Underemployment

Underemployment


Underemployment Definition

Underemployment measures how many people work in jobs that do not match their education, skills, or availability to work. 

For example, Nancy Marsi, a medical degree holder, is currently working as a medical assistant, leading to her underemployment. Even after completing her 6-year degree, she is unable to practice medicine. As an immigrant citizen, she has to face more challenges than other citizens.

It occurs when work continues despite their qualifications. The above frequently happens when someone is required to meet the requirements of their position despite a lack of education or experience. Offering the right job to the right person can solve this issue.

Key Highlights

  • Underemployment is when an individual does not utilize their full professional potential or takes a job that does not reflect their training and financial needs.
  • Economic recessions and business cycles are a few of the many causes.
  • It is of two types: Visible and Invisible.
  • The cause of this issue is complex. The most likely reasons are Graduates who are not qualified, obsolete school curriculum, and technological improvements.

Examples

Example #1

John Doe graduated from the university in 2022 with a degree in electrical engineering. However, after his graduation, the only job he could find was as a retail sales clerk.

Although John has a job, his career does not reflect his skill set. Therefore, he is not unemployed but underemployed.

Example #2

Olivia, a college graduate, is capable enough to secure a placement at a high-paying job. However, due to increasing competition in the industry and the need to make ends meet, she chooses to work at a department store.

Even though she can find a better-paying job to match her skills, her inability to work in a demanding environment led to her underemployment.

Types

Visible

  • Visible underemployment is when employees work fewer hours than standard hours.
  • Even though they have the ability to work full-time, they are unable to find regular work.
  • Therefore, to make ends meet, they usually take on one or more than one part-time job.

Invisible

  • Invisible underemployment is when individuals work in roles that underutilize their skill sets.
  • For instance, Sarah worked as a partner in a legal firm for 5 years, but when she shifted jobs, she had to start from being an associate. Thus, underutilizing her skills.
  • However, it is very difficult to quantify this category as it requires extensive research.

How to Measure the Underemployment Rate using Formula?

We can compute the rate by dividing the number of underemployed citizens by the workforce size.

Underemployment Rate = Number of Underemployed Citizens / Workforce Size
  • The number of underemployed citizens is the total count of underemployed people in the entire population or nation.
  • The size of the workforce comprises individuals, both employed and unemployed, in an economy.

Underemployment Examples

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You can download this Underemployment Examples here – Underemployment Examples

Example #1

Country X has a total of 57 million underemployed citizens. Additionally, the total workforce is about 164 million. Calculate the underemployment rate.

Given,

underemployment-eg1 q

Solution:

Implementing the formula,

underemployment- eg 1 a

The underemployment rate for country X is 34.76%. More than a quarter of the country’s population needs to be more employed.

Example #2

Country Y has a working population of 240 million. The number of underemployed civilians is 30 million. Compute the underemployment rate.

Given,

eg2 q

Solution:

Implementing the formula,

Eg2 a

The underemployment rate for country Y is 12.50%. It suggests that less than a quarter of the country’s population needs to be more employed.

Top Ten Countries with Unemployment – 2022

Highest Unemployment 2022

  • As of October 2022, South Africa has the highest unemployment rate of about 34.6%. It is a member country of the G20 intergovernmental forum.
  • Turkey stands second with a 10.8% rate, followed by Brazil, France, and others.

These are the top ten countries with the highest unemployment in 2022:

Country

Unemployment Rate (2022)

South Africa 34.6%
Turkey 10.8%
Brazil 9.8%
France 7.5%
Argentina 6.9%
Indonesia 5.5%
Canada 5.3%
Russia 4%
United States of America 3.7%
Australia 3.6%

(Source: Statista)

Lowest Unemployment 2022

  • According to the Planning and Statistics Authority (PSA), Qatar remains at the top of the list of countries with the lowest unemployment rates.
  • According to the most recent data, Qatar’s unemployment rate remains stable at 0.1% as of 2020.

