Reviewed by Anjaneyulu | Updated on Sep 28, 2020


Underemployment is a condition in which workers are employed in less than full-time or regular jobs or insufficient jobs for their training or economic needs. Also, underemployment is a worker's underuse because a job does not use the skills of the worker, i.e. part-time, or leaves the worker idle.

Examples include maintaining a part-time job while desiring full-time work, and over-qualification in which the employee has qualifications, experience, or expertise beyond the work requirements.

Causes of Underemployment

A recession and the resulting cyclical unemployment may result in underemployment. Change in technology also causes underemployment. For example, ATMs and mobile banking replace the need for many bank tellers. These once were the entry-level positions for a finance and banking career.

As a result, plenty of college grads that were finance majors are taking what they can. They may be winding up as home health aides, waiters, or drivers for Uber because digital technology does not easily replace these roles.

Effects of Underemployment

Underemployment has similar effects to those of unemployment. Both of these cause higher levels of poverty. Families don't buy as much without adequate income. This reduces consumer demand and slows business growth. As a result, the gross domestic product of the nation is lower, similar to employment growth. It's a vicious spiral downward.

When underemployment persists, staff with on-the-job or training lose the ability to upgrade their skills. They may not be able, without training, to return to their former field. Many downscale their lifestyle and embrace underemployment over the long term, and that causes structural unemployment.

Underemployment in India

In India, the fundamental problem is not unemployment but serious underemployment. According to the National Sample Survey Office (NSSO) statistics, India's highest four-decade unemployment rate is only 6.1 per cent, which in many Western countries is considered full-employment.

Therefore, unless people move from low-income employment in agriculture and unorganized sectors to higher-earning jobs in industry and services, there would still be a lot of working Indians living in poverty.

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