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Definition of Underemployed:

Underemployed describes an individual who must accept a part-time position or a job that is ill-suited to the worker’s education or skill level.

Detailed Explanation:

Unlike unemployed workers, underemployed people are employed. However, their jobs are inadequate – either because it does not provide sufficient hours or because the worker is qualified for a higher skilled job. 

Visible underemployment describes a person who accepts a job working fewer hours than desired. For example, Dennis is a welder. He helped manufacture cars and worked 40-hour weeks for many years. He was recently let go but quickly found another part-time welding job that pays less. Dennis would prefer to work 40 hours, so he is underemployed. Visible underemployment is referred to as “visible” because it is relatively easy to quantify.

Invisible underemployment refers to circumstances where an individual accepts a job below their skill level. For example, Joan recently graduated with a bachelor’s degree in marine biology. Her parents live in Ohio, where few jobs require a marine biology degree. Joan accepts a full-time job as a retail clerk, hoping to land a higher-paying job in her field. Clearly, Joan is not using her training as a marine biologist. This type of underemployment is referred to as invisible underemployment because it is difficult to track. 

Underemployment also describes labor utilization. When underemployment is high, the workforce is not functioning to its full potential.

The underemployment rate usually increases during dips in a business cycle. High unemployment rates during a recession will likely increase the underemployment rate. Mounting bills and dwindling savings may prompt an unemployed worker to accept a job for which he is overqualified. Recent college graduates are frequently underemployed because businesses prefer hiring more experienced workers. They may be forced to accept any job until the economy rebounds. Also, businesses frequently reduce labor hours during a recession, increasing visible underemployment. 

Changes in technology impact underemployment. Robots replaced many highly skilled workers in many industries. Those workers who accept lower-paying jobs that do not use their skills are underemployed. 

Discrimination increases underemployment. Employers may be less likely to place highly trained foreign workers or workers with a disability in jobs for which they are qualified. Instead, these workers may begin employment in an entry position.

Here's a fun video explaining the concept more.

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