DEFINITION of 'Underemployment'

A measure of employment and labor utilization in the economy that looks at how well the labor force is being utilized in terms of skills, experience and availability to work. Labor that falls under the underemployment classification includes those workers that are highly skilled but working in low paying jobs, workers that are highly skilled but work in low skill jobs and part-time workers that would prefer to be full-time. This is different from unemployment in that the individual is working but isn't working at their full capability.

BREAKING DOWN 'Underemployment'

For example, an individual with an engineering degree working as a pizza delivery man as his main source of income is considered to be underemployed and underutilized by the economy as he in theory can provide a greater benefit to the overall economy if he were working as an engineer. Also, an individual that is working part-time at an office job instead of full-time is considered underemployed because they are willing to provide more employment, which can increase the overall output.

  1. Structural Unemployment

    A longer-lasting form of unemployment caused by fundamental shifts ...
  2. Concealed Unemployment

    When people who are out of work are not counted in official unemployment ...
  3. Below Full Employment Equilibrium

    A macroeconomic term used to describe a situation where an economy's ...
  4. Full Employment

    A situation in which all available labor resources are being ...
  5. Natural Unemployment

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

    A measure of the active portion of an economy's labor force. ...
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