Unemployment in the UK and the US is really, really low. Technically, both countries have full employment.

That was achieved through the growth of involuntary part-time jobs.

New data from investment bank UBS and the Resolution Foundation show that, ironically, full employment via involuntary part-time work has increased inequality in the UK.

90% of British people saw their share of national household income decline or stay flat over the long term.

In most years since the 2008 financial crisis, UK workers have taken a pay cut in real terms, after inflation.

Last week, John Wraith, a strategist at the investment bank UBS, published a bullish report on the UK economy. "Still no cracks in the UK labour market," his headline said, celebrating the historic low unemployment rate of 3.8%. But Wraith's paper also contained a puzzle. Although all the economic data for workers seems to be getting better — jobs, nominal income growth, and so on — consumer confidence is in a steep decline.

Why would consumers feel so negative when their job prospects have never been better?

One potential answer can be found in the excellent charts Wraith published on part-time work in the UK. Although part-time work has declined recently, the long-term trend shows overall growth, including involuntary part-time work (where workers are only working part-time because they cannot find full-time work).

The trend has contributed to stubbornly low wage growth and a recent increase in inequality, according to the Resolution Foundation, a think tank.

At first glance, the unemployment statistics could not look better. The UK has record low unemployment (at 3.8%) and record high employment at (76.1%).

The stats are similar in the US. But those topline figures mask the most significant change in the labour market over the last decade: The fact that full-time jobs are being replaced by part-time jobs and temp work.

That's an important — and negative — trend for workers.

Full-time work, in the form of a 40-hour work week with overtime and promotions, is the way that working people prosper. It is extremely difficult to buy a house or raise a family if you're on less than 40 hours a week, or if your job is only temporary. Yet part-time jobs are a growing long-term trend. Over 26% of all UK jobs are now part-time, UBS's data show.

More than one in four jobs are now part-time jobs. UBS

Between 2003 and 2019 the proportion of people stuck in part-time jobs who really want full-time jobs went from 7% to 11%.

Economists refer to these people as "underemployed" or "PTWFT," meaning "part-time wants full-time". They form a reserve army of workers that employers can call on any time. That keeps wages low. And it ensures full-time workers always know that they can be replaced anytime by the woman at the desk next to them, who only works three days a week.

Today, more than one in every 10 UK part-time workers is in involuntary part-time work.

It's a similar situation in the US, where part-time jobs have grown relentlessly.

This chart (below) shows the number of workers in part-time jobs who would prefer full-time work. Each recession since the 1960s has resulted in a sharp uptick in the creation of involuntary part-time jobs. It takes years before employers feel forced to end them in favour of full-time jobs. According to data published by Rob Valletta, a vice president in the Economic Research Department of the Federal Reserve Bank of San Francisco, there has been a 40% increase in the amount of involuntary part-time work in the US between 2000 and 2018. This data is from FRED, the economic database:

FRED

Temp work is on the rise.

At the same time, full-time jobs and part-time jobs have become more insecure. More than 10 years have passed since the 2008 economic crisis. But today, temp work is still a greater proportion of all work than it was before the recession.

Most workers have seen a shift toward insecure employment.

The shift away from full-time jobs to insecure or part-time jobs has affected most demographics of British society, except white women and Indian women, according to the Resolution Foundation, a think-tank that studies economic inequality.

The result has been that the bottom 90% of British people have seen their income fall or stay flat as a share of national income.

The bottom 90% of people have seen their share of income decline or stay flat. Only the top 10% have seen their share grow, according to the Resolution Foundation.

Taken together, the outcome of the two trends of temp work and part-time work are startling: Full employment — the result of GDP growth in every year since 2009 —has not created a rising tide that lifts all boats equally.

Rather, it has created low-paid insecurity for the one-quarter of all workers in part-time work, which is almost always less lucrative than full-time work.

British workers actually got poorer in most years since 2008 (after inflation is taken into account).

This next chart shows wages (blue) plotted against inflation (red). The green area represents the difference — "real earnings growth." (For example, if a worker receives an increase in earnings of 2%, but inflation that year is 3%, then the worker's real earnings will have declined 1%.)

The 2008 crisis changed real earnings growth for British people. Before the recession, real earnings grew most years. After the recession — the 10 years in which part-time work was ramped up — real earnings declined most years.

The green section shows wage growth after inflation is taken into account — whether workers got richer or poorer in real terms. Resolution Foundation

There may be some good news on the horizon, according to UBS's Wraith. More recently, there have been "ongoing improvements in the data relating to temporary and part-time workers," he wrote.

"It is encouraging that the number of temporary and part-time employees as a proportion of all workers continues to decline ... and also that the number of those working in such roles involuntarily (ie who would prefer a permanent or full time job) has been falling steadily as a percentage of all in employment."

That's a result of unemployment reaching the very bottom of its limit. At 3.8%, unemployment is freakishly low. The supply of available part-time workers — "slack" is the technical term — is dwindling and forcing employers to offer more full-time jobs. The key issue is whether part-time jobs are driven back down to their pre-crisis lows, or whether they are a permanent feature of the modern economy.