For the television series, see Underemployed Underemployment refers to an employment situation
that is insufficient in some important way for the worker, relative to a standard.
Examples include holding a part-time job despite desiring full-time work, and overqualification,
where the employee has education, experience, or skills beyond the requirements of the job.
Underemployment has been studied in recent decades from a variety of perspectives, including
economics, management, psychology, and sociology.
In economics, for example, the term underemployment has three different distinct meanings and
applications.
All meanings involve a situation in which a person is working, unlike unemployment,
where a person who is searching for work and cannot find a job.
All meanings involve under-utilization of labor which is missed by most official definitions
and measurements of unemployment.
Underemployment can refer to: "Overqualification" or "overeducation", or
the employment of workers with high education, skill levels, or experience in jobs that do
not require such abilities.
For example, a trained medical doctor who works as a taxi driver would experience this
type of underemployment.
"Involuntary part-time" work, where workers who could be working for a full work-week
can only find part-time work.
By extension, the term is also used in regional planning to describe regions where economic
activity rates are unusually low, due to a lack of job opportunities, training opportunities,
or due to a lack of services such as childcare and public transportation.
"Overstaffing" or "hidden unemployment", the practice in which businesses or entire economies
employ workers who are not fully occupied—for example, workers currently not being used
to produce goods or services due to legal or social restrictions or because the work
is highly seasonal.
Underemployment is a significant cause of poverty: although the worker may be able to
find part-time work, the part-time pay is not sufficient for basic needs.
Underemployment is a problem particularly in developing countries, where the unemployment
itself is often actually low, with most workers doing subsistence or occasional part-time
jobs.
The global average of full-time workers per adult population is only 26%, compared to
30-52% in developed countries and 5-20% in most of Africa.
Underutilization of skills In one usage, underemployment describes the
employment of workers with high skill levels in low-wage jobs that do not require such
abilities.
For example, someone with a college degree may be tending bar, or working in production
industries.
This may result from the existence of unemployment, which makes workers with bills to pay take
almost any jobs available, even if they do not use their full talents.
This can also occur with individuals who are being discriminated against, lack appropriate
trade certification or academic degrees, have disabilities, or have served time in prison.
Two common situations which can lead to underemployment are immigrants and new graduates.
When highly trained immigrants arrive in a country, their foreign credentials may not
be recognized or accepted in their new country, or they may have to do a lengthy or costly
re-credentialing process.
As a result, when doctors or engineers from other countries immigrate, they may be unable
to work in their profession, and they may have to seek menial work.
New graduates may also face underemployment, because even though they have completed the
technical training for a given field for which there is a good job market, they lack experience.
So a recent graduate with a Master's degree in accounting may have to work in a low-paid
job until they are able to find work in their field.
Another example of this is someone who holds high quality skills for which there is low
market-place demand.
While it is costly in terms of money and time to acquire academic credentials, many types
of degrees, particularly those in the fine arts and classics, are valued poorly by marketplace.
A number of surveys show that skill-based underemployment in North American and Europe
can be a long-lasting phenomenon.
If university graduates spend too long in situations of underemployment, the skills
they gained from their degrees can atrophy from disuse or become out of date.
Similarly, technically specialized workers may find themselves unable to acquire positions
commensurate with their skills for extended lengths of time following layoffs.
Given that most university study is subsidized, this type of underemployment may also be an
ineffective use of public resources.
Several solutions have been proposed to reduce skill-based underemployment: for example,
government-imposed restrictions on enrollment in public universities in fields with a very
low labor market demand, or changes in degree cost structure that reflected potential demand.
A related kind of underemployment refers to "involuntary part-time" workers.
These are workers who could be working for the standard work-week who can only find part-time
work.
Underemployment is more prevalent during times of economic stagnation.
Obviously, during the Great Depression of the 1930s, many of those who were not unemployed
were underemployed.
These kinds of underemployment arise because labor markets typically do not "clear" using
wage adjustment.
Instead, there is non-wage rationing of jobs.
Underuse of economic capacity Underemployment can also be used in regional
planning to describe localities where economic activity rates are unusually low.
This can be induced by a lack of job opportunities, training opportunities, or services such as
childcare and public transportation.
Such difficulties may lead residents to accept economic inactivity rather than register as
unemployed or actively seek jobs because their prospects for regular employment appear so
bleak.
The tendency to get by without work can be aggravated if it is made difficult to obtain
unemployment benefits.
Relatedly, in macroeconomics, "underemployment" simply refers to excess unemployment, i.e.,
high unemployment relative to full employment or the natural rate of unemployment, also
called the NAIRU.
