Underemployment 318784 219998216 2008-06-17T20:31:59Z OnBeyondZebrax 933709 /* Underuse of employed workers */ add comments In [[economics]], the term '''underemployment''' has three different distinct meanings and applications. While it is related to [[unemployment]], a situation in which a person who is searching for work cannot find a job, in the case of underemployment, a person is working. All three of the definitions of "underemployment" involve underutilization of labor that critics say is missed by most official (governmental agency) definitions and measurements of [[unemployment]]. The term can describe the [[employment]] of workers with high [[skill]] levels in low-[[wage]] jobs that do not require such abilities, as in the case of a medical doctor who is driving a cab. A related kind of underemployment refers to "involuntary part-time" workers. These are workers who could (and would like to) be working for a full work-week who can only find part-time work. The term is also be used in [[regional planning]] to describe regions where [[economic activity]] rates are unusually low, due to a lack of job opportunities, [[training]] opportunities, or due to a lack of services such as [[childcare]] and [[public transport|public transportation]]. The third definition of describes the opposite phenomenon: "overstaffing" or "hidden unemployment," the practice in which [[business]]es or entire [[economics|economies]] employ workers who are not fully occupied [[i.e.]] who are currently not being used to produce goods or services due legal or social restrictions or because the work is highly seasonal. ==Underutilization of skills== In one usage, underemployment describes the [[employment]] of workers with high [[skill]] levels in low-[[wage]] jobs that do not require such abilities. For example, someone with a college [[academic degree|degree]] may be [[bartender|tending bar]] or driving a cab or being a cashier. Alternatively, a skilled machinist may be working at a [[fast-food]] outlet. This may result from the existence of [[unemployment]], which makes workers with bills to pay (and responsibilities) take almost any jobs available, even if they do not use their full talents. This can also occur with individuals who are being [[discrimination|discriminated]] against, lack appropriate [[trade certification]] or [[academic degree]]s (such as a [[high school]] or [[college]] [[diploma]]), have disabilities, or have served time in [[Prison|jail]]. Two common situations which can lead to underemployment are immigration and new graduates. When highly-trained immigrants arive in a country, their foreign credentials may not be recognized or accepted in their new country, or they may have to do a lengthy or costly re-credentialing process. As a result, when doctors or engineers from non-Western countries immigrate to North America, they may be unable to work in their profession, and they may have to seek work as a cab driver or cashier. New college or university graduates may also face underemployment, because even though they have completed the technical training for a given field for which there is a good job market, they lack experience. As a result, a recent graduate from a Master's degree in accounting may have to work as a cashier or restaurant worker until they are able to find work in their field. Another example of this is someone who holds high quality skills for which there is low [[demand|market-place demand]]. While it is costly in terms of money and time to acquire [[academic degree|academic credentials]], many types of degrees, particularly those in the fine arts and classics, are valued poorly by [[market]]place. As a result, people with Master's degrees or PhDs in music or literature often end up taking jobs as store clerks or office workers, that do not utilize their full educational potential. If this type of underemployment was only a short-term problem, it might be acceptable. However, a number of surveys show that skill-based underemployment in North American and Europe can be a long-lasting phenomenon. If a university graduate spends too long in a situation of underemployment, the skills they gained from their degree can atrophy from disuse, or even, in the case of computers or other technical fields, become out of date. If all of the underemployed MAs and PhDs had studied in private universities, without taking on government student loans, then their underemployment would be only a personal, private tragedy. However, given that most university study is subsidized (either because it takes place at a state or public university, or because the student receives government loans or grants), this type of underemployment may also be an ineffective use of public resources. Several solutions have been proposed to reduce the level of skill-based underemployment. Government-imposed restrictions on enrollment in public universities in fields with a very low labour market demand (e.g., music, fine arts, literature, etc.) to only the most promising students, or the top schools would reduce the number of graduates in these underemployment-prone fields. However, the university system would be unlikely to support such a proposal, as it would reduce student enrollment. A related kind of underemployment refers to "involuntary part-time" workers. These are workers who could (and would like to) be working for the standard work-week (typically [[full-time]] [[employment]] means 40 hours per week in the [[United States]]) who can only find part-time work. Underemploment is more prevalent during times of economic stagnation (during [[recession|recessions]] or [[depression (economics)|depressions]]). Obviously, during the [[Great Depression]] of the 1930s, many of those who were not unemployed were underemployed. These kinds of underemployment arise because [[labor market]]s typically do not "[[market clearing|clear]]" using [[price adjustment|wage adjustment]]. Instead, there is non-wage [[rationing]] of jobs. ==Underuse of economic capacity == Underemployment can also be used in [[Regional planning]] to describe localities where [[economic activity]] rates are unusually low. This can be induced by a lack of job opportunities, [[training]] opportunities, or services such as [[childcare]] and [[public transport|public transportation]]. Such difficulties may lead [[Residency (domicile)|residents]] to accept economic inactivity rather than register as [[unemployment|unemployed]] or actively seek jobs because their prospects for regular employment appear so bleak. (These people are often called [[discouraged worker]]s and are not counted officially as being "unemployed.") The tendency to get by without work (to exit the [[labor force|labour force]], living off relatives, friends, personal savings, or non-recorded economic activities) can be aggravated if it is made difficult to obtain unemployment benefits. Relatedly, in [[macroeconomics]], "underemployment" simply refers to ''[[unemployment#Cyclical unemployment|excess unemployment]]'', i.e., high unemployment relative to [[full