ECN200: Econometrics Coursework Brief
What factors characterise under and over-employment?
Abstract
This study uses a model to explain the main factors that characterise under and over employment. It uses concepts from previous studies to see if the results are the same. From the study it became clear the main factors characterising under and over employment are age under 25 and over 65, sex male, full time, occupation group namely private industry and geographical location working in London, this is supported by numerous literature. A number of variables are used in the regression; many are proved to be insignificant.
Introduction
Unemployment is an indicator of the state of the labour market; however it may not fully capture the spare capacity. The full capacity of the labour market would be more accurately determined if underemployment is taken into account. Owing to the labour market assumption dictates that workers will match themselves to jobs offering the number of working hours they want (Golden & Gebreselassie 2007). In reality constraints from employers, trade unions, lack of labour mobility and standard hours typical for their industry make this equilibrium difficult to achieve. Consequently there are mismatches between a workers actual and preferred number of hours of worked, thus creating time related underemployment and overemployment (Tam, H 2010). Around one in five workers in the UK are dissatisfied with the number of hours they work. 8.5% are categorised as underemployed, wanting to work additional hours at the basic pay rate or more, and 10.5% are overemployed saying they would prefer to work fewer hours for less pay (Simic M 2002)
Literature review
Underemployment found to have significant and negative impact on aspects such as income level, welfare dependency, and life satisfaction (Wilkins 2007) this is supported by (Feldman & Bolino 2000). Part time workers who were underemployed had lower levels of job satisfaction. Underemployment leads to lower levels of health and wellbeing including job satisfaction (Burris 1983 Kahn and Morrow 1999). This is supported by Herzog et al 1991. A change in employment status from adequately employed to underemployed led to an increase in depression (Prause & Ham-Rowbottom 2000). Other forms of underemployment arising from a shortage of income, demotion in status and underutilisation of skills can create more severe health and mental problems in the person (Friedland & Price 2003). Overemployment can lead to increased work family conflict and indirectly with psychological distress (Major et al 2002). The negative association between hours and worked and wellbeing has also been shown to be exacerbated if overemployment was mandatory (Golden & Wiens-Tuers 2008).
In the qualification category, people with a higher qualification, those having a degree, were less likely to be underemployed and more likely to be overemployed than workers with lower qualification. In Q1 2010 the underemployment rate for people with a degree was 7.1% compared with 11% for other workers with lower qualifications. (Tam 2002). Same findings in four other studies including Simic (2002), Sugiyarto (2008), Barham et al (2009) and Golden &Gebreselassie (2007). Barham et al finds that underemployment is more prevalent among individual with lower qualifications due to lack of qualifications, skills and experience as the main obstacles that prevent this group from obtaining adequate work (Barham et al, 2009).
In the age category younger individuals are more likely to be underemployed compared to older individuals. In Q1 2010, 22.4 per cent of 16- to17-year-olds and 17.6 per cent of
18- to 24-year-olds were underemployed, whereas, above 25 years underemployment rates were at less than 10 per cent (Tam 2002). Workers above state pension age 65 and over showed the lowest rate of underemployment at 4.5% (Tam 2002). Higher rates of underemployment among the young could be due to
