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. Non-Accelerating Inflation Rate ...

    The specific level of unemployment that exists in an economy ...
  2. General Equilibrium Theory

    General equilibrium theory studies supply and demand fundamentals ...
  3. Unemployment

    Unemployment occurs when a person who is actively searching for ...
  4. U-6 Rate

    The U-6 rate is the unemployment rate that includes discouraged ...
  5. Structural Unemployment

    A longer-lasting form of unemployment caused by fundamental shifts ...
  6. Full Employment

    Full employment is a situation in which all available labor resources ...
Related Articles
  1. Personal Finance

    Understanding Natural Unemployment

    Natural unemployment is often defined as the lowest rate of unemployment an economy will reach.
  2. Personal Finance

    Why Global Unemployment Is Rising

    The ILO is reporting that there are now 50 million fewer jobs in the global economy than before 2008. Find out why.
  3. Insights

    How The Unemployment Rate Affects Everybody

    Depending on how it's measured, the unemployment rate is open to interpretation. Learn how to find the real rate and how it affects everyone.
  4. Insights

    The Downside of Low Unemployment

    Yes, the unemployment rate can be too low.
  5. Insights

    Will You See Higher Wages In 2015?

    It's been a few years into the economic recovery from the Great Recession, and the employment picture has been rocky.
  6. Personal Finance

    What The Unemployment Rate Doesn't Tell Us

    The unemployment rate is climbing, but what does it mean?
  7. Insights

    Examining The Phillips Curve

    This model depicts an inverse relationship between unemployment and wage inflation, but is it accurate?
  8. Investing

    Did Your State Cut Unemployment Benefits?

    Many of the states now cutting back on unemployment benefits significantly under-funded their coffers prior to the Great Recession.
  1. Is there a natural rate of cyclical unemployment?

    Learn more about cyclical unemployment and find out about the relationship of cyclical unemployment to the natural unemployment ... Read Answer >>
  2. What is the difference between structural unemployment and cyclical unemployment?

    Learn more about about the differences between structural and cyclical unemployment and when cyclical unemployment becomes ... Read Answer >>
  3. What happens when inflation and unemployment are positively correlated?

    Learn about the historic relationship between inflation and unemployment and the implications that occur when they are positively ... Read Answer >>
  4. What is general equilibrium theory in macroeconomics?

    Achieving equilibrium of prices in a single or multi-market setting involves a bidding process that is informed precisely ... Read Answer >>
  5. What is the best way for my startup to have sustainable growth?

    Discover how many years structural unemployment can last. Deciding whether the economy is encumbered by structural or cyclical ... Read Answer >>
  6. How does the U.S. Bureau of Labor Statistics calculate the unemployment rate published ...

    Understand the process used by the U.S. Bureau of Labor Statistics to determine the official unemployment rate for the United ... Read Answer >>
Hot Definitions
  1. Money Market

    The money market is a segment of the financial market in which financial instruments with high liquidity and very short maturities ...
  2. Perfect Competition

    Pure or perfect competition is a theoretical market structure in which a number of criteria such as perfect information and ...
  3. Compound Interest

    Compound Interest is interest calculated on the initial principal and also on the accumulated interest of previous periods ...
  4. Income Statement

    A financial statement that measures a company's financial performance over a specific accounting period. Financial performance ...
  5. Leverage Ratio

    A leverage ratio is any one of several financial measurements that look at how much capital comes in the form of debt, or ...
  6. Annuity

    An annuity is a financial product that pays out a fixed stream of payments to an individual, primarily used as an income ...
Trading Center