How to Know if You’re Underemployed and What You Should Do About It

Underemployment is a significant and complex issue in the workforce. And while it may not receive the same level of attention as other work-related issues, such as unemployment or minimum wage, it affects a substantial number of U.S. workers. Maybe you've just graduated from college and are having challenges finding a job that makes use of your hard-earned degree. Or you've been in the workforce for many years, but your career and salary don't match your skills and education. If this is the case, you might be underemployed.

Determining whether you're underemployed can be a subjective process and depends on your personal goals and aspirations. In this article, we take a closer look at underemployment, its definition, the most common causes and signs, and what you can do to turn things around for the better.

What is Underemployment?

Underemployment is essentially a measure of employment and labor utilization that looks at how well the workforce is used regarding workers' skills, experience, and availability to work.

The wider term can be divided into two key distinctions:

1. Invisible underemployment: a term that describes the number of people working in low-skill and low-paying jobs.
2. Visible underemployment: people who are only working part-time because they can't get full-time jobs.

Underemployment can affect individuals from all backgrounds and demographics. However, certain groups may be more susceptible than others. These include:

• Recent graduates may find themselves underemployed due to a lack of experience and limited job opportunities in their chosen field.
• Older workers can find it challenging to secure employment due to age discrimination, despite having a wealth of experience and skills.
• People with disabilities may face barriers to employment due to physical or mental limitations, as well as discriminatory attitudes and lack of accommodations in the workplace.
• Workers with limited skills or education might have to accept low-paying jobs that don’t offer opportunities for advancement.
• Immigrants and refugees may face language barriers, limited access to education and job training, and discrimination in the job market.
• Women may be more likely to experience underemployment due to gender discrimination and limited opportunities for career development.
• Racial and ethnic minorities can face discrimination in the workplace, as well as limited access to education and job training programs.

Unemployed vs Underemployed

The answer to "What does underemployed mean compared to unemployed?" is pretty straightforward. Both are related but distinct concepts that represent forms of labor market inefficiencies.

In other words, if you're unemployed, you don't have a job but are actively seeking employment. This can be due to various factors, including a lack of job opportunities or a mismatch between your skills and the requirements of available jobs.

On the other hand, if you're underemployed, you're typically working in a job that doesn't fully utilize your skills or education. This often leads to earning less than you deserve.

Causes of Underemployment

The causes of underemployment are complex and multifaceted, and addressing them requires a combination of policy and structural changes, including investing in education and training programs, promoting economic growth, and implementing policies that protect workers' rights and ensure fair compensation. Some of the most common causes include:

1. Economic conditions: Fluctuations in the economy can lead to underemployment. For example, during a recession or economic downturn, businesses may reduce their workforce, leading to layoffs, reduced hours, or pay cuts. Additionally, policies that favor employers over workers, such as right-to-work laws that weaken unions, can lead to employees not being paid what they deserve.
2. Technological change: Advancements in technology can lead to job displacement and underemployment. As automation and other technological advancements become more prevalent, certain jobs may become obsolete or require fewer workers, reducing employment opportunities and increasing underemployment.
3. Structural factors: Discrimination and pay disparities based on race or gender, lack of access to education and training, and inadequate social safety nets can lead to underemployment. For example, individuals from marginalized communities may face discrimination in the labor market, limiting their job opportunities.
4. Globalization: Globalization can lead to increased competition in the job market, resulting in underemployment. As companies move their operations to countries with lower labor costs, workers in higher-cost countries may face increased competition for fewer job opportunities.
5. Demographic shifts: Changes in demographics, such as an aging population or changes in family structures, can lead to underemployment. For example, older workers may find it challenging to secure work due to age discrimination, while single parents may struggle to balance work and caregiving responsibilities.
6. Education and skills: A lack of education or skills can lead to underemployment, as some workers may need more qualifications to secure higher-paying jobs. Similarly, workers who are overqualified for their current jobs may be underemployed, as they are not fully utilizing their skills and abilities.

What are the Effects of Underemployment?

