Labour underutilization

A main objective of monitoring labour markets is to assess the extent to which the economy is fully utilizing its available human resources, or put another way, the extent to which it provides opportunities to employ its population to its full potential. Three main measures of labour underutilization recognized in the international statistical standards are:

  • Time-related underemployment
  • Unemployment
  • Potential labour force

These measures capture groups of the population that, in one way or another, do not have sufficient access to employment (i.e. work for pay or profit). These groups share in common an unmet need for employment but differ in terms of their participation or attachment to the labour market. In the international standards, they have been defined so as to be coherent with the measurement of employment and with the classification of the working age population by labour force status. They are thus, current measures of labour underutilization, assessed in reference to a short reference period, so as to provide a snapshot picture of labour market performance and support monitoring of changes over time through their frequent measurement.
  • Time-related underemployment captures persons who are employed but whose working time is insufficient compared to an alternative employment situation in which they are willing and available to engage. Persons in time-related underemployment are defined as all persons in employment, who during a short reference period, wanted to work additional hours, whose working time in all jobs was less than a specified hours’ threshold, and who were available to work additional hours given an opportunity for more work.
  • Unemployment captures persons that altogether lack employment, but who are actively putting pressure on the labour market by seeking opportunities for employment and by being currently available to start working. Thus, they represent current underutilized labour supply. Persons in unemployment or Unemployed population are defined as all those of working age who were not in employment, carried out activities to seek employment in a recent period (comprising the previous 4 weeks or month) and were currently available to take up employment (in the reference period or within a short subsequent period not exceeding two weeks in total).
  • Potential labour force captures persons who, similar to unemployed, lack employment and exert some pressure on the labour market. However, compared to the unemployed they show a lower level of attachment, as they either do not seek employment or are not available to start working. As the term indicates, they thus represent the potential supply of labour at a given point in time. Potential labour force is defined as all persons of working age who were neither in employment, nor in unemployment but who were:
    • (a) unavailable job seekers, that is, carried out activities to seek employment in a recent period but were not currently available to take up employment
      Or
    • (b) available potential job seekers, that is, did not carry out activities to seek employment in a recent period, but wanted employment and were currently available to take up employment.

Current international guidelines

The latest international recommendations on the measurement of labour underutilization are contained in the Resolution concerning statistics of work, employment and labour underutilization adopted by the 19th ICLS in 2013. These recommendations recognize the monitoring of labour markets and of labour underutilization as a core objective of national labour market statistics programmes. They provide detailed definitions and operational guidelines for the measurement of these three components of labour underutilization as well as guidance to calculate different indicators to be disseminated together with the unemployment rate as headline measures for monitoring labour market performance.

Other important dimensions of labour underutilization are also recognized, including skills mismatches and slack work, in particular among the self-employed. At present, the ILO Department of Statistics is conducting work in order to develop suitable measures of these important dimensions of labour underutilization for future discussion by the International Conference of Labour Statisticians.
Guidance to measure related forms of inadequate employment, particularly with respect to skills, income and excessive working time, are also contained in the Resolution concerning the measurement of underemployment and inadequate employment situations, adopted by the 16th ICLS in 1998.

Read more about the history of the international statistical standards on this topic