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The Extent and Consequences of Underemployment in Australia

  • Roger Wilkins

    ()

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

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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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
Contact details of provider: Postal: Melbourne Institute of Applied Economic and Social Research, The University of Melbourne, Victoria 3010 Australia
Phone: +61 3 8344 2100
Fax: +61 3 8344 2111
Web page: http://www.melbourneinstitute.com/
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  1. 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.
  2. S. Antonio Ruiz-Quintanilla & Rita Claes, 1996. "Determinants of Underemployment of Young Adults: A Multi-Country Study," ILR Review, Cornell University, ILR School, vol. 49(3), pages 424-438, April.
  3. 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.
  4. William T. Dickens & Shelly J. Lundberg, 1985. "Hours Restrictions and Labor Supply," NBER Working Papers 1638, National Bureau of Economic Research, Inc.
  5. 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.
  6. 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.
  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. 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.
  9. Denniss, R, 2003. "Flexible measures for a flexible labour market," Australian Bulletin of Labour, National Institute of Labour Studies, vol. 29(2), pages 113-125.
  10. Kahn, Shulamit & Lang, Kevin, 1991. "The Effect of Hours Constraints on Labor Supply Estimates," The Review of Economics and Statistics, MIT Press, vol. 73(4), pages 605-11, November.
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