Underemployment can have a wide range of adverse effects on you and your family. The most common include:

Financial Strain

One of the most significant effects is financial strain. You might not earn enough to cover your basic expenses, such as rent, food, and utilities. This can lead to financial stress and insecurity, harming your overall well-being. In addition, you may not have access to benefits such as health insurance or retirement plans, which can further exacerbate your financial struggles.

Poor Mental Health

Underemployment can also impact your mental health. You may experience feelings of inadequacy, low self-esteem, and social isolation. Or you may feel like you're not contributing to society meaningfully, which can lead to depression and anxiety.

Reduced Productivity

Another negative effect of underemployment is reduced productivity. You’re more likely to be less motivated and engaged in your work, which can lead to poor job performance. This can have an unfavorable impact on your job as well as your long-term career prospects.

Signs That You’re Underemployed

If you identify with some of these signs, you may be one of many underemployed workers in the U.S. But you can take action to address your situation, such as seeking additional education or training, networking, or exploring new job opportunities. You can also speak with your employer to discuss potential opportunities for advancement or ways to better utilize your skills and abilities in your current role.

Here are some indicators to look out for:

1. You’re working part-time but want full-time work.
2. You’re not using your skills and abilities.
3. You feel unchallenged by your job.
4. You’re not earning enough to make ends meet.
5. You earn less than you feel you are worth or less than others in similar positions.
6. You don't see a future for yourself in your current job or industry.
7. You feel bored or uninterested in your work.
8. You’re not advancing in your career.
9. Your job doesn't align with your career goals or interests.
10. You’re not receiving benefits such as health insurance or retirement plans through your employer.

What is the Underemployment Rate?

The underemployment rate measures the percentage of the workforce working part-time but preferring to work full-time or those that have given up looking for work. It is a broader measure of labor market slack than the official unemployment rate, which only includes those actively seeking work. Also, the rate is strongly correlated with the unemployment rate, increasing during recessions, and declining during expansions.

Underemployment is calculated by dividing the number of underemployed by the total number of workers in a labor force. The rate tends to be higher than the official unemployment rate during periods of economic weakness, as more workers may have to take part-time work or become discouraged and drop out of the labor force altogether. During periods of economic strength, the underemployment rate is typically lower as more workers can find full-time employment.

Compared to other labor force statistics, the underemployment rate history in the U.S. is relatively short. The census only began to track underemployment in 1994. Since then, there has been an average of 5.4 million underemployed workers in the U.S. And, sadly, nearly half of American workers identify themselves as underemployed.

What Industries Experience the Highest Underemployment?

Based on recent trends and historical data, the industries most commonly associated with underemployment tend to offer low-paying, part-time, or seasonal jobs that may not provide consistent or sufficient hours to meet employees' financial needs. These industries include:

• Retail: The retail industry is one of the largest in the U.S. and the most vulnerable to underemployment. Many retail workers are part-time, seasonal, or have irregular schedules, making it difficult to earn a livable wage or access benefits.
• Hospitality and tourism: Workers who have temporary or part-time jobs, such as food service workers or hotel staff suffer from underemployment. They often experience fluctuations in their schedules and income, making it challenging to plan their lives and pay the bills.
• Healthcare: While the healthcare industry is generally considered to be a stable and growing sector, there are still many workers, such as nurses or medical assistants who can’t find full-time positions. In addition, this industry has strong hiring demands and difficulties finding skilled workers, leading to staffing shortages and underemployment.
• Education: The education sector, while stable, suffers from underemployment. Many educators, particularly adjunct professors and teachers may only work part-time or on a temporary basis and often don’t have access to the same benefits and job security as full-time employees.
• Information technology: While the tech industry is known for high salaries and job growth, there are still many workers in this field who are underemployed. This may be due to the rise of contract work and the use of independent contractors, which can lead to job insecurity and a lack of benefits. Plus, this industry struggles with tech talent shortages despite massive layoffs and can cause uncertainty among workers.

It's important to note that underemployment can occur in any industry. Whether you’re just starting your career or are an experienced professional, it's essential to be aware of the potential for underemployment and take steps to protect yourself financially and professionally.

