Underemployment
Underemployment occurs when employed individuals work involuntarily fewer hours than desired or hold positions that underutilize their skills, education, or experience, representing a form of labor market inefficiency distinct from unemployment.[1][2] This condition encompasses time-related underemployment, where workers seek additional hours, and skills-related underemployment, involving mismatches between job requirements and worker capabilities.[3] Unlike unemployment, which tracks those actively seeking but unable to find work, underemployment highlights deficiencies within existing employment, often masking broader slack in economic output potential.[4] International standards from the International Labour Organization frame underemployment as the underutilization of employed persons' productive capacity, complementing unemployment statistics to reveal total labor deficiencies.[5] In the United States, the Bureau of Labor Statistics quantifies it via the U-6 measure, which includes the unemployed, marginally attached workers, and those part-time for economic reasons; this rate reached 8.1 percent in August 2025, more than double the official U-3 unemployment rate of 4.3 percent for the same period.[2][6] Empirical evidence links rises in underemployment to recessions, skills-education mismatches, and barriers to labor mobility, with post-recession recoveries often leaving persistent overqualification among workers.[7][8] Underemployment contributes to reduced earnings, job dissatisfaction, and adverse health outcomes compared to full employment, underscoring its role as a drag on individual and aggregate productivity.[9] Measurement challenges persist, as standard metrics may underestimate subjective underutilization or fail to capture dynamic thresholds of adequate employment, prompting calls for refined indicators like individualized labor utilization frameworks. Despite methodological debates, underemployment rates signal structural labor market frictions beyond cyclical unemployment, influencing policy debates on education alignment, wage floors, and work-hour regulations.[10]Conceptual Foundations
Definition and Distinctions
Underemployment occurs when individuals in employment fail to fully utilize their productive capacity, either through insufficient hours worked or mismatch between their skills, education, and job requirements. The International Labour Organization (ILO) formally measures time-related underemployment—its most standardized component—as employed persons who, during a reference period, worked fewer hours than a specified threshold (typically 40 per week), sought or were available for additional work, and whose underutilization stems from economic factors rather than personal choice.[11] This definition emphasizes involuntary constraints, excluding voluntary part-time work or self-imposed limits. Broader conceptualizations extend to skills-related underemployment, where workers hold positions below their qualification levels, such as college graduates in low-skill service roles, though this lacks the ILO's universal measurability due to reliance on subjective assessments of overqualification.[12] Underemployment differs fundamentally from unemployment, which the ILO defines as persons without any work, actively seeking employment, and immediately available to start.[5] Unemployed individuals contribute zero labor supply in the measured period, whereas underemployed workers provide partial output, often masking true labor market slack; for instance, U.S. Bureau of Labor Statistics data from 2023 showed underemployment rates exceeding official unemployment by factors of 1.5 to 2 times when including involuntary part-timers and marginally attached workers.[13] This distinction highlights causal differences: unemployment reflects outright job absence, frequently tied to demand shortfalls, while underemployment arises from supply-demand mismatches within employment, such as rigid scheduling or credential inflation. Economists note that underemployment can perpetuate income losses and skill atrophy akin to unemployment but without qualifying for standard jobless benefits, complicating policy responses.[4] Further distinctions separate visible underemployment, observable via hours deficits (e.g., part-time workers desiring full-time roles), from invisible underemployment, which involves qualitative mismatches like overeducated labor in routine tasks without evident time shortages.[14] Visible cases align closely with cyclical downturns, as seen in post-2008 recession spikes where involuntary part-time employment in the U.S. rose to 8.9% of the workforce by 2010.[12] Invisible underemployment, conversely, correlates with structural shifts, such as automation displacing mid-skill jobs, leading to persistent overqualification rates of 20-30% among young graduates in OECD nations as of 2022. Neither equates to disguised unemployment, a term for surplus labor in low-productivity sectors like agriculture, where workers exceed optimal staffing but remain employed due to institutional factors rather than market signals.[15] These categories underscore underemployment's multifaceted nature, demanding metrics beyond binary employed-unemployed dichotomies for accurate labor assessment.Types of Underemployment
