Underemployment - Definition and Examples

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What does it mean to be underemployed? Underemployment refers to people who are working in a lower capacity than they are qualified for, including in a lower-paid job or for fewer hours than they would like to work. It is also a measure of the economy that describes how efficiently the labor force is using its skills, education and experience.

Underemployment is different from unemployment in that the person is in fact, working, just not at their full potential.

While technically employed, many underemployed individuals compete with the others for better jobs. 

Underemployment Definition

A worker may be considered underemployed if they hold a part-time job instead of a full-time one, or if they are overqualified and have education, experience, and skills that exceed the requirements of the job.

Reasons for Being Underemployed

Underemployment often illustrates the employment of workers with skilled backgrounds in low-wage or hourly jobs that do not require such prerequisites. This under utilization of skills occurs most commonly in the immigrant and new graduate population, but can happen to anyone seeking work. 

In many cases, highly skilled individuals come to work in a new country, but face underemployment because their foreign credentials are not be accepted nor considered to be an equivalent fit for the position in question. 

Few employers are willing to send foreign documents for evaluation by a third party, so many professional individuals such as doctors, lawyers, or engineers take necessary jobs that would otherwise be seen as inferior positions.

Ironically, new graduates also struggle with underemployment despite having the necessary and acceptable educational experience, they lack experience in the field and many must find low-paying jobs to make ends meet until they can get into their desired field.

In addition to students, foreign nationals, and trade workers, those with disabilities, mental illnesses, or former inmates are often discriminated against and are forced to take the first job made available to them for fear of not finding another.

Some individuals with acceptable experience and skills are underemployed because of low market demand. An Oceanographer, for example, may have to take a part-time job living in Wisconsin until they are able to move to a location that can better accommodate his or her skill set.

Unemployment vs. Underemployment

Unlike unemployment, where a person is actively seeking a job and cannot find work, underemployment describes a situation where a person is working, regardless of the number of hours or the skill level.

However, unemployment and underemployment are closing related, as the latter often occurs on account of the former. Mounting bills, expenses, and responsibilities require people to take any job they can get, even if it is not in line with their respective skill set or career interest. These employees can be considered “involuntary” part-time workers because they would like to work a full-time, salaried position but could only find temporary or part-time work.

A person is considered underemployed when they are working at a job they are over-qualified for, working part-time when they would prefer full-time work, or working at a low-wage job when they could, if jobs were available, be working more hours.

Underemployment can be caused by a recession, an uneven demand for workers, layoffs, or redundancy due to technological change.

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