Underemployment in the United States and Europe

Abstract

The authors produce estimates for a new and better rate of underemployment for 25 countries using the European Labor Force Survey that is based on workers’ reports of their preferred hours at the going wage. Both voluntary and involuntary part-time workers report they want more hours. Full-time workers who say they want to change their hours, mostly say they want to reduce them. When the Great Recession hit, the number of hours of those who said they wanted more hours increased, and the number of hours of those who said they wanted fewer hours decreased. The percentage of workers in both categories remains elevated. The authors provide evidence for the United Kingdom and the United States as well as from an international sample that underemployment lowers pay in the years after the Great Recession, but the unemployment rate does not. They also find evidence for the United States that decreases in the home ownership rate have helped to keep wage pressure in check. Underemployment replaces unemployment as the main influence on wages in the years since the Great Recession.