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Underemployment

Underemployment

BIBLIOGRAPHY

The labor force concept of underemployment can be defined as a comprehensive way to identify and measure the underutilization of labor resources. In this sense, it goes beyond plain unemploymentbeing jobless while looking for workto further include different forms of inadequate employment, such as being discouraged or subemployed, or employed involuntarily in part-time and low-income jobs with marginal or unstable labor market attachments.

The globalization of the world economy and the corresponding industrial restructuring of developed countriesaway from manufacturing and towards serviceshave had a considerable impact on the composition and characteristics of the labor market. While labor force participation has increased, it has also resulted in an important rise in employment hardship with the emergence, among a considerable portion of the labor force, of unstable, poorly paid, and often involuntarily part-time jobs. This new situation has led labor-market researchers to point out the need for a new term (beyond unemployment ) to better capture all meaningful forms of employment hardship.

Interestingly, the origin of this researchers concern can be traced back to the 1930s in the work of British economist Joan Robinson (19031983). At that time, she wisely argued that in a society where no regular system of unemployment benefits exists and where poor households are unlikely to be supported by social institutions (i.e., a social welfare system), individuals who are out of work and who cannot find a job fitting their skills will naturally employ their time as usefully as they possibly can.

Thus, except under peculiar conditions, a decline in effective labor demand which reduces the amount of employment offered in the general run of industries will not lead to unemployment in the sense of complete idleness, but this surplus of labor will rather get employment into a number of occupations still open to them [where] their productivity is less than in the occupations that they have left. (Robinson 1936, p. 226)

Robinson referred to this phenomenon as disguised unemployment. Other researchers later drew attention to the existence of such disguised unemployment in certain economic sectors (e.g., agriculture), particularly in the economies of developing countries (Moore 1953; Lewis 1954) where the presence of an unlimited supply of labor makes its marginal productivity negligible, zero, or even negative.

Sponsored by the International Labor Organization, labor statisticians have gathered on numerous occasions to discuss and develop concrete measures of underemployment. In this ongoing discussion, American sociologist Philip Hauser (19091994) made an important contribution by developing what became widely known as the labor utilization framework (LUF) to capture a more accurate picture of employment, acknowledging both the official forms of unemployment, as well as different categories of economically inadequate employment based on hours (involuntarily part-time work) and wages (poverty-level pay) (Hauser 1974). The LUF has evolved through time and now has both a substantial literature and a more elaborated set of subcategories (Clogg 1979; Sullivan 1978) to better capture the employment situation and to adapt more efficiently to datasets other than the U.S. Current Population Survey (CPS, compiled monthly by the U.S. Census Bureau for the Bureau of Labor Statistics), where all the original empirical work came from.

Nevertheless, the operational definitions of states of underemployment typically used by researchers can be summarized as follows, from the most to the least severe:

Subunemployed is a proxy for discouraged workers and includes individuals who are not currently working and who did not look for work during the previous four weeks because they felt no jobs were available.

Unemployed follows the official definition and includes those not working but who (1) have looked for work during the previous four weeks, or (2) are currently on layoff.

Underemployed by low hours (or involuntary part-time employment) parallels the official definition of those who are working part-time for economic reasons and includes those who are working less than thirty-five hours per week because they cannot find full-time employment.

Underemployed by low income (or working poor ) includes those whose labor market earnings during the previous year, adjusted for weeks and hours worked, were less than 125 percent of the official poverty threshold for an individual living alone.

Underemployed by occupational mismatch (or overeducated) includes those whose educational level (measured as years of schooling) is greater than one standard deviation above the mean education for workers with the same occupation.

All other workers are defined as adequately employed, while those who are not working and do not want to be working are defined as not in the labor force.

Of course, no standardized measure of any important concept will be perfect, and underemployment is not without flaws. Some of these deficiencies are related to problems with the operationalization itself (e.g., using poverty thresholds that ignore cost-of-living differences), while others have to do with other related forms of employment hardship, such as job security, which are not included in the definition. Notwithstanding, these criticisms are minor since underemployment provides a useful way to analyze trends over time, as well as inequality between groups in the prevalence of employment hardship.

