Underemployment vs. Unemployment | What to Know  

Underemployment is an often misunderstood part of the economy. Unemployment is a term that refers to the number of people who want a job and do not have one. Underemployment represents people who are working but are not working in a job that matches their skills or abilities, often leading to earning less than what he or she should earn. When a person cannot find a job that matches their availability, skills, and experience, that is called underemployment. When considering who has a job and how many people are without one, it’s critical to understand the full picture.

How Underemployment Differs from Unemployment

A person who is underemployed is working, but they are not working or earning as much as they would like to or to their full abilities. This may be related to their experience in a field, abilities, or other skills. Consider a few examples of underemployed individuals:

  • Someone wants to work at a full-time job but takes a part-time position instead.
  • A person is working at an entry-level job even though they have experience and qualifications for a senior position.
  • Someone has an advanced degree but is working in a field that does not require a degree.

Underemployment is sometimes desirable for the individual. It may be that they do not want the responsibilities of a more advanced position or that they need to work part-time hours to meet needs or other obligations.

Unemployment, by contrast, is simply not having a job but wanting to work. This is a person that may be having a hard time finding a position he or she qualifies for. They may be looking for opportunities, but failing to land a job.

There are two types of underemployment. Visible underemployment occurs when a person is working fewer hours or earning a lower wage in their chosen field. Invisible underemployment occurs when a person is unable to find a job within their chosen field at all, and they take a job that does not fit their skills.

How Underemployment Negatively Impacts Employees

While there may be advantages to being underemployed, there are some restrictions and limitations on it as well. Even if you want to be working part time, being underemployed can lead to challenges later. For example, you may want to change jobs later, but now you may not see as many opportunities available to you. That’s because your more recent job experience is in a lower field. Prospective employers may question that.

As a worker in general, high underemployment is worrisome. If you want to change jobs later, you are now competing with both people who are unemployed and those who are willing to accept underemployment. As a result, prospective employers may see a person who has far more skills than you earning less. That may become a problem over time across the industry if more people decide to take jobs that undercut their abilities.

More so, when any worker wants a raise, he or she must show that they are qualified to earn more for the work they do. If there are underemployed individuals working for the company, you have less ability to bargain for your salary increase.

For those who are working as an underemployed individual, there are some disadvantages to consider beyond this. For example, the wages earned or the number of hours available may not be enough to support the needs of your family. You may struggle with balancing your budget. It may also make going to college less beneficial in the long run. Some workers have trouble overcoming the stresses of underemployment. They may find it hard to get out of these positions over time because they lack newer, recent skills.

Why Does Underemployment Happen?

A working person who wishes to find a job that fits their skills but struggles to do so may be tempted to take a job that’s under them. This can happen for various reasons including the following:

  • Cyclical unemployment: One reason this occurs is when the economy is recovering from a period of recession. At that time, the number of people who are unemployed is high, often higher than the number of jobs available. This leads to high levels of underemployment (as well as unemployment).
  • College students: Those who have recently graduated from college face the difficult task of finding a job that fits their career objectives and education while not having any real-world experience. Many face a temporary period of time of underemployment as they work towards finding better-paying positions in their field. They may take jobs to fill the gap in the meantime.
  • Tech improvements: One of the most noted recent reasons for underemployment is the lack of skill in areas of technology. Some people may find that the skills they had in the field are no longer good enough to meet the technological requirements of today’s modern world.
  • Discrimination and barriers: There are situations where people may not seem to get into a job because of discrimination or because they are young. Others may have to find ways to balance families and that may mean they are not available for enough hours of work to meet their goals.
  • Low demand: Another reason for this type of outcome is low demand for the skills they have. The local job market may not have enough positions in the field of their study, for example. They may take a part-time job to make ends meet because there are no jobs available locally to them.

There are various other reasons underemployment can occur. As noted, sometimes people do not want to take positions that are at their skill level or experience range. While that may be okay from a personal standpoint, for most people it does not offer the same advantages.

What Can You Do If You Are Underemployed?

The big question for those who are in this situation is what to do about their situation. There are multiple potential outcomes here. In some situations, gaining additional training may help to support the lack of a specific skill or having a job that is no longer in demand. For example, for those who may have skills that are outdated as a result of a change in technology or innovation in the industry, gaining new skills may be helpful.

In other cases, it can be hard to move beyond underemployment unless there is one-on-one help and support in finding a better-fitting job. That may mean networking in the field or working to find resources that can help.

The best ways to avoid underemployment include:

  • Having a strong network to rely on.
  • Work to build your resume through new skills and experiences.
  • Search for your ideal position and apply heavily for it.
  • Keep an eye on the economy. If you are in a position for a new job now, make sure the market is capable of helping you find it.

At Goodwill, our team works closely with individuals who need those extra skills to find the job they desire. We also offer a full network of companies that are looking for people with core skills. If you are finding it difficult to find a position that fits your needs, our team is ready to help you to explore new opportunities.

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