Underemployment a bigger issue than unemployment: economists

Singapore

IF December's data is any indicator, Singapore's labour market appears to be on the mend, but economists warn that underemployment - rather than unemployment - could be the bigger issue this recession.

Overall unemployment rate fell for the second straight month in December, coming in at 3.2 per cent, but Walter Theseira, an economist at the Singapore University of Social Sciences, believes one reason is that "a lot of people have decided to settle for any kind of job for the moment".

Concurring, Irvin Seah, DBS senior economist, said: "During this Covid-19 crisis, my observation is that underemployment is actually a much bigger problem in Singapore than unemployment, but it's just that we don't have the numbers to substantiate this."

This is because there is currently no international consensus on how underemployment should be measured.

There are two main types of underemployment: One is when individuals work fewer hours than is necessary or desired; the other is when individuals work in lower-paying jobs that do not match their skill set.

While time-related underemployment can be tracked, the problem with skill-based underemployment is a lack of parameters to quantify it, particularly since it is difficult to ascertain whether it is a voluntary situation.

For example, an assessor could look at all the workers in a job type and find out the most common qualification, and then deem that as an appropriate qualification level. But this could present incomplete data that does not account for individual work experience beyond objective qualifications, Assoc Prof Theseira said.

In the US, the UK and the European Union, underemployment is measured based only on the number of involuntary part-time workers who want a full-time job.

Singapore tracks a time-related underemployment rate, which is based on the percentage of part-timers who are willing and available to work additional hours.

"In general, underemployment is a concern during any economic shock in Singapore," said Assoc Prof Theseira.

"While our economic shocks typically do not result in a substantial increase in unemployment, they can result in underemployment, when displaced workers choose to take up less preferred jobs, or jobs that require less skills than their last-held position," he said.

One clue is in the number of qualified professionals who have had to take up "informal jobs" during this recession, such as those in the ride-hailing or food-delivery industries, Mr Seah said. This is especially the case if they come from sectors that are hard hit by Covid-19, but possess skills that are not easily transferable to other industries.

Not helping workers to get out of temporary and lower-skilled jobs as the economy recovers could result in "long-term scarring" of these workers, said Assoc Prof Theseira. It could become more difficult for them to move to a more desirable or well-paying jobs later, since they would lack the experience for more senior positions.

Again, this comes back to retraining and upskilling - something that is likely to be integral to Budget 2021. But beyond that, creating the right opportunities for these workers is equally important.

Mr Seah said: "Continued upskilling of our workers has to go hand in hand with the calibration of the extent of competition from our foreign workers."

Another way to reduce underemployment is to support job-search efforts and match displaced workers with opportunities that require their skills and hence are likely to offer better wages and career progression, said Assoc Prof Theseira.

"This is one of the reasons unemployment insurance is considered to help reduce underemployment, even though it may increase unemployment because it may help to lengthen the job-search process," he said.

He added that underemployment could also be a perception issue, as some workers may not feel they are "being paid fairly, have meaning in their jobs, career progression, and are valued".

"Career progression comes to an end for all of us at some point, when our abilities and skills start deteriorating relative to younger workers and we become less competitive in the labour market," he said.

"I don't think many societies or organisations have learned how to manage that transition for older workers in a way that preserves job opportunities and avoids the sense of underemployment."

Singapore's time-related underemployment rate rose to 4.1 per cent in 2020, from 3.1 per cent a the year before, just shy of the 4.3 per cent seen during the 2009 Global Financial Crisis, says the Labour Force in Singapore 2020 report.

However, the rate rose more sharply for industries severely affected by the Covid-19 pandemic, including retail, food and beverage and transport and storage.

The time-related underemployment rate for workers in their 50s and above, as well as those with below-secondary qualifications also increased more acutely than for other workers.

Meanwhile, the proportion of part-time workers among employed residents fell to 10.6 per cent in 2020, from 11.2 per cent the previous year, even though more part-timers were willing and available to work additional hours.

This is because the services industries, which typically employ more part-time workers, cut back on part-time employment as they were more adversely affected by Covid-19 and work stoppages. These industries include F&B, retail, education and the arts, entertainment and recreation.

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