Posts Tagged ‘employees’

Underemployment among part-time workers may have detrimental psychological consequences

Victoria Mousteri, Michael Daly, and Liam Delaney outline how underemployment affects well-being. They find that underemployment predicts meaningful increases in distress in two UK cohorts – an effect that is reversed when the underemployed find full-time work.

The potential psychological effects of atypical and precarious employment arrangements are attracting increasing attention among academic and policy researchers. The UK economy is approaching ‘full employment’ and the jobless rate has dropped below pre-recession levels. Yet, for many workers these employment levels have not meant high quality jobs. More employees now find themselves underemployed than before the recession and many more are on zero-hours contracts. Furthermore, when considered together, the total number of underemployed and zero hours workers has remained remarkably stable since the recession in contrast to the improving picture of employment rates more generally.

Underemployment (or hours-underemployment specifically) is an intrinsically undesirable state, defined as working part-time while preferring to work more hours. In a recent study, we examined whether this persistent employment hardship could have detrimental mental health consequences. It is not difficult to imagine why this may be the case. Hours-underemployment is linked to uncertainty, reduced control over working hours, in-work poverty and reduced well-being. We argue that understanding the psychological harms of underemployment is crucial for motivating the design of policies aiming to protect workers and prevent labour force detachment and poverty.

To examine the contribution of hours-underemployment to psychological distress, we operationalised the International Labour Organization (1998) definition of underemployment, defining underemployment as working below 30 hours per week in the UK context and preferring to work more hours. Distress was assessed with a well-validated measure (the 12-item General Health Questionnaire) and we took two important steps to consider self-selection biases and reverse causality.

First, drawing on the very rich information collected as part of the National Child Development Study, we compared part-time workers preferring to work more hours with full-time workers. Using propensity score matching, we constructed two comparable samples of underemployed and full-time employed workers that had similar probabilities to end up in hours-underemployment based on a broad set of demographic, cognitive, psychosocial, and economic background factors. We found that being in hours-underemployment predicts substantially higher levels of psychological distress compared to working full-time (β = .22-.25).

Next, we drew on the British Household Panel Survey to explore the psychological impact of moving between underemployment and full-time employment. As previously, we used analytical techniques to account for unobserved differences among workers that might explain transitioning between different types of employment as well as their psychological wellbeing. We found that moving from full-time employment to underemployment was associated with increased distress levels across 18 years of observations.

The estimated effects were comparable to longitudinal estimates of the psychological effect of becoming unemployed (i.e. β = .19). Critically, our results also suggested the adverse psychological consequences of hours-underemployment are reversible. Transitioning from hours-underemployment to full-time positions predicted a decrease in distress that closely matched the increase associated with becoming hours-underemployed.

We also tested alternative combinations of working part-time and working time preferences to distinguish between the contribution of employment type and individual preferences to the observed impact. Our sensitivity analysis revealed that the combination of working less than 30 hours per week and preferring to work more hours was associated with the greatest and most consistent increases in psychological distress.

Somewhat surprisingly, job earnings and perceptions of job security explained only a small portion (≈10%) of the psychological impact of underemployment. We suggest two reasons for this. First, the inferior working conditions of underemployment in affecting time structure, social contact, and status, were only partly captured by our income and job security measures. Second, we did not assess the potential broader impact of underemployment in depriving psychological needs of competence and autonomy, curtailing work ambitions, and hampering social relationships and family formation. An extensive analysis of the paths linking underemployment to poor psychological health is now needed.

In addition to our work on underemployment we now aim to examine the psychological impact of the recent proliferation of zero-hours contracts. Such contracts are associated with poorer self-assessed general health and an increased risk of psychological distress. We anticipate distressing effects similar to underemployment because zero-hours contracts are associated with many of the disadvantages of underemployment along with high levels of insecurity, uncertainty, and pressure to accept unfavourable hours.

There is a stark divide in the United Kingdom between those employed on secure full-time contracts and those working on precarious employment contracts. Underemployment has outstripped unemployment in prevalence over the past decade and may have similar psychological implications. Our research suggests that the divide between full time workers and the underemployed is not only associated with financial inequality, it may be generating mental health inequalities.

