Importance and applications

The primary objective of measuring underemployment is to improve the analysis of employment problems and contribute towards formulating and evaluating short-term and long-term policies and measures designed to promote full, productive and freely chosen employment. Statistics on underemployment complement statistics on employment, unemployment and inactivity.

Indeed, estimates of employment and unemployment are often insufficient to understand the labour market situations in many countries. As defined and measured the unemployment rates of many developing countries are lower than those of industrialised countries. This does not mean that the labour market is more effective in the former countries, but rather that unemployment is only one manifestation of employment problems: namely that of total lack of work. Indeed, most developing countries:

  • lack unemployment relief programmes, and many workers who find themselves without work cannot afford to stay in this situation. They have to engage in informal sector or similar activities to survive, even if they do not employ them full time or generate sufficient income for a decent living;
  • have a high proportion of persons in self-employment jobs, and when these workers face periods of no work they tend not to seek work (and thus will not be seen as unemployed) but to engage in alternative self-employment activities, even if these generate a lower than usual income; and
  • organise work in rural communities according to traditional arrangements, so that the available labour is distributed between all workers at the cost of lowering the average hours and income of the whole population. The problem in developing countries thus is often summarised as “underemployment”: partial lack of work, low employment income, under-utilization of skills or low productivity; and not only unemployment as normally measured.

Recently, “underemployment” has come to be recognised as an important phenomenon also in developed and transition countries, as they experience reductions and reorganizations in their economies. Many workers there also experience a lack of employment opportunities for the type of work that they could and would like to do, and thereby causing them to work less productively or fewer hours than they could and would like to; as well as making them unemployed for a shorter or longer period, or to drop out of the labour force permanently.