Underemployment and immigration

Alexandra Turcu over at the Asymmetric Information substack goes through some of the underemployment figures. 

The answer matters. One story I'm regularly given about why Labour wants to maintain very tight immigration settings is that Labour ministers believe there is still a lot of slack in the labour force, despite inflation and despite the positive output gap, because of the seemingly high underemployment figures. 

Turcu finds:

We analysed data from New Zealand's Household Labour Force Survey (HLFS) spanning the six years between Q2 of 2016 to Q2 of 2021, finding that under-employed workers were only working one hour per week less than their fully-utilised counterparts. For those working full-time, this equates to 40 hours worked by the underemployed compared to 41 hours worked by the fully-utilised.

The key difference between the underemployed and the fully-utilised is not hours worked; rather it seems to be household and individual income. As an example, part-time underemployed workers earn 28% less than their fully-utilised counterparts, and this gap widens to 32% when we compare the full-time underemployed to to fully-utilised full-time.3

These findings challenge the tempting assumption that underemployed workers are just not working enough. It also begs the question: Is the issue that underemployed individuals aren’t working enough hours, or that they can’t increase their incomes while working a 40-hour week? We cannot determine this from the HLFS, as a “not enough income” option was not offered to respondents.

If you click through to the full paper, you find that there are about as many underemployed full-time workers as there are underemployed part-time workers and that the average underemployed worker puts in about one fewer hour per week than the average fully-employed worker - whether full-time or part-time. So a part-time worker who says they're underemployed works about an hour less than a part-time worker who says they're fully utilised. 

If Minister Wood thinks that there are a pile of underemployed workers who could put in a lot more hours if it weren't for those dirty dirty immigrants, well, there ain't much slack there. The paper suggests that a lot of reported underemployment is dissatisfaction about current income rather than hours.