Unemployment rates are always an important factor in how the economy is doing overall. If people have jobs, then they will have more money to spend on both necessities and luxuries. However, the unemployment rate doesn’t tell the whole story of how well people are able to participate fully in the economy and support their families.
As of February 2023, unemployment rates are the lowest they’ve been in 54 years. With an unemployment rate of just 3.4%, things seem to be going well. Unfortunately, there’s still a significant issue that persists: underemployment.
What are the Different Kinds of Unemployment?
Unemployment looks different for everyone. There are many reasons that someone might be out of work, either temporarily or permanently, including:
- Cyclical unemployment—shifts up and down with the strength of the economy.
- Structural unemployment—caused by changes in regulations, needed skills, or job location. People might be ready and willing to work these jobs, but they are not able to for structural reasons.
- Seasonal unemployment—occurs at different times of the year, based on the demand for certain services. Examples include lawn maintenance, which is often only needed in the summer in many areas of the country, or holiday retail help needed in November and December.
- Frictional unemployment—voluntary unemployment, due to workers’ desire for better pay, working conditions, or other reasons.
Any of these unemployment conditions add to the overall unemployment rate. However, the rate does not consider the number of underemployed Americans who are struggling to make ends meet.
The Deception of Underemployment
Underemployment is a major concern. People who are underemployed have jobs, but they aren’t making enough to support themselves or their families. Underemployment can also apply to people who are overqualified for the job they have and are not making full use of their skills, such as recent college graduates.
A person can be underemployed if they work full-time but don’t make enough to meet all their expenses in the area where they lived. Or, it can mean that someone only gets part-time hours or sporadic shifts when they would like to be working full-time. In either situation, living under the stress of underemployment can have a huge negative impact on a person’s life.
Unemployment rates that don’t include underemployment information are inherently deceptive. A low unemployment rate can make the economy seem healthier than it is if lots of people are underemployed and hurt financially.
This means that policies and government assistance programs might not be as popular with politicians and voters, since they seem like they’re not needed. However, this is simply not the case— many people who are underemployed are having trouble getting by.
The other economic concern relating to underemployment is inflation. One downside of low unemployment rates is that inflation will go up as spending power grows. While this affects everyone, it has a bigger impact on people who are unemployed or underemployed since their income is lower.
How Underemployment Affects Americans
Income affects every area of a person’s life. Someone who is employed and making enough to take care of all their basic needs is going to be less stressed than someone who can’t always pay the bills. Underemployed people also tend to experience low job satisfaction and struggle to attain career advancement.
Underemployed Americans typically live with chronic stress, which can affect both mental and physical health. Over time the effects of stress can have serious health consequences. Additionally, people who are working part-time and don’t know when their next shift will be might struggle to deal with ever-changing sleep schedules, which can increase health and well-being issues.
Many people who are underemployed have to try applying for government assistance, which can be inconvenient, challenging, and emotionally difficult. Most people who are underemployed do not qualify for unemployment payments and might have to apply for other assistance programs. However, some people do not qualify for these programs because their income is too high.
Ultimately, underemployment can lead to physical and mental health issues, constant stress, debt, and trouble affording necessities like rent. Without a full-time job, many underemployed people are also unable to afford health insurance. Some people even have the potential to become homeless due to underemployment, while their struggles are brushed off.
What Can Be Done About Underemployment?
The issue of underemployment continues to be a problem, especially since having people work part-time often means that employers don’t have to pay for benefits. There are many ways to increase the number of people who are fully employed, including investing in education, encouraging entrepreneurship for job creation, and giving businesses incentives to provide workforce development opportunities.
These are just a few of the many ways to address the persistent issue of underemployment. With the impact of inflation and the downsizing that many large corporations have done in recent months, people are hurting more than ever. We have to look beyond the unemployment rate and help people who are trying to find the right job but are having to settle for less.