The UK is suffering a total jobs deficit. But it also seems to be suffering from a deficit of jobs that match with the wants and needs of workers. Many in work want and need to increase their work hours and are also prepared to do so for no extra pay, but they are confronted with employers who will not grant them longer work hours. These workers are hours constrained and in technical terms they are to be classified as underemployed.
Here I want to address some key issues concerning the existence of underemployment. These issues will allow me to identify some surprising basic defects in orthodox neoclassical economic theory. I have pointed out some of these defects elsewhere; below I want to show the inadequacy of orthodox economics in terms of understanding the problem of underemployment. This is, I will argue, a vital ground-clearing exercise if we are to provide better theory and better policy recommendations.
The presence of underemployment reflects the relatively weak bargaining power of UK workers. Many workers are faced with the need to work longer hours in order to make ends meet. The reduction in real wages has added to the pressure on workers to extend hours at work. The need to service outstanding debt – a problem magnified by falling real wages – has placed even more pressure on workers to work longer hours. The consolidation of a debt–based culture – linked to the processes of financialisation – has made longer work hours a necessity for many workers. Coercion more than choice is behind the increased willingness of UK workers to work longer hours.
The fact that many workers remain willing to work longer hours without the requirement for an increase in the hourly wage rate may be a reflection of workers wanting to show commitment to employers when times are hard. Workers face the stark choice of being compliant at work or losing their jobs. This fact creates a willingness to work longer hours but it is a willingness based on fear and insecurity.
The constraint on work hours raises important issues for economic theory in the sense that it implies that the labour market is not an idyll of free choice. Orthodox neoclassical economics assumes that workers "choose" the hours they desire based on their preferences. If workers want to work more they can do so. They will also be rewarded for the disutility of longer work hours with higher wages.
This fantasy world of free choice runs contrary to the reality of the labour market that exists in the UK and elsewhere. Workers are not “free to choose" the work they want but instead confront constraints both on their ability to secure paid work and when in work on their ability to work the hours they need and desire. Employers set work hours not workers and often employers will deny workers the work hours they need and desire. Workers can suffer not just involuntary unemployment but also involuntary underemployment.
Neoclassical economics fails to recognise and indeed denies the unequal bargaining power between capital and labour and its influence on labour market outcomes. Contrary to what neoclassical economics assumes, in the real world, workers are not able to realise their preferences at will; rather they face having to take jobs on a take-it-or-leave-it basis. In work, workers must settle for hours decided upon by employers. Employers will not accede to the demands of workers for longer work hours unless they stand to gain higher profits from doing so. They will also be liable to impose longer work hours against the will of workers if they find it profitable to do so. While some workers will be denied longer work hours, others will face being overworked.
Just as involuntary unemployment poses a challenge to neoclassical economics so too does involuntary underemployment. The latter exposes the fiction of neoclassical economics in relation to its depiction of workers as "free agents" who are able to decide their work hours at will. As a tool for understanding how the labour market operates including the creation and reproduction of involuntary underemployment, neoclassical economics is dangerously mistaken. Only by going beyond neoclassical economics can we grasp the importance of power and the lack of free choice that feature in the actual labour market. There is no shortage of alternative perspectives: institutional, post-Keynesian, feminist and Marxian economics being obvious examples. It is to these alternatives to orthodoxy that we should look in understanding and combating the problem of underemployment.