Household Income Inequality and Part-Time Employment: The Role of DUAL Earners during the Financial Crisis

Part-time workers are found in households in all parts including the higher deciles of the distribution of household labour income in European countries (Salverda and Haas, 2014). Apart from their role in combining work and childcare as a labour supply choice, it is also the case that part-time jobs are taken as a second-best alternative (when full-time employment is not easily found) or as a form of additional income when unemployment increases (the added worker effect). There may also be other factors which come into play such as reducing hours of work towards the end of working life.    

In the context of stagnating real incomes and difficult labour market conditions, this paper examines the role of part-time work in working households in a small group of European economies in the period 2008-11. Data from the EU Survey of Income and Living Conditions (SILC) are used to examine differences between countries and how the role of part-time employment evolved during the economic and financial crises from 2008 onwards. 

1  The sample used

We follow the approach adopted by Salverda and Haas (2014) insofar as the sample used is comprised of individuals aged 18 to 64 living in households where total labour income is the largest component of household income. Student households and the self-employed are excluded. The distribution of annual labour income as declared in the SILC surveys is used as the basis for the analysis and in what follows is presented in quintiles.

Hours of work are declared by each individual for all jobs occupied. If total weekly hours are less than 35, the respondent is regarded as not working full-time, or for simplicity, working part-time. Note that an individual may work part-time in more than one job and not be considered to be working part-time on the basis of total hours worked. This cut-off is in line with the approach used in Salverda and Haas (2014) and the one applied in the United States, but is at odds with the conventional definition of less than 30 hours used by organisations such as the OECD. In practice the legal cut-off will vary across countries and occupations (e.g. a school teacher will generally be present at work for less than 35 hours a week).  For the countries considered here, Figure 1 gives an indication of the numbers involved at different hours cut-offs. Apart from the Netherlands where it amounts to 12%, in 2008 the proportion working more than 29 hours but less than 35 is 2% to 3%. The proportion of non full-time workers is lowest in France (16%), very similar in the UK and Germany (around 25%), but substantial in the Netherlands (44%). By 2011, the figures had risen in all countries, by 3.5 percentage points in the UK and France and by 2.5 points in the Netherlands.

2   The place of part-time workers in the distribution of annual household earnings in 2008      

There are various ways of assessing the role of part-time work in the composition of household earnings. Figure 2 shows how the proportion of multiple-earner households changes between different quintiles of the distribution. For all four countries, it is between 10% and 20% in the lowest quintile, rising in a linear fashion up to the third quintile before flattening out (except in the case of Germany) across the two higher quintiles. In the top quintile the share of multiple-earner households, i.e. those likely to contain part-time workers, ranges from 68% in the UK to 87% in the Netherlands. The second curve in Figure 2 indicates the share of households with at least one part-time worker. In the lowest quintile, the share varies from less than a third in France to nearly 60% in the Netherlands. In the UK the figure is around a half. This means that a non negligible proportion of low income households are headed by someone who is working less than full-time hours. In all four countries considered the share of households with part-time workers is lower in the second quintile from the bottom before rising substantially in the case of the Netherlands, slightly increasing in Germany and stabilising in France and the UK. In the highest quintile of the income distribution, part-time workers are present in 27% of households in France, 35% in the UK, 42% in Germany and 67% in the Netherlands.

The presence of part-time workers in all parts of the earnings distribution including the top, needs to be put in to perspective. Figure 3 shows that in France, Germany and the UK, the contribution of part-time earnings to the total is around 10% in the top three quintiles, less than 20% in the second quintile. In the lowest quintile it varies from 32% in France to 46% in the UK. The Netherlands stands out because of the preponderance of the contribution of part-time work to total earnings which above 25% in the top four quintiles and over a half in the lowest quintile.   

3  What happens after 2008 ?

Between 2008 and 2011, labour market conditions deteriorated in each of the countries. Inequality as measured by the ratio of the top decile to the median of labour income increased in all countries considered, except for Germany (Figure 4). However the lowest decile relative to the median decreased in Germany and France. These changes are accompanied by a decrease in multiple earner households in the lowest quintiles of labour income in all four countries and an increase the UK in the top quintiles (Figure 5). Interestingly the percentage of households in the lowest quintile which contain part-time workers in the UK, rises to the same percentage as that of the Netherlands in 2011. In all countries the share of labour income obtained from part-time workers increased for households in the bottom quintiles.   

References

W. Salverda and C. Haas (2014) Earnings, employment and income inequality, in W. Salverda, B. Nolan, D. Cecchi, I. Marx, A. McKnight, I. Toth and H. Van de Werfhorst, (2014) Changing Inequalities in Rich Countries, Oxford University Press, Oxford.