What is underemployment? What is the Difference between underemployment and unemployment?
Underemployment refers to a situation in which individuals are forced to work in low-paying or low-skill jobs. A worker may be considered underemployed if he/she holds a part-time job instead of a full-time one. It can also occur when a worker is qualified for a more senior position in their field but hold a lower-level job. An example would be someone with a law degree working as a legal clerk or a paralegal. Underemployment can cause problems when the wages or hours are not enough to support a family or to repay college student loans. The reasons behind underemployment range from low availability of jobs, lack of skills among educated students, lack of coordination between industry and universities, concentration of jobs in certain cities and many others.
There are two types of under-employment:
1. Visible underemployment: This type of underemployment happens when an individual works fewer hours than what is necessary for a full-time job in their chosen field. Due to the reduced hours, they may work two or more part-time jobs in order to make ends meet.
2. Invisible underemployment: It refers to the underemployment situation in which an individual is unable to find a job in their chosen field. Consequently, they work in a job that does not match their skill set and, in most cases, pays much below their customary wage. Difference: Being unemployed means you do not have a job, while underemployment means the job you have is inadequate-
• Unemployment: It is an economic situation where an individual who is jobless, qualified for a job, and has been actively looking for employment is unable to find a job. It is one of the major factors usually considered to indicate the economic status of a nation. Unemployment rate is the measure used to express the extent of this condition. High rates of unemployment result in economic and social crisis in any society which is civilized. When economic problems occur, they lead to reduced production of both goods and services, decreased income distribution, tax revenue loss, fall in the rate of GDP, and other adverse effects. A lower GDP ultimately results in high rate of unemployment. On the other hand, social problems affect the unemployed individuals and take a toll on them psychologically and financially. Depression resulting from the inability to fulfil their financial responsibilities on time may result in poor health, early deaths, or even suicides.
• Underemployment: It is an economic situation where a job that an individual is committed to perform does not utilize all the skills and education the employee possesses. It occurs when there is a mismatch between the availability of jobs and the education level and skills of the individuals. Most often, underemployment is connected to jobs that are low-paying or for a limited number of hours. The term is also a measure of labour utilization. When underemployment is high, the workforce is not being utilized to its full potential.
Parameters used to measure unemployment and underemployment:
• Unemployment is measured using the unemployment rate which is a representation of the number of unemployed individuals in the country. It is the percentage of the part of the labour force which is jobless. It rises and falls depending on the state of the economy. When the economy is poor and there is scarcity of jobs, for example, the unemployment rate is expected to rise.
• In contrast, there exists no distinct measure for underemployment due to the fact that invisible underemployment is almost impossible to measure. However, underemployment can be measured indirectly by calculating brain drain. Brain drain refers to the emigration of highly skilled and intelligent individuals from one country to another, where they expect better pay, better working conditions, and a better lifestyle. Job opportunities are normally scarce in developing economies and this leads to many professionals seeking employment abroad that matches their profiles.
Employment is the primary source of income for a person and hence, it is the source of economic growth of a nation. High rate of unemployment or underemployment suggests low economic development of a nation. When a person is unemployed or underemployed, it affects their financial status. The stress and anxiety as a result of not being able to make ends meet creates a sense of inadequacy. Dr Amartya Sen proved how a feeling of inadequacy is also a sign of Poverty among individuals in a country. This can seriously affect their mental and emotional health. Also, with inadequate income, families do not consume as many goods and services as before. The reduction in demand leads to slow business growth, pushing the economy towards a recession or depression due to low Gross Domestic Product (GDP), and little to no job growth.
Extra Information:
Causes:
• Causes of Unemployment: Unemployment is mainly caused by a rise in the cost of production and a drop in the aggregate demand. When the cost of production is high, employers target on minimizing expenditure and are therefore unlikely to hire new employees. They may even release some of the employees in order to cut on the production cost. A drop in the aggregate demand also contributes to unemployment as employers might consider cutting off some employees to avoid overstaffing. Other significant causes of unemployment are changes in technology and recession. Advancement in the technology compels the employers to look for new employees with the necessary skills to substitute the current unskilled employees, resulting in unemployment.
• Causes of Underemployment: One of the main reasons for underemployment is the business cycle the economy currently operates in. If the economy is currently in a recession or economic depression, it is unlikely that organizations will be hiring for many full-time positions. Underemployment also occurs when the supply of workers is greater than its demand, due to an increase in population growth or a decrease in the demand for a product. Another cause of underemployment is changes in the job market due to shifts in technology. As job descriptions change or jobs are automated, laid-off workers can be retrained or retired from the workforce