Underemployment - Underutilization of Skills

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 degree may be tending bar or driving a cab. 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 discriminated against, lack appropriate trade certification or academic degrees (such as a high school or college diploma), have disabilities, or have served time in prison.

Two common situations which can lead to underemployment are immigrants and new graduates. When highly-trained immigrants arrive 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 other countries immigrate, they may be unable to work in their profession, and they may have to seek menial work. New 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. So a recent graduate with a Master's degree in accounting may have to work in a low-paid job 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 market-place demand. While it is costly in terms of money and time to acquire academic credentials, many types of degrees, particularly those in the fine arts and classics, are valued poorly by marketplace. A number of surveys show that skill-based underemployment in North American and Europe can be a long-lasting phenomenon. If university graduates spend too long in situations of underemployment, the skills they gained from their degrees can atrophy from disuse or become out of date.

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 skill-based underemployment. For example, government-imposed restrictions on enrollment in public universities in fields with a very low labor market demand. 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. Underemployment is more prevalent during times of economic stagnation (during recessions or 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 markets typically do not "clear" using wage adjustment. Instead, there is non-wage rationing of jobs.