Underemployment encompasses multiple forms where employed individuals experience inadequate work relative to their capacities or preferences. The International Labour Organization (ILO) distinguishes between time-related underemployment, often termed visible underemployment, and invisible underemployment arising from skills underutilization.[1] Time-related underemployment affects workers who are employed but desire and are available for additional hours beyond a threshold, typically less than 40-48 hours per week, due to economic or job constraints.[16] This type captures involuntary part-time employment, where individuals work fewer hours than full-time equivalents but seek more.[17] Invisible underemployment, conversely, involves the underutilization of workers' skills, qualifications, or experience in roles below their competency level, such as overqualified professionals in low-skill positions.[18] This skills mismatch manifests as overeducation or overqualification, where educational attainment exceeds job requirements, leading to wage penalties and reduced productivity.[19] Studies indicate that invisible underemployment persists even in low unemployment environments, driven by structural barriers rather than cyclical downturns.[20] Additional classifications include income-related underemployment, where earnings fall below a living wage threshold despite full-time work, though this is less standardized across metrics.[14] The OECD recognizes underemployment's components, including involuntary part-time and skills gaps, which rose to 5.5% across member countries by 2017, reflecting both cyclical recovery lags and structural shifts like automation.[21] These types often overlap, complicating measurement, as a single worker may face both time shortages and skill mismatches simultaneously.[22]Measurement and Data
International and National Metrics
The International Labour Organization (ILO) establishes global standards for measuring underemployment as part of labour underutilization, complementing unemployment statistics to capture broader inefficiencies in labour markets.[1] Time-related underemployment, the primary quantifiable metric, identifies employed individuals working fewer hours than a national threshold (typically 40-48 hours per week) who seek additional work, are available for it, and face constraints due to economic factors such as slack demand.[23] This rate is calculated as the share of time-related underemployed persons in total employment, with ILOSTAT providing harmonized data across countries; for instance, global estimates indicate varying prevalence, often higher in developing economies where informal work predominates.[24] Invisible underemployment, involving skills or qualification mismatches, is harder to quantify and relies on supplementary surveys assessing whether workers' competencies exceed job requirements, though it lacks uniform international aggregation.[1] The ILO's broader labour underutilization indicator combines the unemployment rate, time-related underemployment rate, and the potential labour force (those not in employment but wanting and available for work, yet not actively seeking due to discouragement), expressed as a percentage of the extended labour force.[23] This composite metric addresses limitations in unemployment data alone, which may understate slack in economies with high part-time or informal employment. The Organisation for Economic Co-operation and Development (OECD) adopts similar harmonized approaches, defining underemployment primarily through involuntary part-time work (those desiring full-time jobs but constrained by economic reasons) and tracking it alongside unemployment in its Employment Database.[25] OECD data, drawn from national household surveys, show underemployment rates averaging around 5-6% in member countries in recent years, reflecting both cyclical fluctuations and structural shifts like increased female labour participation in part-time roles.[21] Nationally, metrics diverge from international standards to incorporate local labour market nuances, often expanding beyond ILO definitions to include broader underutilization. In the United States, the Bureau of Labor Statistics (BLS) publishes six alternative measures (U-1 through U-6) from the Current Population Survey, with U-3 as the official unemployment rate and U-6 as the most comprehensive gauge of underemployment.[2]| Measure | Description | Components |
|---|---|---|
| U-1 | Persons unemployed 15 weeks or longer, as a percent of the civilian labor force | Long-term unemployed only |
| U-2 | Job losers and persons who completed temporary jobs, as a percent of the civilian labor force | Involuntary job separations |
| U-3 | Total unemployed, as a percent of the civilian labor force (official rate) | All actively seeking work |
| U-4 | U-3 plus "discouraged workers" (those not seeking work due to perceived lack of opportunities) | Adds marginally attached who are discouraged |
| U-5 | U-4 plus other "marginally attached workers" (want and available for work but not actively seeking) | Broader non-participation |
| U-6 | U-5 plus total employed part time for economic reasons (want and available for full-time work) | Includes involuntary part-time underemployment[2] |