Thus, in Keynesian economics, reference is made to underemployment equilibrium.
Economists calculate the cyclically-adjusted full employment unemployment rate, e.g. 4%
or 6% unemployment, which in a given context is regarded as "normal" and acceptable.
Sometimes, this rate is equated with the NAIRU.
The difference between the observed unemployment rate and cyclically adjusted full employment
unemployment rate is one measure of the societal level of underemployment.
By Okun's Law, it is correlated with the gap between potential output and the actual real
GDP.
This "GDP gap" and the degree of underemployment of labor would be larger if they incorporated
the roles of underemployed labor, involuntary part-time labor, and discouraged workers.
Underuse of employed workers The third definition of "underemployment"
describes a polar opposite phenomenon: to some economists, the term refers to "overstaffing"
or "hidden unemployment," the practice of businesses or entire economies employing workers
who are not fully occupied i.e. who are currently not being used to produce goods or services.
This may be because of legal or social restrictions on firing and lay-offs or because they are
overhead workers, or because the work is highly seasonal.
This kind of underemployment does not refer to the kind of non-work time done by, for
instance, firefighters or lifeguards, who spend a lot of their time waiting and watching
for emergency or rescue work to do; this kind of activity is necessary to ensure that if
three fires occur at once, there are sufficient firefighters available.
This kind of underemployment may exist for structural or cyclical reasons.
In many economies, some firms become insulated from fierce competitive pressures and grow
inefficient, because they are awarded a government monopoly or due to a situation of abuse of
market power.
As such, if they may employ more workers than necessary, they might not be getting the market
signals that would pressure them to reduce their labour force, and they may end up carrying
the resultant excess costs and depressed profits.
In some countries, labour laws or practices may force employers to retain excess employees.
Other countries often have significant cultural influences that result in a reluctance to
shed labour in times of difficulty.
In Japan, there is a long-held tradition that if a worker commits to serve a company with
long and loyal service, the company will, in return, keep the worker on the payroll
even during economic downturns.
In centrally-planned economies, lay-offs were often not allowed, so that some state-run
companies would have periods when they had more workers than they needed to complete
their tasks.
Cyclical underemployment refers to the tendency for the capacity utilization of firms to be
lower at times of recession or depression.
At such times, underemployment of workers may be tolerated—and indeed may be wise
business policy—given the financial cost and the degradation of morale from shedding
and then re-hiring staff.
Alternatively, paying underused overhead workers is seen as an investment in their future contributions
to production.
This kind of underemployment has been given as a possible reason why Airbus gained market
share from Boeing.
Unlike Airbus, which had more flexibility, Boeing was unable to ramp up production fast
enough when prosperous times returned because the company had dismissed a great part of
its personnel in lean times.
Another example is the tourism sector, which faces cyclical demand in areas where attractions
are weather-related.
In some tourism sectors, such as the sun and sand tours operated by Club Med, the company
can shed bartenders, lifeguards, and sports instructors, and other staff in the off-season,
because there is such a strong demand amongst young people to work for the company, because
its glamorous beachfront properties are desirable places to work.
However, not all tourism sectors find it so easy to recruit staff.
Some tourism sectors require workers with unusual or hard-to-find skills.
Northern Ontario hunting and fishing camps that require skilled guides may have an incentive
to retain their staff in the off-season.
Another example is companies which run tours for foreign tourists using staff speaking
the travelers' native tongue.
In Canada, guided tours are available for Japanese and German tourists in their native
languages; in some locations, it may be hard for companies to find Japanese- or German-speaking
staff, so the companies may retain their staff in the off-season.
See also Dead-end job
Discouraged workers Discrimination
Effective unemployment rate Job guarantee
Labor force Macroeconomics
Microeconomics Occupational Outlook Handbook
Poverty Supply and demand
Wage Work force
Working poor References
Further reading Dooley, David and JoAnn Prause.
The Social Costs of Underemployment: Inadequate Employment as Disguised Unemployment.
Cambridge University Press.
ISBN 978-0-521-81014-2 | ISBN 0-521-81014-0.
Maynard, Douglas C. and Daniel C. Feldman.
Underemployment: Psychological, Economic, and Social Challenges.
Springer Business + Science.
ISBN 978-1-4419-9412-7 | ISBN 1-4419-9412-2 External links
A Study of Underemployment in Kentucky – The University of Kentucky
Statistics Explained: Underemployment and potential additional labour force statistics
– Eurostat, April 2012 United States Underemployment – US Bureau
of Labor and Statistics