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Underemployment refers to a situation where there is a disequilibrium in the labour market causing labour to be under utilised. This can include: Workers working less hours than they would like Workers accepting jobs that dont utilise their skills According to the Office for National Statistics, there are 2.8 million workers in Britain who are working less hours than they would like (link). This could include people forced to work part time rather than full time. This figure of underemployment has increased during the recession because firms have
sought to avoid paying redundancy by reducing working hours and therefore cost of labour. Underemployment does not have as many costs as official unemployment. But, it does mean the underemployed have lower incomes and so will spend less. Another type of underemployment occurs when workers end up with low skilled jobs that dont utilise their qualifications. For example, a trained accountant who works in McDonalds is under using his skills. If this kind of underemployment is widespread, it means the economy will be operating below its potential capacity.
Disguised Unemployment
Underemployment is similar to the concept of disguised unemployment. Disguised unemployment looks at people who are not officially counted as unemployed but are either not working or working very inefficiently. e.g.
disguised unemployment could count students not working in holidays who are not counted on official statistics.