In this article, we explained underemployment, the types, the causes, how to measures it, how underemployment affects the economy and the solution.
Definition
Underemployment refers to people working in jobs that do not fully utilize their skills, education, or experience, or working in insufficient hours for their needs. It includes visible underemployment, where a person works fewer hours than they would like, and invisible underemployment, where a person works full-time but in a job below their skill or education level.
Features of Underemployment
Mismatch of Skills and Education:
Highly skilled and educated workers may be in low-skill or low-paying jobs that do not utilize their qualifications.
Insufficient Working Hours (Visible Underemployment):
Individuals work part-time when they want and are available for full-time work but cannot find it.
Involuntary Part-Time Work:
Some individuals work part-time not by choice but because full-time positions are unavailable.
Low Income:
Underemployed workers typically experience lower earnings and limited financial benefits compared to their potential.
Job Dissatisfaction and Mental Health Impacts:
The failure to work at one’s full capability can lead to feelings of frustration, anxiety, and a loss of hope.
Limited Career Growth:
Underemployment often restricts opportunities for advancement, recognition, and career progression.
Reduced Productivity and Innovation:
When workers are not contributing their full potential, it hinders economic productivity and innovation within businesses and the broader economy.
Misallocation of Labor Resources:
Underemployment indicates a fundamental imbalance between labor and other factors of production, showing that human capital is not being efficiently used.
The Three Main Types of Underemployments are:
- Voluntary Part-Time Underemployment
(or Visible Underemployment): When individuals work part-time because they are unable to find full-time work, despite preferring it.
- Invisible Underemployment
(or Overqualified/Overeducated Underemployment): When individuals are employed in jobs that do not match their skill level or educational background, meaning their skills are not fully utilized.
- Marginally Attached Workers
(or “Discouraged Workers”): People who want to work and are available for work but have stopped looking because they have been unable to find a job for a prolonged period.
- Visible Underemployment
Description:
This category includes people who work part-time but would prefer to work full-time.
Examples:
Someone taking a part-time job in retail because they cannot find a full-time role in their chosen field.
- Invisible Underemployment
Description: This occurs when an individual’s skills and education are not being utilized in their current job.
Examples: A highly skilled engineer working in a low-skilled customer service role.
- Marginally Attached Workers
Description:
This group includes those who want and are available for work but have been discouraged from seeking employment by a prolonged inability to find a suitable job.
Examples:
A person who has diligently searched for a job for a year or more and has given up looking, but would still take a job if one were available.
Causes of Underemployment:
Economic Factors
Recessions and Downturns:
During economic contractions, companies reduce hiring or lay off workers, forcing them to take lower-skill or part-time jobs, leading to underemployment.
Supply and Demand Imbalance:
When the number of available workers, especially those with specific skills, exceeds the demand for those skills, workers are forced into less suitable jobs.
Structural and Technological Factors
Skill Mismatch:
There is a disconnect between the skills of the workforce and the skills required for available jobs.
Technological Advancements:
Automation can replace jobs previously held by humans, displacing workers into positions that don’t fully utilize their qualifications.
Obsolete Education Curricula:
Outdated educational programs can produce graduates whose skills no longer match the demands of the modern job market.
Other Contributing Factors
Population Growth:
A rapid increase in population can create a larger labor force than the economy can absorb, increasing the competition for jobs.
Involuntary Part-Time Work:
Some workers may be forced into part-time jobs when full-time positions are unavailable, even if they possess the skills for a full-time role.
How Underemployment Affects the Economy
Underemployment doesn’t just harm individuals — it has widespread economic and social consequences.
Wasted Human Capital
When highly educated or skilled individuals perform low-skill jobs, their potential contributions to productivity and innovation are lost.
Lower Consumer Spending
Underemployed workers typically earn less, limiting their purchasing power, which slows down overall economic demand.
Reduced Tax Revenue
Lower earnings mean lower income tax contributions, which can impact public services and national budgets.
Hidden Poverty
Underemployment often disguises itself under employment data, leading to underreported poverty and economic hardship.
Low Job Satisfaction and Morale
People stuck in unchallenging or poorly paid roles may feel disillusioned, leading to mental health issues, absenteeism, and lower engagement.
How to Measure Underemployment
Traditional labor statistics often overlook underemployment. However, more nuanced metrics exist:
U-6 Rate (U.S.): This is a broader unemployment measure by the U.S. Bureau of Labor Statistics that includes discouraged workers and involuntary part-time workers.
Time-related underemployment rate: Measures those working fewer hours than they would prefer.
Skill mismatch surveys: Conducted to assess how workers’ qualifications match their jobs.
Solutions to Underemployment:
Upskilling and Reskilling:
Pursue vocational and technical training, on-the-job training, and certifications to gain in-demand skills.
Networking:
Build and utilize a strong professional network by attending industry events, joining professional organizations, and connecting with former colleagues.
Entrepreneurship:
Consider starting a business or seeking opportunities to gain experience in a relevant industry.
Freelancing/Side Hustles:
Take on freelance projects or side jobs to generate income, gain new skills, and expand professional networks.
Career Development:
Proactively seek out roles that align with your career goals, even if it means taking a step back to move forward later.
For Governments and Policymakers
Promote Education and Training:
Ensure education systems and vocational training programs are closely aligned with current industry needs and provide pathways to employment.
Support Entrepreneurship and SMEs:
Implement programs and incentives to encourage and support small and medium-sized businesses, which are significant job creators.
Invest in Infrastructure:
Drive economic growth and create jobs by investing in crucial infrastructure projects.
Strengthen Key Industries:
Invest in growth sectors like agriculture, manufacturing, and the digital economy to create more job opportunities.
Encourage Public-Private Partnerships:
Foster collaboration between government and the private sector to develop training programs, apprenticeships, and job creation initiatives.
Enhance Labor Market Information:
Provide better information to job seekers about market needs, making it easier for them to make informed career choices.
For Society
Promote a Dignity of Labor: Foster an environment where all types of work are valued and respected.
Support Underprivileged Groups: Implement programs specifically to support groups like women and youth who face unique employment barriers.
Ensure Economic Growth: Governments can use fiscal and monetary policies to stimulate economic growth, leading to increased demand for labor.
Conclusion
Underemployment is a less obvious but equally important indicator of an economy’s health compared to the unemployment rate. It reveals that many people who are employed are not working in jobs that fully use their skills or provide sufficient hours, meaning they are working but not prospering. For leaders and policymakers, addressing underemployment is crucial for creating strong, fair economies. For individuals, understanding underemployment helps them see their job struggles as a systemic issue rather than a personal failing.
READ: Causes of Unemployment in Nigeria.