In the UK, the effectiveness of the policies implemented to prevent unfavourable treatment of part-time workers and improve quality of part-time jobs has been criticised. For example, Bell argues that the Part-Time Workers (Prevention of Less Favourable Treatment) Regulations 2000 was not successful in removing discrimination against part-time workers or in supporting transitions into full-time employment especially in low-skill, low-wage sectors with high female presence. The findings of our research suggest that policy makers should monitor the implementation of current regulation more closely and consider the design of interventions aiming to improve the working conditions and psychological well-being of underemployed workers. The work of Bell and Blanchflower documenting high rates of underemployment in the UK and throughout the OECD underscore the importance of these issues internationally.

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Note: the above draws on the authors’ published work in Social Science & Medicine.

About the Authors

Victoria Mousteri is Senior Economist at Alma Economics and a member of the Stirling Behavioural Science Centre.

 

 

Michael Daly is Associate Professor in Psychology/Behavioural Science at Maynooth University.

 

 

Liam Delaney is Professor of Economics at UCD and Visiting Professor of Economics at Stirling University.

 

 

All articles posted on this blog give the views of the author(s), and not the position of LSE British Politics and Policy, nor of the London School of Economics and Political Science. Featured image credit: Pixabay (Public Domain).

How household debt influences inequality

James Wood writes that private debt contributes to increasing inequality, as highly indebted households provide a revenue stream to the financial sector, where profits are distributed to financial employees, managers, and executives, as well as to the most affluent households which hold the concentrated ownership of financial assets.

Britain has one of the highest levels of inequality in Europe. As such, the severely negative social and political consequences of inequality have seen it emerge as one of the defining issues of Britain’s modern political economy. Although technological change, globalisation, and labour market flexibility have often been blamed for the rise of inequality in advanced economies, much of Britain’s inequality is down to the growth of its financial sector. British finance re-emerged in the 1980s due to the inter-related processes of financialisation, which are made up of the shift towards the shareholder value model of corporate governance, the rising share of corporate profits generated by the financial sector, and the increased public engagement with financial services.

Financialisation contributes to inequality by increasing incomes for financial sector workers, particularly managers and executives, in relation to non-financial sector workers, as well as by driving returns on investments for affluent households who hold the concentrated ownership of financial assets. Although several studies have examined the effects of ‘high finance’ on driving inequality, relatively few have looked at the distributional consequences of the more mundane relationship between households and the financial sector in Britain.

Private debt is one of the major drivers of financialisation and it is the most widely diffused mechanism directly connecting households to the financial sector. The most highly indebted group are middle-income households, who leverage their incomes to access large volumes of mortgage credit to buy homes. The sustained demand for homeownership has contributed to rising house prices, which are considered the main determinant of household indebtedness in Britain. As interest payments on private debt provide a revenue stream for the financial sector, household debt may actually exacerbate pre-existing inequalities by increasing incomes for financial sector workers and asset holders at the upper end of the distribution scale. Therefore, this research examined whether, and to what extent, increases in household debt contribute to increases in inequality in Britain.

This was evaluated using an econometric analysis of the real volume of household debt and four measures of inequality: the Gini index; the top 5% income share; the Palma index; and the ratio of income distributed to the top 5% in relation to the middle 40%. This variable is selected as the middle of the income distribution is the most highly indebted, and it is posited the income generated from interest baring debt-instruments is distributed to the upper end of the income scale.

Household debt contributes to rising inequality

The results show that household debt has significant and positive effects on all four measures of inequality in Britain between 1966-2016. An examination of the specific inequality variables suggests household debt contributes to rising inequality by increasing the share of income at the upper end of the distribution, while reducing the concentration of income away from the middle. Therefore, household debt contributes to rising inequality by providing a revenue stream from highly indebted middle-income households to the financial sector, where it is distributed to managers, shareholders, and top-earning employees.

