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What is Underemployment? - Definition, Types, Causes & Effects

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  • 0:01 What Is Underemployment?
  • 0:26 Who Are the Underemployed?
  • 1:25 Causes of Underemployment
  • 2:18 Effects of Underemployment
  • 3:08 Lesson Summary
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Lesson Transcript
Instructor: Kimberly Winston
Many people in today's economic climate are underemployed. In this lesson you will learn what underemployment is, types of underemployment, as well as its causes and effects.

What is Underemployment?

Let's break down the word underemployment. 'Under' generally refers to something that is beneath or below something. In this case, the something is employment. While that's a simplistic definition of underemployment, it is nevertheless accurate. Underemployment may be defined as a situation in which workers are employed below their education or skill level, or their availability.

Who Are the Underemployed?

Underemployed workers can be divided into several categories. The most common type of underemployed workers are listed below:

  • Skilled workers in low-paying jobs
  • Skilled workers in low-skill jobs
  • Part-time workers preferring full-time hours

While underemployed workers are not necessarily unemployed workers, there is a certain category of unemployed worker that falls under the heading of underemployed. Unemployed workers who are currently looking for jobs may also be considered to be underemployed.

It is often difficult to get an accurate measurement of underemployment since some underemployed workers are visible, which means their underemployment status is easily identifiable, and other workers are considered invisible because their underemployment status is not easily identifiable. For example, those in the part-time worker category may be considered visible, while those workers whose skills or education are under-utilized are considered to be invisible.

Causes of Underemployment

Underemployment has been attributed to adverse economic conditions, such as a recession, which occurs when there is a decline in economic activity. Underemployment is also caused when the supply of workers is greater than the demand for workers, there are layoffs, or when there is a technological change. A technological change occurs when technology takes the place of a job that a worker would have previously occupied. For instance, in some cases, vending machines have taken the place of some cafeteria workers or cashiers.

When there is a recession, unequal supply and demand, layoffs, or technological changes workers are displaced. Workers have to find different jobs and this often leads to initially accepting low-paying, low-skilled, or part-time work to pay the bills. A low-paying, low-skilled, or part-time job is often preferable to no job.

Effects of Underemployment

Underemployment is a social problem that affects job growth, poverty levels, business growth, career growth, and the emotional health of underemployed workers. Underemployment is a vicious cycle in which each effect is linked to the next. For instance, underemployed workers generally have less disposable income. Therefore, workers have a tendency to spend less, which impacts business growth, poverty levels, and the underemployed worker's emotional outlook.

Job growth and career growth are also impacted as workers become locked into the cycle of underemployment. They have less opportunity for maintaining or updating skills associated with their educational background or previous skill set. Underemployed workers may also experience bias from employers, keeping them from getting new jobs and competition from recent graduates.

Lesson Summary

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Underemployment is a situation in which workers are employed below their education or skill level, or their availability.

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