Increasingly insecure labour market a risk finds Economy Committee


Individuals working fewer hours than they want to, or taking on jobs which don’t utilise all their skills, are at risk of damaging their earning potential in the long term, according to a report published today by the Economy, Energy and Tourism Committee.

Underemployment has grown significantly since the economic crisis five years ago, with young people particularly badly affected. The Committee has concluded that this underemployment impacts upon an individual’s long-term career opportunities and earning potential in the same way that unemployment does.

Of concern to the Committee is the potential that some of the trends emerging during this period of economic difficulty will become permanent, including the use of zero hours contracts, temporary contracts, self-employment as a replacement for employment, and involuntary part time working. 

Convener of the Economy, Energy and Tourism Committee, Murdo Fraser MSP, said:

“This inquiry has found that the focus on headline unemployment or employment levels only provides one side of the story. Underemployment can have a similarly devastating impact on income and on the ability to secure long term employment.

“Whilst underemployment may decline when demand returns to the economy, we need action now to prevent negative labour market trends becoming embedded in Scotland.”

Deputy Convener of the Committee, Dennis Robertson MSP, said:

“The Committee was particularly concerned about the impact of underemployment on young people and women. There was also evidence suggesting that other people with protected characteristics, particularly disabled people, may be disproportionately affected by underemployment and we have called for more data to be collected on employment trends for these groups.”

The Committee’s inquiry into the impact of underemployment came to the following conclusions:

Why has underemployment in Scotland increased?

  • Economic downturn (p31). The Committee recognised that the economic downturn and the consequent decline in output have resulted in a reduction in the demand for labour.
  • Employment legacy of the economic downturn. The Committee is concerned that there is a risk that some of the trends that have emerged during the economic downturn – such as involuntary part-time work, self-employment where it is a replacement for employment, zero-hours contracts and temporary contracts with recruitment agencies – may become embedded in a way which makes work significantly more insecure, particularly for the young and unskilled.
  • Labour hoarding (p33). The Committee believes that labour hoarding has served the dual purpose of restricting redundancies and retaining skilled staff. It recognises that this has helped businesses remain sustainable and reduced the number of people made redundant, although there has been a high personal cost for many of those that have experienced underemployment.
  • Displacement (p35). The Committee believes that underemployment and unemployment have resulted in a displacement effect that is harmful to all those who are unable to work at a level in keeping with their skills and ultimately it is the least skilled and the young who are most likely to experience barriers in gaining access to the labour market.
  • Self-employment (p38). The Committee believes that the data showing an increase in the number of self-employed part time jobs represents a significant new trend in the labour market. However, there is no concrete evidence to explain the reasons for the increase in Scotland. The Committee believes that there needs to be further analysis by the Scottish Government.
  • Increase in zero hours contracts (p39). The committee is concerned by the reported rise in the use of zero-hour contacts and the evidence suggesting their use by public sector contractors.

Defining underemployment 

  • Sector specificity of underemployment (p13). The Committee concludes that there is evidence to suggest that underemployment is more prevalent in certain sectors such as retail and social care, as well as in the tourism industry.
  • The gender (p15) and age dimension (p17,18). It is clear to the Committee that there is a distinct gender profile to underemployment. The Committee is particularly concerned by the higher levels of underemployment experienced by young people. Not only does underemployment inhibit young people’s capacity to be independent, but it has a long-term effect on employment prospects.

Skills underutilisation

  • Data and research (p28). The Committee believes that its inquiry has highlighted the paucity of data and research on skills underutilisation in Scotland. It believes that aligning skills and qualifications with employment opportunities is a key issue for the future of Scotland’s economy.

The costs of underemployment

  • Personal costs (p44). The Committee believes that the case studies on the personal impact of underemployment provide stark evidence of the effect that is it having on people’s lives and that these effects are similar to those caused by unemployment. It recognises that individuals have faced a reduction in their incomes as a result of underemployment which has placed them in sometimes untenable financial positions. The evidence demonstrates a strong link between underemployment and poverty.

What can be done?

  • Policy context (p45). The Committee calls on the Scottish Government to consider how its labour market targets can be adapted to reflect an ambition to grow the number of hours people are in work, improve the quality of jobs in Scotland and the types of contracts used.
  • Learning, skills and wellbeing (p46). The Committee calls on the Scottish Government, Skills Development Scotland and the Scottish Funding Council to consider whether opportunities to access education, training and work experience can be improved for those that are underemployed, including graduates.
  • Training (p47). The Committee is particularly concerned by the recent reduction in staff training and calls on the Scottish Government to consider how it can work with partners to promote employer engagement.
  • Childcare (p48). The Committee is calling for more research into why childcare costs are so high.
  • Supportive business environment (p48). It is vital that the Scottish Government and the enterprise agencies maximise the outcomes from their investments and consider whether more can be done to link the provision of investment to the creation of secure and high quality jobs.


The Committee launched its inquiry into underemployment in December 2012.

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