Underemployment exists when employed persons have not attained their full employment level in the sense of the Employment Policy Convention adopted by the International Labour Conference in 1964. According to this Convention, full employment ensures that (i) there is work for all persons who are willing to work and look for work; (ii) that such work is as productive as possible; and (iii) that they have the freedom to choose the employment and that each workers has all the possibilities to acquire the necessary skills to get the employment that most suits them and to use in this employment such skills and other qualifications that they possess. The situations which do not fulfil objective (i) refer to unemployment, and those that do not satisfy objectives (ii) or (iii) refer mainly to underemployment.
Underemployment reflects the underutilisation of the productive capacity of the employed population. The concept is integrated in the conceptual framework for measuring the labour force , and is based on similar criteria to those used to define employment and unemployment. The underemployed population is a subcategory of the employed population and is identified by comparing their current employment situation with an “alternative” employment situation that they are willing and available to carry out: simply put, persons in underemployment are all those who worked or had a job during the reference week but were willing and available to work “more adequately”
The conceptual framework for measuring the labour force was adopted by the 13th International Conference of Labour Statisticians in 1982. It sets the measurement standards to classify persons according to their activities during a short reference period, such as a week, in three categories, which are mutually exclusive and exhaustive of the population in a country. These are the employed population, the unemployed population and the economically inactive population. This framework is widely recognised at the international level and this has allowed the increased production of regular and internationally comparable statistics on employment and unemployment in a significant number of countries. The classification criteria of this labour force framework used to determine whether a person is employed, unemployed or economically inactive are three: (a) to work or to have a job, (b) to be willing to work, and (c) to be available for work. Unemployment, for example, includes persons who during the reference week did not work nor had a job but who were willing to work (they prove this by looking actively for work) and were available to work. By analogy, underemployment will include persons who even though during the reference week worked or had a job, they were willing and available to work “better” or “more adequately”.