employment]] or the [[natural rate of unemployment]], also called the [[NAIRU]]. Thus, in [[Keynesian economics]], reference is made to [[underemployment equilibrium]]. Economists calculate the cyclically-adjusted [[full employment]] unemployment rate, e.g. 4% or 6% [[unemployment]], which in a given context is regarded as "normal" and acceptable. Sometimes, this rate is equated with the [[NAIRU]]. The difference between the observed unemployment rate and cyclically adjusted full employment unemployment rate is one measure of the societal level of underemployment. By [[Okun's Law]], it is correlated with the gap between [[potential output]] and the actual real [[gross domestic product|GDP]]. This "GDP gap" and the degree of underemployment of labor would be larger if they incorporated the roles of underemployed labor, involuntary part-time labor, and discouraged workers. ==Underuse of employed workers== The third definition of "underemployment" describes a polar opposite phenomenon: to some [[economist]]s, the term refers to "overstaffing" or "hidden unemployment," the practice of [[business]]es or entire [[economics|economies]] employing workers who are not fully occupied [[i.e.]] who are currently not being used to produce goods or services (in other words, employees who are not [[productivity|economically productive]], or underproductive, or [[economic inefficiency|economically inefficient]]). This may be because of legal or social restrictions on firing and lay-offs (e.g. union rules requiring managers to make a case to fire a worker or spend time and money fighting the union) or because they are ''overhead'' workers, or because the work is highly seasonal (which is the case in [[accounting|accounting firms]] focusing on [[tax]] preparation, as well as [[agriculture]]). This kind of underemployment does ''not'' refer to the kind of non-work time done by (say) [[firefighters]] or [[lifeguards]], who spend a lot of their time waiting and watching for emergency or rescue work to do; this kind of activity is necessary to ensure that if (e.g.) three fires occur at once, there are sufficient firefighters available. Critics of governments from the [[public choice]] school argue that government public services tend to add more staff than they need, because they claim that government managers have an incentive to "empire build"; that is, to increase their apparent importance by creating a larger body of staff (i.e., an "empire") for them to manage. They argue that managers hire a team of technical advisors and then create subordinate groups underneath them to enhance their stature; however, these staffers may have little actual work to do. This kind of underemployment may exist for ''[[structural]]'' or ''[[business cycle|cyclical]]'' reasons. In [[Western society|Western]] economies, some firms become insulated from fierce competitive pressures and grow [[inefficiency|inefficient]], because they are awarded a government monopoly (e.g., telephone or electrical utilities) or due to a situation of abuse of market power (e.g., [[monopoly]]). As such, if they may employ more workers than necessary, they might not be getting the market signals that would pressure them to reduce their labour force, and they may end up carrying the resultant excess [[cost]]s and depressed [[profit]]s. In some countries, labour laws or practices (e.g. powerful [[labor union|union]]s) may force employers to retain excess employees. Other countries ([[e.g.]] [[Japan]]) often have significant cultural influences (the relatively great importance attached to [[worker solidarity]] as opposed to [[shareholder]] rights) that result in a reluctance to shed labour in times of difficulty. In Japan, there is a long-held tradition that if a worker commits to serve a company with long and loyal service, the company will, in return, keep the worker on the payroll even during economic downturns. In [[central planning|centrally-planned economies]], lay-offs were often not allowed, so that some state-run companies would have periods when they had more workers than they needed to complete their tasks. Cyclical underemployment refers to the tendency for the [[capacity utilisation rate]] of firms (and therefore of their demand for labor) to be lower at times of [[recession]] and/or depression. At such times, underemployment of workers may be tolerated — and indeed may be wise business policy — given the financial cost and the degradation of [[morale]] from shedding and then re-hiring staff. Alternatively, paying underused overhead workers is seen as an investment in their future contributions to production. This kind of underemployment has been given as a possible reason why [[Airbus]] gained [[market share]] from [[Boeing]]. Unlike Airbus, which had more flexibility, Boeing was unable to ramp up [[Production, costs, and pricing|production]] fast enough when prosperous times returned because the company had dismissed a great part of its personnel in lean times. Another example is the [[tourism]] sector, which is faces cyclical demand in areas where attractions are weather-related. In some tourism sectors, such as the sun and sand tours operated by [[Club Med]], the company can shed bartenders, lifeguards, and sports instructors, and other staff in the off-season, because there is such a strong demand amongst young people to work for the company, because its glamorous beachfront properties are desirable places to work. However, not all tourism sectors find it so easy to recruit staff. Some tourism sectors require workers with unusual or hard-to-find skills. Northern Ontario hunting and fishing camps that require skilled guides may have an incentive to retain their staff in the off-season. Another example is companies which run tours for foreign tourists using staff speaking the travellers' native tongue. In Canada, guided tours are available for Japanese and German tourists in their native languages; in some locations, it may hard for companies to find Japanese- or German-speaking staff, so the companies may retain their staff in the off-season. ==See also== * [[Unemployment]] * [[Employment]] * [[Labor force]] * [[Work force]] * [[Macroeconomics]] * [[Microeconomics]] * [[Supply and Demand]] * [[Wage|Wages and Salaries]] * [[Occupational Outlook Handbook]] * [[Discrimination]] * [[Poverty]] * [[Working poor]] ==Further reading== * Dooley, David and JoAnn Prause. ''The Social Costs of Underemployment: Inadequate Employment as Disguised Unemployment''. Cambridge University Press. ISBN-13: 9780521810142 | ISBN-10: 0521810140. ==External links== * [http://www.ukcpr.org/Publications/Bollinger_DP2003-08.pdf A Study of Underemployment in Kentucky (from the University of Kentucky)] * [http://www.aph.gov.au/library/pubs/rn/1999-2000/2000rn27.htm A Study of Underemployment and Overwork in Australia (from the Australian Parliamentary Library)] * [http://change.monster.com/articles/underemployment/ What Can You Do About Underemployment? (career advice article)] [[Category:Employment]] [[de:Unterbeschäftigung]] [[he:אבטלה סמויה]]