In all years, these trends are unequivocally countercyclical, a phenomenon reflected in the fact that underemployment rose and then fell over the 1990s owing to the recession early in the decade and subsequent economic expansion. Inequality between groups in the risk of underemployment is often striking and should be an issue of great policy concern. Women, minorities, the young, and those with low educational attainment are all especially vulnerable to underemployment. Moreover, these vulnerabilities are often particularly acute among residents of rural areas and central cities. As a result, economists continue research (both theoretical and empirical) on the topic to further contribute to the understanding of these trends in employment hardship over time and between groups.

SEE ALSO Unemployable; Unemployment

BIBLIOGRAPHY

Clogg, Clifford C. 1979. Measuring Underemployment: Demographic Indicators for the United States. New York: Academic Press.

Hauser, Philip M. 1974. The Measurement of Labor Utilization. The Malayan Economic Review 19: 117.

Lewis, W. Arthur. 1954. Economic Development with Unlimited Supplies of Labor. Manchester School of Economic and Social Studies 22: 139191.

Moore, Wilbert E. 1953. The Exportability of the Labor Force Concept. American Sociological Review 18 (1): 6872.

Robinson, Joan. 1936. Disguised Unemployment. Economic Journal 46 (182): 225237.

Sullivan, Teresa A. 1978. Marginal Workers, Marginal Jobs: The Underutilization of American Workers. Austin: University of Texas Press.

Esperanza Vera-Toscano

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Underemployment Rate

Underemployment Rate

BIBLIOGRAPHY

Underemployment generally refers to one of several situations that result in employment in an economically inadequate position. In this context the underemployment rate refers to the fraction of those employed who are underemployed. Some scholars utilize an alternative version of this definition by considering some nonemployed individuals as underemployed. Regardless of the definition of underemployment, the concept evolved from inadequacies in the unemployment rate in capturing work-related hardships (Jensen and Slack 2003, p. 25).

Ignoring for now the definition of underemployment that includes nonemployed individuals, the underemployed work while incurring some form of employment-related hardship. This includes individuals working in occupations with an insufficient number of hours, individuals working in positions with insufficient pay, individuals working in occupations below their levels of educational attainment, and individuals working in positions involving some combination of the above scenarios. Because they have employment they are not considered to be unemployed according to the standard definition of unemployment.

First, underemployment refers to a situation where employees work fewer hours than they desire. Such an event may occur because of real-world labor-market rigidities such as a fixed-hour workweek. For example, workers desiring a thirty-hour workweek at a job that requires forty hours for full-time employees or twenty hours for part-time employees will be considered underemployed if they accept the part-time position. A similar case occurs when workers accept part-time employment without choice, often referred to as involuntary part-time. This is the most widely cited reference to the underemployment rate, perhaps because it is easier to measure than the other types of underemployment. John Ham (1982) estimates that in the United States in 1970 over a quarter of the labor force was either unemployed or underemployed according to the hours worked measurement of underemployment.

Alternatively, workers may accept positions that offer the desired workweek but with low pay. In this case workers will be considered underemployed when their expected wagesbased on personal (i.e., educational attainment, experience) and job-specific characteristicsare higher than their actual wages. This type of underemployment may occur within the context of either full-time or parttime employment. In a sense, workers accept such employment rather than become unemployed. Measuring the underemployment rate by this definition is difficult due to the need for an empirical estimation of ones expected wage.

Some scholars consider all working-poor individuals to be underemployed, thereby eliminating the need for wage estimates. Such scholars would likely categorize a full-time employee earning the minimum wage as underemployed. Other researchers note that this need not be the case if the earnings of low-wage individuals are consistent with their level of human capital. Among those who consider all working poor as underemployed, a debate exists as to what the threshold level of income should be. Frequently a percentage of the official poverty threshold (either 100% or 125%) or a fraction of the median wage (from one-third to two-thirds) is utilized. Critics contend that such levels are arbitrarily determined.

