Reconceptualising labour utilisation and underutilisation with new ‘full-time equivalent’ employment and unemployment rates

Donald Houston () and Colin Lindsay ()
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Donald Houston: University of Birmingham
Colin Lindsay: University of Strathclyde

Journal for Labour Market Research, 2025, vol. 59, issue 1, 1-17

Abstract: Abstract Time-related underemployment (wanting to work more hours) has become an entrenched feature of a number of mature economies since the Global Financial Crisis of 2008, recent short-run post-COVID labour shortages notwithstanding. Employment and unemployment rates are thus increasingly inadequate measures of labour utilisation and underutilisation. This paper develops novel ‘Full-Time Equivalent’ (FTE) employment and unemployment rates based on hours worked and hours wanted calibrated to a 37.5-h full-time week for the United Kingdom. FTE rates reveal greater labour market slack than evident in conventional measures, as well as lower utilisation and/or greater underutilisation among women, young people, low-skilled workers and in geographically and economically peripheral regions. The FTE employment rate shows statistically significant correlations with both earnings and labour demand across UK local labour markets, whereas the conventional employment rate fails to detect this relationship. The paper argues that the use of FTE metrics by policy makers would point towards, firstly, more demand-side labour market policies in weaker local labour markets rather than relying heavily on coercive supply-side labour market activation and, secondly, less hawkish monetary policy required to control inflation, which causes unnecessary harm to economically weaker regions.

Keywords: Labour utilisation; Labour underutilisation; Unemployment; Underemployment; Gender; Youth unemployment; Regional unemployment; Labour market slack; Monetary policy (search for similar items in EconPapers)
JEL-codes: J64 R23 (search for similar items in EconPapers)
Date: 2025
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DOI: 10.1186/s12651-025-00396-z

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