What Is Underemployment? (With Examples)

By Sky Ariella
Sep. 21, 2022

Find a Job You Really Want In

A job that isn’t living up to expectation in terms of the hours and role is often called underemployment.

Underemployment puts on a lot of different faces. Sometimes, it’s when your job isn’t utilizing your abilities to the fullest potential. Another employee might experience underemployment when they aren’t scheduled for enough hours to make ends meet.

Recognizing the reasons for unemployment is a good start towards improving the circumstance.

Key Takeaways:

  • Underemployment is when an employee works at a position that does not meet their skill level and expectations, or an employee fails to use their skills appropriately.

  • The three types of underemployment are lacking hours, overqualification, and idleness.

  • Underemployment can happen due to overstaffing, a recession, and technological changes.

  • Learning new skills, a target job search, and networking are all ways to help break out of underemployment.

What Is Underemployment? (With Examples)

What Is Underemployment?

Underemployment is the underuse of an employee because they are overqualified, lack hours, or are left idle.

It is a common scenario for many people across the country. Underemployment is a significant cause to poverty, especially when due to reduced working hours. A person may have a job, however they are not making enough to rise out of their situation.

Also, underemployment leads to strenuous situations for employees with little room for job growth or sustainability.

Underemployment can be tough for underemployed people. They may feel bad about themselves because their skills are not being used properly, or that they are stuck in a situation that provides no future. This can lead to greater dissatisfaction.

High underemployment rates describe a job climate where fewer people are unemployed but more are dissatisfied with their position.

Unemployment Vs. Underemployment

Although the terms sound deceptively familiar, unemployment and underemployment are vastly separate conditions.

  • Unemployment. Unemployment refers to individuals who do not have a job at all, whether or not they’re actively seeking to change this joblessness. They are not making any income from working as an employee. High unemployment rates mean that it’s extremely challenging to find a job in the current labor market.

  • Underemployment. Alternatively, underemployment is used to describe individuals who have jobs, but their current position presents challenges involving being underutilized. This often looks like an employee’s hours and income are limited or working in a position they’re overqualified for.

Despite their clear differences, underemployment and unemployment share a lot of the same negative consequences for employees. It leaves them feeling defeated and usually leads to financial strife.

A society with high rates of either unemployment or underemployment creates a struggling economy.

Types of Underemployment

Even though underemployment presents differently in each case, there are some general types that most situations align with. Below are the major types of underemployment:

  1. Lacking hours. Having a job is supposed to mean security for the employee.

    When an employee’s hours are cut, they’re not making the amount of money they need to and depletes this sense of security. Working in a position that isn’t giving enough hours is a taxing scenario for any employee.

    It puts them in the position of picking up a second job or taking on a financial burden. Additionally, an employee who only works part-time probably won’t receive the benefits that a full-time worker receives.

    This type of underemployment occurs seasonally in certain businesses. For example, an ice cream shop that receives the majority of business in the summer likely limits their employee’s hours from roughly November to March.

  2. Overqualification. Overqualification refers to employees who are currently working in a position in which their skill level exceeds the job requirements.

    These individuals might have an extensive background or received a higher education degree in a field that does not apply to their position. This environment leaves many employees feeling that their room to grow in the job is stunted.

    For example, consider an individual who graduated from medical school and ends up working as an administrative assistant. They have a wealth of information that they’ve accumulated through their schooling experience, and none of it is applicable in their current job.

    Businesses with overqualified employees often have a high turnover rate because these individuals go on to seek other opportunities. High staff turnover means that a company has to hire people more frequently, costing money and time.

  3. Idleness. Employees are expected to use their skills to handle the professional responsibilities of their position. In some underemployment situations, employees may be idle due to overstaffing or lack of direction.

    When an employee fails to use their skills to achieve the best results in their job, it has negative implications for the company that employs them.

    Imagine a business whose entire team is employed by individuals who aren’t applying their skills and standing around idly. The scenario spells out disaster because the organization would soon come to a screeching halt.

Reasons for Underemployment

There are a few common underlying reasons for underemployment. Understanding the reasons behind underemployment helps to fix and prevent it in the future.

  1. Oversaturation of job applicants. There are more qualified job applicants looking for the position of their dreams than ever before.

    While it’s great that so many talented applicants are graduating from university programs, there’s an influx of people hoping to be hired.

