Underemployment: Is it a real problem?

By Ron Maxwell - CEO

Underemployment, whereby workers are employed in temporary, casual, or part-time jobs that don't match their qualifications and/or meet their financial needs, is a complex problem for Australia today. Unlike unemployment, which is regularly discussed as a key indicator of economic health, underemployment can slip under the radar. In my opinion, however, it's something we need to pay very close attention to. 

Today, nearly every industry is being disrupted on almost every level. Technology is changing the way we do business and competition is global in many industries. The marketplace is also changing; we have customers who are looking for efficient, quick delivery of products, services or experiences, often at the lowest price possible. This is putting strain on businesses of all sizes, but particularly smaller, local businesses who can't meet the demands as quickly or cheaply as larger ones or even overseas alternatives. 

Casualisation is an issue

In this climate, businesses are looking to increase agility and cost-savings and casualisation of the workforce is often seen as an effective solution from a short-term, financial standpoint. 

We are also seeing an oversupply of graduates, particularly in white-collar jobs. While many industries are suffering from a skills shortage, for those with more workers than jobs it means employers aren’t motivated to make attractive offers and can offer roles that are less permanent or secure. 

The labour market is changing 

The way we work, and often how our employment is structured, is rapidly changing and while flexibility is often talked about in positive terms, there is a downside. 

Many industries, that used to pay a wage to employees are shifting to a contract model, often to meet market demands. Take a look at transport, for example. Once, a taxi driver could secure regular work on a wage basis, today, with the dominance of ride-sharing services, like Uber, drivers are more likely to find themselves in contract work, only making money when they have a fare. 

Consequences could affect us all

The flexibility this provides is one thing, and some find themselves attracted to these roles for just that reason, but for others it can create uncertainty and difficulty meeting their financial needs – and that's where it can become a problem, not just for the individual, but for the economy too.

It can have dire consequences; creating a generation of workers who don't have the financial means to participate in the economy the way previous generations did. This lack of stability can impact everything from ability to buy property to how life decisions, such as when to start a family, are made.  All of which has a flow-on effect to the broader economy.

Additionally, for an economy to boom, it needs secure jobs with workers who are committed to the organisation's future, something that just isn't going to happen with a casual workforce. An underemployed workforce is generally not good for economic growth.

No simple solution

So, what can be done? Casualisation was a hot topic toward the end of 2018, especially with a federal election looming. At that time, the Fair Work Commission ruled that casual employees have the right to ask for a permanent position after a year of regular hours.

While this certainly sounds like a good thing on the surface, I have concerns that it may just go the other way; encouraging businesses to look for loopholes, such as reducing employee hours before the 12-month mark or moving to a contract model that is not impacted by the Fair Work ruling. Both outcomes would only serve to increase financial instability. 

This may sound like it is big business taking advantage of the employee, and while there certainly are cases of rogue employers, it can also be smaller businesses simply trying to stay afloat in tough market conditions.

There is no single answer to the problem, but for me, looking at the way we structure our higher education system could play a part in a longer-term solution. We need to find ways to provide more job skills and more opportunities to connect with employers. Being competency-based, many vocational education and training (VET) courses are designed to do this, but there is more work to be done across the whole sector.  

On the policy front, there is no easy fix, but for me, it's about governments and industry working closely together to fix what's broken, because the reality is that, in the longer term, a heavily casual workforce doesn’t benefit anyone. There are some industries, such as those that are heavily seasonal, where a casual workforce does make sense, but for most industries it could be a short-term gain that results in a long-term loss for us all.