Underemployment Equilibrium


DEFINITION of 'Underemployment Equilibrium'

A condition where underemployment in an economy is persistently above the norm and has entered an equilibrium state. This, in turn, is a result of the unemployment rate being consistently above the natural rate of unemployment or non-accelerating inflation rate of unemployment (NAIRU due to sustained economic weakness.

BREAKING DOWN 'Underemployment Equilibrium'

Underemployment in an economy implies that workers have to settle for jobs that require less skill than they possess, or that offer lower wages or fewer hours than they would like. The degree of underemployment is dictated by the strength (or lack thereof) of the job market, and tends to rise when the economy and employment are weak. Advocates of Keynesian economics suggest that a solution to an underemployment equilibrium state is through deficit spending and monetary policy to stimulate the economy.

  1. Keynesian Economics

    An economic theory of total spending in the economy and its effects ...
  2. Non-Accelerating Inflation Rate ...

    The specific level of unemployment that exists in an economy ...
  3. Underemployment

    A measure of employment and labor utilization in the economy ...
  4. Phillips Curve

    An economic concept developed by A. W. Phillips stating that ...
  5. Natural Unemployment

    The lowest rate of unemployment that an economy can sustain over ...
  6. Elastic

    A situation in which the supply and demand for a good or service ...
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