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The Extent and Consequences of Underemployment in Australia

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  • Roger Wilkins

    ()
    (Melbourne Institute of Applied Economic and Social Research, The University of Melbourne)

Abstract

Underemployment is generally conceived as excess labour supply associated with employed persons – that is, as a situation where employed persons would like to work more hours at prevailing wage rates. Using information collected by the 2001 Household, Income and Labour Dynamics in Australia (HILDA) survey, this study seeks to investigate the extent of underemployment and its effects on outcomes such as income, welfare dependence and subjective well-being. It is found that over one in six employed persons is underemployed, corresponding to a failure to utilise 5 per cent of hours supplied by employed persons. Underemployment is more frequently associated with part-time employment for females, but for males is more frequently associated with full-time employment. Models estimated of the effects of underemployment on outcomes imply that, while unemployment clearly has greater adverse consequences, underemployment is nonetheless associated with significant detrimental effects on the outcomes examined. Negative effects are found for both part-time employed and full-time employed workers who would prefer to work more hours, but effects are greater for underemployed part-time workers, and are particularly large for part-time workers who would like to work full-time. Indeed, for part-time workers seeking full-time employment, effects attributable to underemployment are, for some outcomes, not far short of those attributable to unemployment.

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Bibliographic Info

Paper provided by Melbourne Institute of Applied Economic and Social Research, The University of Melbourne in its series Melbourne Institute Working Paper Series with number wp2004n16.

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Length: 46 pages
Date of creation: Aug 2004
Date of revision:
Handle: RePEc:iae:iaewps:wp2004n16

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Postal: Melbourne Institute of Applied Economic and Social Research, The University of Melbourne, Victoria 3010 Australia
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  1. William T. Dickens & Shelly J. Lundberg, 1985. "Hours Restrictions and Labor Supply," NBER Working Papers 1638, National Bureau of Economic Research, Inc.
  2. Sarah Brown & John G. Sessions & Duncan Watson, . "The Relative Contributions of Wage and Hours Constraints to Working Poverty in Britain," Discussion Papers in Public Sector Economics 01/4, Department of Economics, University of Leicester.
  3. Mark Wooden & Simon Freidin & Nicole Watson, 2002. "The Household, Income and Labour Dynamics in Australia (HILDA)Survey: Wave 1," Australian Economic Review, The University of Melbourne, Melbourne Institute of Applied Economic and Social Research, vol. 35(3), pages 339-348.
  4. Stewart, M.B. & Swaffield, J.K., 1996. "Constraints on the Desired Hours of Work of British Men," The Warwick Economics Research Paper Series (TWERPS) 468, University of Warwick, Department of Economics.
  5. Shulamit Kahn & Kevin Lang, 1988. "The Effects of Hours Constraints on Labor Supply Estimates," NBER Working Papers 2647, National Bureau of Economic Research, Inc.
  6. S. Antonio Ruiz-Quintanilla & Rita Claes, 1996. "Determinants of underemployment of young adults: A multi-country study," Industrial and Labor Relations Review, ILR Review, Cornell University, ILR School, vol. 49(3), pages 424-438, April.
  7. Ham, John C, 1982. "Estimation of a Labour Supply Model with Censoring Due to Unemployment and Underemployment," Review of Economic Studies, Wiley Blackwell, vol. 49(3), pages 335-54, July.
  8. J. A. Jacobs, . "Trends in wages, underemployment, and mobility among part-time workers," Institute for Research on Poverty Discussion Papers 1021-93, University of Wisconsin Institute for Research on Poverty.
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Cited by:
  1. Murat Arik & David A. Penn, 2010. "Available Labor Force in Southern Middle Tennessee: An Underemployment Study," Studies 201001, Middle Tennessee State University, Business and Economic Research Center.

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