Moreover, some workers are in occupations with an adequate workweek and pay but are not using all of their human capital, most notably by not fully using their educational qualifications. For example, individuals with a bachelors degree working in positions requiring only a high-school diploma are considered underemployed when compared to degree holders with higher-level jobs. As noted by Stephen Rubb (2005), the same individuals are considered overeducated when compared to others in their own occupational category. Measuring the underemployment rate by this definition is difficult due to the need for an estimation of the required level of education (and other human capital characteristics) for various occupations. Implicit in such a calculation of an occupational mismatch is the idea that all jobs within an occupational category are homogenous and that educational quality is uniform. Many scholars find such assumptions objectionable. Due to such complexities, researchers tend to focus on underemployment from other categories. A similar concept is disguised unemployment introduced by Joan Robinson (1937, p. 84) where workers productivity is less than in the occupation they have left, presumably because the workers new occupation does not make full use of their human capital.

It should be noted that many scholars (e.g., Jensen and Slack 2003) use underemployment to capture all forms of employment hardship, including those associated with nonemployment. As such, their definition of underemployment includes both discouraged and unemployed workers in addition to those employed in inadequate situations. For such scholars, the underemployment rate is the fraction of the labor force that is underemployed with a slight adjustment to include discouraged workers as part of the labor force. Discouraged workers are individuals who are neither employed nor looking for work, and typically they are not counted as part of the labor force. Using such a definition, Jensen and Slack find that in the United States in 2000 the overall underemployment rate was 13.5 percent, and that it was notably higher during the global recession in the early 1990s. In their model the most common type of underemployment is the working poor. This is followed by unemployment, insufficient hours, and discouraged workers as the second, third, and least common types of underemployment. They do not estimate the level of occupational mismatches in their calculation of the underemployment rate. Researchers who include nonemployed workers in their estimates of the underemployment rate tend to also automatically include working-poor individuals in their calculation. In general, their work tends to focus on issues involving the equitable distribution of income. Other researchers disagree with the inclusion of discouraged and unemployed workers in the estimates of the underemployment rate, contending that underemployment implicitly infers employment.

SEE ALSO Natural Rate of Unemployment; Unemployment

BIBLIOGRAPHY

Ham, John C. 1982. Estimation of a Labour Supply Model with Censoring Due to Unemployment and Underemployment. Review of Economic Studies 49 (3): 335354.

Jensen, Leif, and Tim Slack. 2003. Underemployment in America: Measurement and Evidence. American Journal of Community Psychology 32 (1/2): 2131.

Robinson, Joan. 1937. Disguised Unemployment. In Essays in the Theory of Employment. London: Macmillan.

Rubb, Stephen. 2005. Overeducation, Undereducation, and the Theory of Career Mobility: A Comment and a Note on Underemployment. Applied Economic Letters 12: 115118.

Stephen Rubb

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under-employment

under-employment Suboptimal utilization of labour, also termed subemployment. Visible under-employment involves working fewer hours than a person normally works, or prefers to work. Invisible under-employment involves under-utilization of a person's skills, qualifications, or experience in a job that is lower grade than their usual job, or involves a skills mismatch, and may lead to low productivity and low income. The majority of part-time jobs are taken voluntarily in preference to full-time jobs, and so do not constitute visible under-employment. However, part-time jobs often involve invisible under-employment, for example when they are taken by women who revert to less skilled work on their return to the labour-market after an absence for child-rearing.

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underemployed

un·der·em·ployed / ˌəndərimˈploid/ • adj. (of a person) not doing work that makes full use of their skills and abilities. ∎  (of a person) not having enough paid work. DERIVATIVES: un·der·em·ploy·ment / -ˈploimənt/ n.

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underemployed

underemployedavoid, Boyd, Coed, droid, Floyd, Freud, Lloyd, overjoyed, self-employed, unalloyed, underemployed, unemployed, void •geoid • amoeboid (US ameboid) •globoid • cuboid • gadoid • typhoid •fungoid • discoid • tabloid • colloid •celluloid • mongoloid • alkaloid •coralloid • crystalloid • prismoid •arachnoid • sphenoid • hominoid •crinoid, echinoid •solenoid • humanoid • paranoid •hypoid • anthropoid • gabbroid •android • steroid • thyroid • hydroid •spheroid • meteoroid • Murgatroyd •Polaroid •haemorrhoid (US hemorrhoid) •asteroid • schizoid • factoid • mastoid •deltoid • planetoid • ovoid • trapezoid •rhizoid

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