What is underemployment?

Underemployment is an economic term describing a situation in which an individual is employed, but not at full capacity in terms of the number of hours they work, the wage they receive, or their occupation. It is distinct from unemployment because the individuals are earning some form of income, but it is lower than what they are qualified to earn.

Causes of Underemployment

Underemployment has become a reality for many around the world today: the number of underemployed people continues to rise. This could be attributed to multiple factors, from economic downturns, to global business restructuring and downsizing, to increasing numbers of people with college degrees competing for fewer available jobs.

Low pay is another reason for this rise as wages have remained stagnant while the cost of living constantly increases. Similarly, automation is an increasingly powerful force in the workplace that is eliminating certain job positions and increasing competition among those seeking employment. All these issues combined lead to underemployment being more common even if overall employment levels remain relatively high.

Underemployment and Unemployment

Unemployment refers to the number of people who are actively searching for work but are unable to find it, while underemployment is defined as a situation in which an individual is employed but not using their full skill level or earning enough income to support their desired lifestyle. Both can have significant consequences for individuals and economies alike, leading to a lack of financial security, potential poverty, lower consumer spending power, and lost economic growth.

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