Examples of Underemployment

Underemployment can manifest in many different ways, from working in jobs requiring lower levels of education or skills to working fewer hours or in jobs that don't provide the same benefits as your previous jobs. To make it easier to understand, here are four underemployment examples:

1. A highly skilled and experienced architect who has been laid off and can only find work in a low-paying food-service job that doesn’t utilize their skills and expertise. In this scenario, the architect has years of experience and a high level of knowledge in their field, but due to factors such as changes in the job market or economic downturns, they have been laid off and can't find a job in their field. As a result, they may end up feeling unfulfilled and financially strained.
2. A business graduate works a part-time job as a retail associate that doesn't require a college degree due to a lack of available jobs in their field. Many graduates face underemployment, particularly if they enter a crowded job market or can't gain work experience or internships during their studies. This can be particularly frustrating and demotivating for the graduate, who may have expected their degree to provide them with better job opportunities.
3. An employee in a part-time office job works fewer hours than they would like and can't find additional work to supplement their income. And despite actively seeking extra work, they may be unable to find any, leading to financial stress, insecurity, and dissatisfaction in their current job.
4. A worker employed in a low-paying office job for an extended period without any opportunity for advancement or wage increases, despite having the skills and experience necessary for a higher-paying job. This scenario involves workers who have reached a career plateau, where they can no longer advance in their current job and cannot find higher-paying work elsewhere. The situation can be demoralizing and lead to feelings of frustration and hopelessness.

What to Do If You’re Underemployed

If you find yourself underemployed, navigating your situation can be challenging. However, there are steps you can take to improve your circumstances and find better employment opportunities.

Assess and Improve Your Skills

Firstly, assessing your skills and experience is essential to identify areas for improvement. Consider taking courses, attending workshops, or pursuing additional training to enhance your skill set and make yourself more marketable to employers.

You can also work on developing your soft skills, such as communication, leadership, problem-solving, and time management, as employers across all industries highly value these skills. After you’ve acquired new skills and training, you can use them as leverage for a raise or promotion or use your fresh knowledge to transition into a more meaningful and better-paid career.

Research Your Worth

Now it’s time to figure out where you are in the workforce. Research job postings in your field, the typical salary range for your desired position, and the skills and experience needed to get there. You can also look at labor market data to see which industries and occupations are growing and which are experiencing job losses. From here, you can identify areas where your skills may be in demand and then determine where you can find better job opportunities.

Network

Networking is another crucial aspect to consider when you're underemployed. Remember, it's not always what you know but who you know. Reach out to your professional network to let them know you're looking for work.

Start attending industry events, conferences, and job fairs to meet new people and learn about potential job opportunities. Don't forget to harness the power of online networking to connect with people in your industry as well.

Optimize Your Resume

Your resume is a potential employer's first opportunity to 'meet' you, so make it stand out. Write an engaging professional summary highlighting any relevant experience or training you've acquired. Be sure to tailor your resume and cover letter to each job you apply for by emphasizing how your skills and experience align with the job requirements.

Volunteer

Volunteering opens up doors to careers you might not have considered before. Plus, it gets you out into your community and can help expand your network. And, you never know, it could also lead to a new job. Remember, volunteer work both looks impressive on your resume and puts your skills to good use.

Explore

It's also important to be open to new opportunities when you're underemployed. Don't limit yourself to jobs that are directly related to your previous experience or education. Be open to exploring new fields or industries in which you can use your transferable skills in better opportunities for employment and advancement.

Stay Positive

If you're struggling to find a job that aligns with your purpose and uses your full potential, or you’re feeling overwhelmed by your situation, consider seeking professional help from a career counselor or therapist. They can provide guidance and support to help you navigate the job market and manage any stress or anxiety you may be experiencing. Remember, being underemployed is a temporary situation, and with persistence, dedication, and a positive mindset, you can find the right opportunity that fits your skills and goals.

Go From Underemployed to Landing the Job You Deserve

Start searching for a career that lives up to your skills and experience and allows you to fulfil your full potential. Sign up for a free profile on Monster and connect with top recruiters by uploading up to five customized versions of your resume. We also send you custom job alerts to help you find an employer that aligns with your goals and values.