When workers are not able to use their full skills, education or availability, they experience underemployment. According to Organization for Economic Cooperation and Development there are two types: visible and invisible 1.
Visible Underemployment
Employees who work fewer hours per week than the norm in their industry are considered to be underemployed. They would like to work longer hours, but are unable to find full-time jobs. Often, they work two part-time positions to get by.
Invisible Underemployment
Workers who are employed full-time but don’t utilize their full skills can be considered invisible underemployed. This type of subemployment is difficult to measure. This type of underemployment is difficult to measure. Workers often do not realize that their skills can be used better elsewhere.
Other Definitions of Subemployment
A second category of underemployed workers is “marginally connected to the labor force”. This group falls into a statistical no man’s land. The U.S. Bureau of Labor Statistics does not count them as unemployed. The BLS includes only those who have actively sought a job within the past four weeks.
The marginally attached are those who have tried to find a job in the past year, want to work and are available. There is a subgroup of marginally attached people who have given up on looking for work. They are called ” discouraged employees” by the BLS. The BLS calls them “a data-component=”link” data-ordinal=”1″ data source=”inlineLink” and data type=”internalLink”.
Underemployment includes people who are employed full-time but still live below poverty. Paul Osterman is the co-director of MIT Sloan Institute for Work and Employment Research. The “working poor” is another name for this group.
Osterman says that the labor market does not deliver what it should for Americans. According to the Department of Health and Human Services’ 2018 data on poverty levels, underemployment is defined as anyone who earns less than $11.83 per hour.
Causes of underemployment
Underemployment can be caused by a recession, and the cyclical joblessness that follows. Underemployment can occur when workers are outnumbered by jobs.
Underemployment is also a result of technological change. ATM machines and mobile banking, for example, have replaced many bank tellers. These positions used to be entry-level jobs for careers in finance and banking. Many finance majors are taking whatever jobs they can. Some may end up working as Uber drivers, home health aides or waiters. Digital technology can’t replace these positions.
Effects of underemployment
Underemployment has similar effects to unemployment. Both increase poverty. Families will not buy as much if they don’t have enough income. This reduces demand for goods and services, which slows business growth. Gross Domestic Product and job growth are both lower as a result. It’s a downward spiral.
If the underemployment persists, workers will lose their ability to update skills through on-the-job-training. Without training, they may not be able return to their previous field. Others retrain in a different field. Some people downscale their lifestyles and accept underemployment for a long time. This creates structural unemployment.
It is possible that young people never have a successful career. They are forced to accept jobs below their skill level, and so they do not get started on the right path. They don’t get the mentoring they need to gain increased responsibility and update their skills. When the recession ends they will be competing against a new group of graduates to get entry-level jobs in their field.
Underemployment Rate
BLS claims that it cannot measure underemployment because it is too complicated. It does measure one facet of visible underemployment. This is the category Working Part-Time for Economic Reasons found in “Employment Situation Summary Table B”. Report on household data adjusted for season. The report breaks down workers who work part-time due to the fact that they only found part-time jobs.
The BLS provides other definitions that are broader. Here are the different designations:
U-1 : Unemployed civilians for 15 weeks or more, expressed as a percentage of the total labor force.
U-2 : Percentage of civilian workers who lost their jobs and completed temporary work.
U-3. Total number of unemployed as a percentage of civilian labor force. The official unemployment rate can confirm economic trends.
U-4. Total unemployed and discouraged workers as a percent of the civilian work force plus discouraged employees.
U-5. Total unemployed plus discouraged workers plus all other marginally affiliated persons, as a percent of the civilian workforce plus all marginally associated persons.
U-6. Total unemployed plus persons marginally associated with the labor market plus persons employed part-time due to economic reasons as a percent of the civilian workforce plus persons marginally associated with the labor. The current real unemployment rate is about twice as high as the official unemployment rate (designated U-3).
Overeducated and underemployed
The effects of underemployment are more severe for those with post-graduate or college degrees. In a Gallup survey from 2012, the unemployed and underemployed were asked to rate their feelings about whether or not they are thriving. A little over half of underemployed people said that they are thriving, while roughly 70% of employed people agreed. The difference was 17 points.
Only 41% of those with a high school diploma or less said that they thrived. This was still only 10 points below their employed counterparts. The less educated are more affected by underemployment than those with higher education.
