Difference between Unemployment and Underemployment

Difference between Unemployment and Underemployment

The concept of unemployment and underemployment are two related but different concepts in the job market. Both unemployment and underemployment are maladies faced by job seekers and graduates worldwide. Today, the work sector is faced with a large pool of individuals that are either looking for jobs or are trying to get a better job. Every year, Universities, Colleges, and other citadels of learning graduate students to hopefully bring fresh ideas to the workspace. However, that hasn’t yet happened for some; this can be attributed to several things ranging from the global economic crisis to the growing competition for limited job opportunities. We cannot eliminate the individual’s role in this as well.

Despite the obvious similarity that exists between the two concepts, there are certain differences between them. While an unemployed individual is actively searching for a job and cannot find one, an underemployed person is working in a limited capacity. Regardless of the number of hours or the skill level, it is arguably better to be underemployed than to be unemployed. These days, many people are unemployed or underemployed in their positions and have numerous challenges finding a befitting job or employment.

Additionally, an often neglected propellant for the growing or increasing rate of unemployment and underemployment is industrialization. Industrial development has been gaining momentum and has become more prominent in the world; this has unfortunately led to the substitution of human labor by machinery. In many countries, machines are manufactured to do the work of humans. However, analysts in the field of economics and other related fields have warned against being confused about the meaning of these two terms. The risk of getting confused about the meaning is more among people who are not familiar with the terminologies. Thus, aside from defining the concepts, this article will explain the causes and clearly distinguish between the two terms.

Meaning and Causes of Unemployment

Unemployment can be defined as a situation when a person who is employable and actively searching for employment or a job is unable to find work. Research has shown that unemployment is a key measure of how healthy a particular economy is. The most frequent measure of unemployment is the unemployment rate; which is the number of unemployed people divided by the number of people in the labor force. Unemployment can be grouped into frictional, cyclical, structural, or Institutional. Remember, when the unemployment rate is high, it is believed to be a signal of economic distress. In contrast, low unemployment rates may signal an overheated economy.

The causes of unemployment include;

  • When you have job seekers or fresh graduates that are just entering the labor market.
  • Also, unemployment can occur when a worker moves to a new city and has to find a new job.
  • Technological advancement is another cause of unemployment.
  • Unemployment can happen when there is a mismatch in the demographics of workers and the types of jobs available; in other words, unemployment occurs when there are jobs that applicants don’t have skills for or vice versa.
  • Poor economy, dissatisfaction of the job by employees, and recession can lead to unemployment.
  • A bad attitude towards employment opportunities and global market changes are other causes of unemployment.

Definition of Underemployment and its Causes

Underemployment refers to the underuse of a worker because a job does not use the worker’s skills, is part-time, or leaves the worker idle. For example, a medical doctor who works as a taxi driver can be considered to be underemployed. Relatively, underemployment can be involuntary; this happens when workers who could and would like to be working full time can only find part-time work. In addition, underemployment has been reported to be a significant cause of poverty because although the worker may be able to work part-time, the remuneration may not be sufficient for basic needs. Similarly, individuals can be underemployed when they are not working the number of hours they desire. Some underemployed individuals tend to work several jobs to make enough money for their living expenses.

Several factors can cause underemployment; these include;

  • Adverse economic conditions such as a decline in economic activity.
  • Underemployment also occurs when there is overstaffing; a situation where the supply of workers is greater than the demand for workers.
  • When staffs are overqualified for a role, they may become underemployed.
  • Finally, technological changes can cause underemployment.


How is Unemployment different from Underemployment?

The following subheadings will be used to differentiate between unemployment and underemployment.


An unemployed individual does not have a job despite being qualified and actively searching for work. On the other hand, an underemployed individual is employed but the job does not meet their expectations and goals. Also, an unemployed person is willing and ready to work and be employed for the current market wages while an underemployed person is interested in finding a better job that pays better and matches their skills and experience.


This can be tricky; however, a person can have all the necessary qualifications and still not be working. For one reason or the other, they are unable to find a job. Simply, you are unemployed when you cannot put your qualifications into use in whatever capacity. In contrast, an underemployed individual is working but not for as long as they like or their qualifications are not fully utilized. This may be because such individual is overqualified for the role or position they currently occupy. Also, the term underemployment is used to describe people who are working in a lower capacity than one in which they are qualified.

Main Causes

When there is a rise in the cost of production and a drop in aggregate demand, unemployment occurs. Most organizations tend to cut their losses when they survive a fall in revenue and hence, release some members of staff and subsequently make them unemployed. Additionally, unemployment can be caused by the recession and other factors that make employers unable to hire new workers. In relation, advancement in technology can make managers and companies look for new hires with the required skills to operate the technology to substitute others leading to unemployment.

In contrast, underemployment is predominantly caused by a disparity or mismatch in the availability of employment opportunities and the corresponding skills available. Relatively overstaffing can cause underemployment as well.

Parameter used to measure both concepts

The Unemployment rate is the parameter used to measure unemployment; it is a representation of the number of unemployed individuals as a percentage of the whole labor force. It represents the part of the labor force that is jobless. The state of the economy determines whether it rises or falls.

On the other hand, there is no distinct parameter for measuring underemployment; however, the brain drain can be used to measure underemployment. The brain drain refers to the emigration of individuals who are highly skilled and intelligent professionals from one country to another where they expect better remuneration, better working conditions, and even better lifestyles. Brain drain can be experienced in industries and specific organizations and possibly from the public to the private sector and vice versa of which the latter is less common.


How to Avoid Unemployment and Underemployment

Enumerated below are several steps to help prevent unemployment and underemployment;

  • Create a job search strategy
  • Consider vocational training
  • Gain more work experience
  • Improve your resume
  • Network and enroll in mentorship programs


As discussed above, the major difference between unemployment and underemployment is that the underemployed person already has a job while the unemployed individual does not. Although it is not up to their standards or they don’t work for as long as they would wish, they still have a job. The unemployed individual has the qualifications, the will, and is actively searching for a job. In addition, an individual who has been laid off for a while and is waiting to be recalled can be treated as unemployed.

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