hours 41.0% 2.2 Underemployment vs unemployment over time The below graph shows the Q4 2015 (October-December) underemployemnt (blue line), unemployemnt (orange line) and the difference between the two (green line) between 2000 and 2015. The graph shows that the gap between underemployment and unemployment remained fairly static until 2011, with both rising following the financial crisis. However, since 2011 the gap has widened, with unemployment falling far faster than underemployment. The gap between underemployment and unemployment is now at its greatest since at least 2000. It suggests that while the economic recovery has helped people remain and move into work, around one in ten people are not working the number of hours they would like. This demonstrates why the government is right to develop an in-work progression service.

Percentage of population 6 Underemployment vs unemployment 1998-2015 12 10 Financial crisis 8 6 4 2 0 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 Year (Q4 Oct-Dec period) Underemployment Unemployment Difference between under- and unemployment 2.3 Geographical variance There are significant variations in underemployment across the UK. Underemployment is highest in Wales, where 11.1% of workers are seeking additional hours. In contrast, only 6% of people in Northern Ireland are looking for more work. The figures also show that despite the dominance of London in the UK s economy, it has the third highest levels of underemployment in the country. The below graph shows underemployment (blue line) and unemployment (orange line) for different parts of the UK (October December 2015 figures). There appears to be little correlation between underemployment and unemployment, as Northern Ireland has one of the higher rates of unemployment, despite the lowest underemployment rate. 4 4 http://www.ons.gov.uk/employmentandlabourmarket/peopleinwork/employmentandemployeetypes/bulletin s/regionallabourmarket/february2016

7 Underemployment and unemployment by location Wales 5.30% 11.10% Yorkshire and Humberside 6.10% 10% London 6.30% 9.80% East Midlands 4.50% 9.80% South West 3.70% 9.70% South East 3.90% 9.50% North West 4.90% 9.50% North East 8.10% 9.50% Scotland 5.80% 9.40% West Midlands 5.20% 9.10% East of England 3.90% 8.60% Northern Ireland 5.80% 6% 0% 2% 4% 6% 8% 10% 12% % seeking additional hours/unemployed Unemployment Underemployment

% seeking additional hours 8 3. Individual characteristics 3.1 Gender and age There is a significant disparity in unemployment between men and women. The official statistics show that while 8.4% of men are looking for more hours, this increases to 10.7% for women. % of women and men seeking additional hours (all employment) 10.7% 8.4% Women Men When we analyse underemployment by age, we see that it is most pronounced among young people and, on average, decreases as people get older. Looking at the age split by gender we observe that women have lower underemployment than men when in their early twenties and then only slightly higher underemployment in their early 30s. Underemployment among women compared to men increases substantially in their late 30s and 40s, and the gap remains pronounced until converging again in their 50s. This could be related to starting a family and indicates that women struggle to return to their desired level of employment after having children. 25 Comparison of underemployment by gender Male Female 20 15 10 5 0 18 20 22 24 26 28 30 32 34 36 38 40 42 44 46 48 50 52 54 56 58 60 62 64 Age

9 3.2 Disability and health problems There is a greater proportion of underemployed disabled people compared to non-disabled people. While 9.3% of people without a disability are underemployed, this increases to 11% of disabled people. % seeking additional hours 11% 9.3% Equality Act Disabled Not disabled Levels of underemployment can be much higher if someone suffers from a health condition, with almost a third of people with learning difficulties (32.2%) and speech impediments (31.4%) seeking additional hours. Underemployment by health condition Legs or feet Progressive illness Heart,blood,pressure,circulation Diabetes Arms,hands Stomach,liver,kidney,digestion Other problems,disabilities Back or neck Skin conditions,allergies Chest,breathing problems Difficulty in seeing Difficulty in hearing Depression,bad nerves Mental illness,phobia,panics Epilepsy Speech impediment Learning difficulties 7.6% 7.8% 7.8% 8.3% 8.6% 8.9% 9.1% 9.2% 10.4% 10.6% 12.1% 13.2% 13.9% 16.2% 18.6% 31.4% 32.2% 0% 5% 10% 15% 20% 25% 30% 35% % seeking additional hours