Private debt may not cause inequality in and of itself. Although household debt is widely diffused throughout British society, there are other countries with higher levels of household debt as a share of GDP than Britain, including Australia, Switzerland, Denmark, the Netherlands, Norway and Sweden, each of which demonstrate lower inequality outcomes than Britain. This suggests that there are other related factors enabling household debt to contribute to rising inequality in the British case.

The answer may lie in how household debt is produced, as British financial institutions are focused on maximising shareholder value. Until the early 1980s British mortgages were largely provided by stakeholder-oriented building societies, but the financial reforms of the 1980s encouraged many building societies to convert to shareholder-oriented banks. These reforms facilitated a significant increase in the mortgage market share captured by profit-oriented shareholder value maximising financial institutions, increasing revenues to be distributed to employees, managers, and shareholders. The production of debt in Britain may be considered highly profitable in comparison to countries dominated by more stakeholder oriented financial institutions, such as Denmark, whose mortgages are largely provided by non-profit co-operatives. This could lead to employee compensation being much lower in such stakeholder-oriented financial sectors, which may influence inequality outcomes.

Asset-based welfare and inequality

The results of this analysis support those from the IMF in suggesting that inequality could be counteracted by government welfare spending. However, there has been little political will to implement such measures in Britain over the past 30 years. As an alternative, the British government has increasingly sought to facilitate access to welfare goods via systems of private debt. For example, debt-leveraged access to private homeownership is an increasingly important financial asset to reduce wealth inequality and support systems of asset-based welfare. Therefore, rather than mitigating inequalities in opportunity, income and assets caused by the withdrawal of the state provision of services, the results of this analysis suggest household debt may actually exacerbate pre-existing inequalities by further increasing incomes for financial sector workers, asset holders, and shareholders at the upper end of the distribution scale. 

The results of this analysis show that the expansion of household debt has positive and significant effects across four measures of inequality. Therefore, private debt should be recognised as a key mediating intersection between various income and wealth inequalities, which contributes to the disparate social relations between affluent and less-affluent households in Britain.

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Note: the above draws on the author’s published work in The British Journal of Politics and International Relations.

About the Author

James Wood is Teaching Associate in Political Economy in the Department of Politics and International Studies, University of Cambridge.

 

 

 

All articles posted on this blog give the views of the author(s), and not the position of LSE British Politics and Policy, nor of the London School of Economics and Political Science. Featured image credit: Pixabay (Public Domain).

Our new immigration system needs flexibility, transparency, and public support

While the government’s immigration proposals are highly restrictive, research suggests that the public would accept a more liberal regime, writes Heather Rolfe. This makes it possible for the government to change approach by relying on public support rather than stealth.

We’re about to leave the EU and, unless the transition period is extended, the government has less than a year to put a new immigration system in place. It’s setting up a system ostensibly to address public concerns, and turning Priti Patel’s hard talk into tough action.

But employers are worried and have been making their voices heard. The government will have to navigate a difficult course if it wants to tighten restrictions without damaging the economy. The new system will allow lower-skilled migration to continue only through short-term visas. These will be initially restricted to a few sectors, for example agriculture, but economic necessity will mean they will have to be extended. Fearing negative public reaction, the government is likely to do this through exercising in-built flexibility and stealth rather than overt policy change.

Those who expected lower-skilled migration to end may feel let down. And an increase in temporary over longer-term migration may be unwelcome in some communities. But instead of setting up a system which will fail and corrode public trust, wouldn’t it be better to take account of public attitudes now? As existing research shows, these are much more nuanced, less ideological, and more realistic than the architects of the new policy assume.

Hardline policies are likely to be tempered by pragmatism

The Conservatives have always made it clear that the new, post-Brexit immigration system will prioritise the ‘brightest and best’, a term repeated tirelessly by past and present prime ministers and home secretaries. In line with this emphasis, the  Conservative plan for immigration includes three broad tiers – exceptional talent, skilled workers, and ‘sector-specific rules based’. This third tier is currently a poorly defined mix of temporary low-skilled visas, youth mobility or short-term visits. Crucially, these visas will be ‘time-limited’ and will not offer a route to settlement, while higher skilled visas will.

