Hidden Unemployment

surveys show that skill-based underemployment in North America 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become out of date. For example, a person who graduates with a PhD in English
literature has advanced research and writing skills when they graduate, but if she or he
works as a store clerk for a number of years, these research and writing skills will
atrophy from disuse. Similarly, technically specialized workers may find themselves
unable to acquire positions commensurate with their skills for extended lengths of time
following layoffs. A skilled machinist who is laid off may find that she cannot find another
machinist job, so she may work as a server in a restaurant, a position which does not
use her professional skills.
Given that most university study in Western countries is subsidized (either because it
takes place at a state university 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 (e.g. fine arts), or
changes in degree cost structure that reflected potential labour market demand.
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.
Underuse of Economic Capacity
Underemployment can also be used in regional planning to describe localities
where economic activity rates are unusually low. This can be induced by a lack of job
opportunities, training opportunities, or services such as childcare and public
transportation. Such difficulties may lead residents to accept economic inactivity rather
than register as unemployed or actively seek jobs because their prospects for regular
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