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Reconceptualising labour utilisation and underutilisation with new ‘full-time equivalent’ employment and unemployment rates

Author

Listed:
  • Houston, Donald

    (City-Regional Economic Development Institute, University of Birmingham, Birmingham, UK)

  • Lindsay, Colin

    (Department of Work, Employment and Organisation, University of Strathclyde, Glasgow, UK)

Abstract

"Time-related underemployment (wanting to work more hours) has become an entrenched feature of a number of mature economies since the Global Financial Crisis of 2008, recent short-run post-COVID labour shortages notwithstanding. Employment and unemployment rates are thus increasingly inadequate measures of labor utilization and underutilization. This paper develops novel ‘Full-Time Equivalent’ (FTE) employment and unemployment rates based on hours worked and hours wanted calibrated to a 37.5-h full-time week for the United Kingdom. FTE rates reveal greater labour market slack than evident in conventional measures, as well as lower utilisztion and/or greater underutilisation among women, young people, low-skilled workers and in geographically and economically peripheral regions. The FTE employment rate shows statistically significant correlations with both earnings and labor demand across UK local labor markets, whereas the conventional employment rate fails to detect this relationship. The paper argues that the use of FTE metrics by policy makers would point towards, firstly, more demand-side labour market policies in weaker local labour markets rather than relying heavily on coercive supply-side labor market activation and, secondly, less hawkish monetary policy required to control inflation, which causes unnecessary harm to economically weaker regions." (Author's abstract, IAB-Doku) ((en))

Suggested Citation

  • Houston, Donald & Lindsay, Colin, 2025. "Reconceptualising labour utilisation and underutilisation with new ‘full-time equivalent’ employment and unemployment rates," Journal for Labour Market Research, Institut für Arbeitsmarkt- und Berufsforschung (IAB), Nürnberg [Institute for Employment Research, Nuremberg, Germany], vol. 59, pages 1-005.
    • Handle: RePEc:iab:iabjlr:v:59:i::p:a005
    DOI: 10.1186/s12651-025-00396-z
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    References listed on IDEAS

    as
    1. David N.F. Bell & David G. Blanchflower, 2018. "Underemployment and the Lack of Wage Pressure in the UK," National Institute Economic Review, National Institute of Economic and Social Research, vol. 243(1), pages 53-61, February.
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    Keywords

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    JEL classification:

    • J64 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Unemployment: Models, Duration, Incidence, and Job Search
    • R23 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Household Analysis - - - Regional Migration; Regional Labor Markets; Population

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