The Hidden Employment Issue: Underemployment

jobsThe historically high unemployment rate, now 7.5% nationally gets the headlines each month as new data is released. The unemployment rate remains high, though it has declined 2 percentage points from its Great Recession high. The economy is improving and we are experiencing job growth for 2-1/2 years. There is progress, albeit slower than hoped. However the decline in the well reported unemployment rate is helped by those who have “given up” (as they are now not counted as unemployed), and the declining rate is also aided by those who have taken part-time jobs far below their experience/educational levels.

What is masked in a high unemployment rate is a significant “underemployment rate”, a large and growing number of people working part-time jobs but who want to work more. At least another 6% or more of the workforce falls in the “underemployment” bucket. The New York Times recently did an interesting analysis, Part-Time Work Becomes Full Time Wait for Better Job.

To be clear, the definition of underemployment is as follows:

A situation in which a worker is employed, but not in the desired capacity, whether in terms of compensation, hours, or level of skill and experience. While not technically unemployed, the underemployed are often competing for available jobs.

A part-time worker (who wants to work full time) is often caught “halfway to the net” as he/she gets hit with a triple whammy:

1. No unemployment compensation since they are working

2. No benefits since they are working less than full-time

3. Modest wages—often lower compensation hourly than an full time worker

Yet for those who have hit the pavement, some work is better than none. These workers feel that the part-time job could lead to a full time position (it does sometimes, but not always) and often workers try to cobble together a livelihood by holding down multiple part-time gigs if possible, while seeking the full-time job.

Recent college grads are often those among the underemployed. A recent analysis of government data by the Associated Press indicated that “half of young college graduates are either jobless or underemployed in positions that don’t fully use their skills and knowledge.” Furthermore, a 2013 analysis from the Center for College Affordability and Productivity, “Why Are Recent College Graduates Underemployed” indicated that almost half of employed U.S. college graduates work in jobs that require less than a four-year college education. They would be wise to read a recent Struming 6 Things College Grads Need to Know.

But clearly recent college grads who are underemployed, or worse unemployed, find paying back their college loans (averaging roughly $27,000) impossible in the short-term, and maybe longer term.

newunderemployedWhat’s troubling overall is that the underemployed of all ages may be swimming upstream in an era where business is looking at using non-traditional, less than full-time employees more than ever. As a result, there has been an increase in those who claim they work part time (defined as less than 35 hours per week). The New York Times article sites that today 19.1% of workers work part-time vs. 16.9% just five years ago.

Another reality straight ahead is that forthcoming health care reform will penalize companies with 50 or more full-time workers which don’t offer health insurance. Companies which are hovering near the 50 full-time employee head count, and don’t offer insurance, will have significant incentives to keep below 50, and additional part-time labor may be one of their solutions.

In the end a healthy economy is the solution to the dilemma. When industry needs more labor, skilled and unskilled, the work force expands and the % of part-time labor (for those who want to be full-time) will also recede.

For those caught “halfway to the net” that can’t happen fast enough.

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