    When businesses are supplied with a surplus of impressive candidates, it makes it that much harder for each one individually. Oversaturation of job applicants usually leads to overqualification underemployment.

  2. A business being overstaffed. Hiring more people than needed leads a business to become overstaffed.

    Having too many staff members is a tough situation for companies because it becomes a money vacuum if left unchecked. When a business becomes overstaffed, its first action is cutting employee’s hours.

    Overstaffing takes opportunities to work and earn money away from each individual employee because the company can’t afford to have them all on a full-time schedule. This qualifies as underemployment.

  3. A recession. An economy that’s experiencing a period of recession unleashes many negative results on society. One of them is underemployment. A recession leads to multiple types of underemployment.

    It encourages overqualification because businesses are less willing to hire during an uncertain time, like a recession. It leads employees to have their hours restricted because their employers don’t have the means to keep paying their entire staff a full-time salary.

    It even contributes to lacking utilization of skills because it keeps employees staying at a job that they’re not satisfied with because they’re afraid to enter a bad job market. A recession is usually responsible for widespread bouts of underemployment.

  4. Cyclical industry changes. Similar to the ice cream shop example, many industries experience cyclical changes depending on the time of year.

    A ski resort sees more business in the colder and snowy months. An RV rental service usually gets more customers looking to take a road trip in the summertime.

    Industries that go through cyclical changes also often experience underemployment during certain low points of the year.

  5. Technology take-overs. Innovations in technology have effects that carry over to the professional world. When a new technology is introduced to the market, it sometimes takes the place of an employee’s job.

    Consider a job like a factory line worker. Over time, new technology has been introduced to assemble products that were once handled by people.

    When these technologies took over assembly job responsibilities, it led to layoffs and cutting hours, leading to underemployment because the employee’s services were no longer needed.

    It’s easy to imagine a future where things like self-driving cars are the reason for a massive wave of underemployment and unemployment.

Tips for Handling Underemployment

Being an employee whose position is affected by underemployment is tricky and leaves a lot of people unsure of what move to make.

Even though underemployment puts you in a difficult position, don’t let that get the best of you. Employ the following tips to improve an underemployment situation at your job:

  1. Continue being productive. Although it’s easy to get bogged down by demotivation when you’re experiencing underemployment, it’s best to resist this temptation.

    Being overqualified for the position you’re working in or having your hours cut is not a valid excuse for letting your performance slip. Continue doing the best work possible in the time that you’re still an employee.

  2. Network in your field. Networking is the best way to uncover opportunities in your field that you didn’t know were there. In an overqualification situation, networking is an excellent solution for potentially finding a role that matches up better with your background and skills.

    Consider touching up your LinkedIn profile or looking into networking events in your area to broaden your professional connections.

  3. Keep up a targeted job search. Underemployment is a sign that the job you’re in now probably isn’t going to last forever.

    Whether you’re not working enough hours to maintain your finances or are overqualified for your position, looking for a new job is usually the solution. While you still have a job, start a targeted job search to get an idea of the professional opportunities near you.

    No matter how casually your job seeking is, make sure that you’re looking for a position that’s going to fit your skills well to avoid underemployment in the future.

  4. Learn more when possible. Adding more skills to your repertoire is a good use of your time when you’re going through an underemployment circumstance. When you’re working in a position that leaves you idle much of the time, it makes that time worthwhile.

    Learning new things strengthens your resume to apply for jobs later and widens the skills you could bring to a new position.

    Learning new skills in your spare time also has the potential to help you in your current position. When being underutilized as an employee, bringing in new skills encourages an employer to award more responsibilities and hours in return.

  5. Only accept the best job offer. Every situation teaches an important lesson, even a difficult one like underemployment. Being stuck in an underemployment situation supplies the knowledge to improve in the future.

    When you’re looking for a new job and start receiving offers, only accept a position that matches your qualifications and is willing to employ you for a suitable amount of hours.

    Understand the signs that a job will become an underemployment situation for you and avoid the positions that display these qualities.

How useful was this post?

Click on a star to rate it!

Average rating / 5. Vote count:

No votes so far! Be the first to rate this post.

Never miss an opportunity that’s right for you.


Sky Ariella

Sky Ariella is a professional freelance writer, originally from New York. She has been featured on websites and online magazines covering topics in career, travel, and lifestyle. She received her BA in psychology from Hunter College.

Related posts