Further details of the new policy will follow delivery of a report from the Migration Advisory Committee (MAC). The MAC will not only influence the new policy but play a more direct role than previously in its adaptation and reformulation. There will be an annual reassessment of the points system, based on MAC’s advice, ‘so it can be adjusted according to changing economic or social circumstances’. And in anticipation that employers will need to recruit lower-skilled migrants, the composition of the lower-skilled tier ‘will be revised on an ongoing basis based on expert advice from the MAC’.

The MAC is run by labour market experts who listen to employers and are aware of the value of migration to the economy. They are unlikely to ignore the fact that sectors such as social care, food production, and hospitality will need flexibility built into the new system. If the government takes advice from the MAC, sectors thrown into crisis through inability to recruit local labour may be given concessions and allowed to issue visas. There will also be pressure to give concessions beyond highly-skilled migration to countries negotiating Free Trade Agreements who will want to include immigration in their deals. Tough talk may have to give way to expediency for Brexit to look like a success.

What might the public support?

Opinion polls have consistently found that the British public would like to see immigration reduced. Yet, as Ipsos Mori surveys have found, attitudes have changed. More people are now positive than negative about the impact of immigration. It’s not clear if this is what some have called the ‘galvanising’ effect of Brexit – we’re leaving the EU and free moment is going to end – or that all the talk about immigration has drawn attention to its benefits. Given Brexit uncertainty, the second explanation seems more likely.

Surveys have more consistently found opposition to low-skilled migration and support for high-skilled migrants, appearing to endorse the new restrictions. However, these findings may have been misinterpreted, by relying on the assumption that respondents interpret ‘high’ and ‘low’ skills in the same way as the government. People are certainly baffled that a nurse or teacher might not qualify for a skilled visa, for example, but also view care and construction workers as skilled workers the UK needs.

In-depth qualitative research suggests that high-skilled migrants are often interpreted as shorthand for migrants with a large contribution to the economy through paying taxes and filling skill gaps. The public recognises the value some low-skilled migrants bring by filling vacancies in hard-to-recruit sectors. They want migrants who come to work or to study. They worry that some migrants come to commit crime or claim benefits, not that they work in low-skilled jobs.

And what of short-term visas allowing stays of up to 12 months? According to the ONS, only 1 in 5 migrants who come to the UK for employment stay for less than a year. They are much more likely than longer stayers to work in London and the South East. Fruit pickers aside, few communities have experienced significant short-term inward migration. This could change quite dramatically under the new policy, as will use of agencies and temporary accommodation. Unable to bring their families, new migrants will be young, single, and transient. And this will be very visible to communities accustomed to more settled migration. On short-term visas alone, the government should be cautious and listen to the public.

Taking account of public attitudes will prevent backlash when controls need to be relaxed

The current proposals are highly restrictive, especially for lower-skilled workers. Flexibility will have to be exercised to prevent damage to the economy, especially faced with wider Brexit challenges. Existing research tells us that the public would accept a more liberal regime than the government has in store. This makes it possible, as well as desirable, to change policies through public support rather than stealth.

Through systematic, in-depth, and mixed methods research, the public could be engaged on the principles of new immigration policies, but also some of the details about sectors, skills, short-term stays and settlement. These are the issues that affect people most, as consumers of goods and services and as citizens. The process must involve experts and evidence so that research participants are able to consider the options in an informed way. Very little research on public attitudes towards immigration is being commissioned and few funders other than the government have the resources for work of the scale needed.

Without public engagement using in-depth research methods, immigration policy is likely to be ill-conceived and damaging to communities as well as to the economy. The government has less than 12 months to create a workable system. To make it work for everyone is a challenge; but failure to listen to the public on the most central Brexit issue will further corrode trust in politicians and widen social divides.

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About the Author

Heather Rolfe is Director of Research at Demos. She previously lead Employment and Social Policy Research at NIESR. Her particular areas of interest include migration, inclusion and integration.

 

 

All articles posted on this blog give the views of the author(s), and not the position of LSE British Politics and Policy, nor of the London School of Economics and Political Science. Featured image credit: Pixabay (Public Domain).

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