Here are the ten countries with the lowest unemployment rates:

Country

Unemployment Rate

Qatar 0.1%
Myanmar 0.5%
Thailand 1.1%
Cambodia 1.2%
Malawi 1.3%
Benin 1.5%
Burundi 1.6%
Cuba 1.7%
Kuwait 2.2%
Japan 2.8%

(Source: ilostat organization)

Causes

Graduates’ Skills and Available Jobs

  • Graduates from today’s educational systems in developed and developing countries need more skills for the current job markets.
  • Although the requirement for new talents is improving, the educational system is yet to incorporate recent trends and skills.
  • Thus, many graduates have to accept positions below their education and training level.

The Poverty Cycle

  • Poverty has a direct impact on both underemployment and unemployment.
  • It prevents families from providing their children with a good education.
  • Without a solid educational foundation, skilled, full-time employment prospects are slim.
  • Moreover, the cycle continues with future generations.

Unqualified Graduates

  • Many graduates need adequate work experience to meet the basic job market requirements.
  • However, due to the lack of opportunities to gain relevant experience, most graduates look for jobs in irrelevant sectors.

Population Growth

  • The world population stands at 8,011 million as of 17 January 2023 and is increasing exponentially.
  • Even though the demand for jobs is increasing, the job requirement hardly increases.
  • As a result, many people are either unemployed or working in jobs that do not match their education and skill level.

An Obsolete School Curriculum

  • It contributes significantly to it due to its slow adoption of new technology and occupational trends.
  • School subjects often use outdated syllabus which may be disadvantageous for the students.
  • It is why many companies no longer consider a college degree a prerequisite for employment.

Technological Improvements

  • Many people are losing their jobs as a result of technological advancements.
  • Computers and artificial intelligence (AI) devices rapidly replace cashiers, bank tellers, and many other occupations.
  • Thus, many professionals work in low-skilled, low-paying positions due to automation.

Underemployment vs Unemployment

Underemployment

Unemployment

It occurs when an employee’s skill set and educational background differ from available employment opportunities. It refers to an economic situation in which people actively looking for work cannot find a job.
The primary cause is a mismatch between the number of available jobs and people with the necessary skills and education. The leading causes of unemployment are an increase in production costs and a decrease in aggregate demand.
It is challenging to quantify because there need to be clear indicators. The rate of unemployment is applied to calculate the level of unemployment.
Example: Ethiopia, Nigeria, Iran, and India are some examples. Example: South Africa, Greece, and Spain are countries with high unemployment rates in recent years.

Final Thoughts

There are numerous compelling social and economic reasons to pay attention to the high underemployment rate. According to a study, it can cause poor physical and mental health, higher employee turnover, lower job satisfaction, and persistently lower income. Giving the right person the right job can help solve the issue.

Frequently Asked Questions (FAQs)

Q1. What is another name for Underemployment?

Answer: Disguised employment is another term one can use instead of underemployment. It means that even though the individuals are not unemployed, i.e., they have a job, they are not using their full potential at work.

Q2. Why is Underemployment a problem?

Answer: Underwork can cause poor mental health. Stress and anxiety arise from not performing, which creates feelings of inadequacy. Relationships can also suffer from unemployment. Underemployment can seriously affect a person’s mental and emotional health.

Q4. What are the two forms of Underemployment?

Answer: Visible and invisible unemployment are two forms of unemployment. Visible underemployment is when employees work less than the typical industrial work timings. For instance, capable full-time workers work part-time. On the other hand, when people work in positions that do not match their skills, it is invisible underemployment.

Q5. Why does Underemployment affect the economy?

Answer: Due to underemployment, average household income falls, and as a result, families start cutting costs. In turn, it reduces consumer demand, slowing business growth. Furthermore, it affects the nation’s gross domestic product and economic development.

Recommended Articles

EDUCBA hopes you have found this guide on “Underemployment” helpful. For further information, please see these articles:

  1. Seasonal Unemployment
  2. Unemployment Rate Formula
  3. How To Get a Bigger Job After Being Underemployed
  4. GDP

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