What is Underemployment?

Underemployment is a situation where workers are not able to utilize all their skills, education, or availability to work in their current jobs. According to the Organization for Economic Cooperation and Development, there are two main types of underemployment: visible and invisible.

Visible Underemployment

Visible underemployment refers to employees who are working fewer hours than is typical in their field. They are capable and willing to work more hours but are unable to secure full-time employment. Many of them end up working two part-time jobs to make ends meet.

Invisible Underemployment

Invisible underemployment involves workers in full-time jobs that do not fully utilize their skills. This type of underemployment is challenging to measure and requires extensive surveying to compare workers' skills to job requirements. Many workers are unaware that their skills could be better utilized elsewhere.

Other Definitions of Underemployment

Another group of underemployed workers, known as "marginally attached to the labor force," fall into a statistical gray area. They are not considered unemployed by the U.S. Bureau of Labor Statistics since they may have looked for a job within the past year but are no longer actively seeking employment. There are also individuals who work full-time but still live below the poverty level, known as the "working poor."

Causes of Underemployment

Underemployment can be caused by factors such as economic recessions, technological changes, and shifts in job requirements. For example, advancements in technology have led to the automation of certain jobs, displacing workers who may end up in lower-skilled positions.

Effects of Underemployment

The effects of underemployment are similar to those of unemployment, leading to higher poverty levels and reduced consumer demand. This, in turn, can result in slower business growth and a decline in the nation's GDP. Additionally, underemployment can hinder workers' ability to update their skills and progress in their careers.

Underemployment Rate

While the Bureau of Labor Statistics does not measure underemployment directly, it does track indicators such as the number of workers who are employed part-time for economic reasons. Various measures of underemployment exist, including the U-6 rate, which accounts for total unemployment, marginally attached workers, and those employed part-time for economic reasons.

Overeducated and Underemployed

Underemployment has a more significant impact on individuals with higher levels of education, such as college or post-graduate degrees. Studies have shown that underemployment can lead to lower levels of life satisfaction among educated individuals compared to those with lower levels of education.