10 3.3 Family situation There is a clear correlation between family situation and underemployment, with lone parents at increased risk. A female lone parent with dependent children is more likely to be underemployed than a male lone parent, and approximately twice as likely to be underemployed than someone part of a married couple with dependent children. Someone who is married with no dependent children is least likely to be underemployed, significantly less than if a married couple has dependent children. Interestingly, while single men are more likely to be underemployed than single women, this situation is reversed when they have dependent children. Underemployment by family type Married couple with no children 5.6% Civil Partners with dependent children 5.9% Cohabiting couple with no children Cohabiting couple with non-dependent children only 1 person - female 8.0% 9.0% 9.0% Married couple with dependent children 9.2% Married couple, non-dependent children only 9.2% Civil Partners with no children 10.6% 1 person - male 10.7% Cohabiting couple with dependent children Male lone parent with non-dependent chldren only Male lone parent with dependent children Female lone parent, non-dependent children only 11.2% 12.6% 14.6% 14.7% Female lone parent with dependent children 20.3% 0% 5% 10% 15% 20% 25% % seeking additional hours

11 It is clear that there is a substantial correlation between marriage and employment, with people married and living with their spouse least likely to be underemployed. However, separation during marriage has a negative impact on employment, with those married and separated the most likely group to be seeking additional hours. Underemployment by marital status Married, living with spouse 7.1% Widowed 9.8% Divorced 10.0% Single, never married 12.4% Married separated from spouse 13.1% 0% 2% 4% 6% 8% 10% 12% 14% % seeking additional hours 3.4 Ethnicity Ethnicity appears to have a significant impact on underemployment, with people of Bangladeshi ethnicity most likely to be seeking additional hours. The ethnicities least likely to be underemployed are Chinese and White Irish. Underemployment by ethnicity White Irish Chinese Indian White British Pakistani Mixed/Multiple ethnic groups Any other Asian background Other White Black/African/Caribbean/Black British Other ethnic group Bangladeshi 4.5% 8.0% 8.8% 8.9% 10.0% 11.5% 11.9% 13.7% 14.8% 16.2% 18.0% 0% 2% 4% 6% 8% 10% 12% 14% 16% 18% 20% % seeking additional hours

% seeking additional hours 12 3.5 Education Data from the Labour Force Survey suggests that there is a link between education and underemployment. People with degrees or equivalent are least likely to be underemployed, with underemployment increasing for those for those with A levels and then GCSEs as their highest education level. Perhaps unexpectedly, people with no qualifications are less likely to be underemployed than those with GCSE levels. 12% 10% 8% 6% 4% 2% 0% 6.90% Degree or equivalent Underemployment by education level 9.20% Higher education 10.40% GCE A level or equivalent 11.30% GCSE grades A*-C or equivalent 10.6% No qualification

13 4. Industry Underemployment varies hugely between different industries, with the underemployment rate in some sectors almost six times as high as others. For example, 23.3% of households as employers (cleaners, babysitters, tutors) are seeking additional hours, compared to only 5.2% of those working in electricity and gas sectors. Accommodation & food services Sectors with highest proportion of underemployment Households as employers such as cleaners, babysitters and tutors. Arts, entertainment & recreation 18.1% 23.3% 15.9% Underemployment by industry Households as employers Accommodation and food services Arts, entertainment and recreation Admin and support services Education Wholesale, retail, repair of vehicles Other service activities Health and social work Transport and storage Water supply, sewerage, waste Construction Real estate activities Manufacturing Prof, scientific, technical activ. Information and communication Public admin and defence Electricity, gas, air cond supply Financial and insurance activities Mining and quarrying Agriculture, forestry and fishing Extraterritorial organisations 0% 5% 10% 15% 20% 25%

14 5. Recommendations Across the UK, approximately 1 in 10 working people would like to work more hours and are therefore underemployed. Since the 2008 financial crisis, the underemployment rate has not decreased as quickly as the unmployment rate and the gap between the two is the largest it has been since at least 2000. This report has considered the profile of people most likely to be underemployed, and examined factors such as age, gender, industry, ethnicity and eduction. Given the findings of this report, we make the following recommendations: Preventing underemployment Underemployment rates should be published alongside headline unemployment rates to drive the focus of policy making. Skills should be better aligned with employment opportunities, with better employer engagement in schools and colleges. This includes providing young people with better careers guidance, and information about the employability potiential of different subjects at an early stage in their education. Reducing underemployment We agree with the Government s policy objective to increase the emphasis on in-work progression within employability programmes. People with particular health conditions are substantially more likely to be underemployed than the population as a whole and an In-Work Support Service should incorporate assistance to manage health conditions to prevent them being a barrier to progression. More support should be provided to women returning to work after having children as well as supporting lone parents. The Government has, rightly, sought to improve access to childcare for 3-4 year olds, and should consider how access to affordable childcare can be ensured for those with older children. Businesses should be provided with a better understanding of how foreign qualifications translate and increasing the availability of English language classes would help remove the barriers faced by people born outside of the UK.