The underemployment problem

Unemployed workers look at the Hot Jobs list at the Workforce One jobs center in Miami, Fla.


Tess Vigeland: So we in the media can stop asking that fairly ridiculous question about are we in an official recession. Yes, we are, and have been since last December according to the pointy heads who track such things. So then it's no surprise that the latest unemployment figures show more than half a million jobs dropped off payrolls in November, the biggest loss since the mid-70s.

Believe it or not, that's only a small part of the story. The government also puts out underemployment stats. That figure is almost double the number of people who are unemployed.

But what exactly does it mean to be underemployed? We asked Rachel Dornhelm to find out.

Rachel Dornhelm: Let's start with the easy part: official definitions. The unemployment number counts anyone who is actively looking for work.

Jared Bernstein: Now there are a lot of people who have given up looking for work. There are people who are working, but not as many hours as they'd like. Those people are counted in the underemployment rate.

That's Jared Bernstein from the Economic Policy Institute. He says of the two concepts, underemployment gets less attention. But it's a bigger problem.

Bernstein: It has gone up considerably faster than unemployment and that's partially because when this recession got started, employers didn't necessarily lay people off as much as they cut their hours.

He says that's what has so many families feeling so pinched right now -- wage earners who don't have enough hours or are no longer applying for jobs. But Bernstein says that's only part of the story.

Bernstein: But then there's this other group of unknown size who is working below their potential.

This is where the concept of underemployment gets fuzzy. There are a lot of people who are excluded from the official number. They're almost impossible to track, but they're not hard to find. Just ask Katherine Levenson.

Katherine Levenson: I have a B.A. from UC Santa Barbara in Anthropology and then an M.A. from Harvard plus about another 6 years of Ph.D. work.

In February, she left a job as a school teacher in Berkeley, CA, after she was injured breaking up a fight between two students. Since then she has been living off savings, working part-time in retail and applying for countless jobs. Just recently, she started selling insurance on commission.

Dornhelm: Is it where you imagined you'd be after getting after all that education?

Levenson: Um, totally not.

Another unofficial definition of underemployment would include people who have full-time jobs with benefits but still can't make ends meet.

Dennis Elston: My name is Dennis Elston. I'm working at near minimum wage.

Elston is 54 and lives in Flint, MI. He drives 84 miles roundtrip to his full-time job every day. He says the other month his boss gathered his department around a table...

Elston:...and was talking about what if we lost our job or were going onto part-time instead of full-time work and if we could survive on just 40 percent of our pay. And at that point I had already realized I wasn't surviving on 100 percent of what I was working for.

Elston says he got through last year thanks to an extra $1,000 from a home equity loan for roof repairs. And help from his parents

Then there are those left out of the official underemployment figures because they're working for themselves. Like Jeff Wenker. He was laid off from his PR job in Seattle two months ago and is now self-employed, getting small jobs here and there. And that's on top of his other responsibilities.

Jeff Wenker: If you're underemployed and you're looking for full-time employment, you are always working. You're working to find a job, you're working to take care of the kids...

Wenker says as time goes on he's willing to take any full-time job just to get the benefits. But until he lands that opportunity, he's trying to look on the bright side of underemployment and indulge his creative dreams. He says he's sleeping just four and half hours a night so he can write a series of blogs and a screenplay.

I'm Rachel Dornhelm for Marketplace Money.

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As a Controller and systems specialist for a mid-sized company, I was laid off over a year ago, so they could hire a younger less-expensive person (as it turned out). Since August, I’ve been able to work through a temp agency for a larger, more progressive company. The temp agency is making $19.50 per hour above what they pay me, without benefits or paid time off. Thanks to the stimulus package, I can still afford COBRA. With an M.B.A. and over twenty years’ experience, I am working well below my potential, but the client company benefits from my depth of knowledge and flexibility at an affordable price. Should they wish to hire me full-time, however, they would have to pay a $20,000 ‘conversion fee’ to the temp agency. Am I part of the ‘employed’, as I’ve stopped applying for unemployment benefits? Is ‘under employed’ better than unemployed? At 60 years old, this is NOT how I’d planned my professional career to end, pulling down 30% less than my best salary, for no benefits or time off.

Too often I have seen underemployment be the prefered model. Companies prefer temp or part time workers, and it has been a growing problem before the recession if not a root cause to the recession. Health care reform may actually inadvertantly help with underemployment, since it gives an incentive to hire less people but for more life sustaining survivable work, instead of a plethera of people for such little money that it is worth not even working. Think in your daily life how many people you interact with where it is cheaper to hire that person for 20 hours a week over 40... and realize that is probably the case in each situation. Bank tellers, cashiers, cooks, secretaries, call centers, customer service personel. The only time you see service industry being full time, is when commission based.

I was a Controller for a small company and got laid off. Because I am single, and could not afford to go through my savings I took a major demotion and paycut (1/5 of my gross salary). The demotion is so hard on the psyche as I am used to being a decision maker and not a clerk. I still wonder if I did the wrong thing, but at the time I was motivated by the desire to save my hard earned money.


The story does not mention the tax burdent on underemployed/self-employed. The self-employment tax is 15.95 over and above income tax. If you made $15,000 self-employed, the Federal Gov't expects $2385 to cover both the employer's, and employee's part of the Social Security tax. The first $600 is exempt, and this number has NEVER been adjusted for inflation.

After reading this story I guess we have been "underemployed" for quite some time. At age 57 my husband and I have worried about not being able to save for our retirement. Now the biggest worry is paying the immediate bills and finding a way to get medical coverage without going on welfare. I just lost my job.

While I certainly agree with Ken Soper's comment, I think that he's forgetting one very important point:

Those of us who take jobs below our full capacities still have bills to pay.

For example, I lost my job in January of 2008. I have plenty of experience in my field, a bachelor's degree, and a nationally recognized certification. I cannot find a job in my field. I've been on over 30 interviews this year. I have, however, been temping at various jobs since March. I'm not wild about it, but it gets my bills paid. Barely.

Has this decision to work at a reduced capacity hurt or setback my career? Absolutely. However, I feel grateful that I've been able to: work at all, keep my house, and stay off unemployment.

I write extensively about my job search and what it's been like to live in Michigan, the state with the highest rate of unemployment in the nation for three years running at: http://www.mittenmusings.net

The underemployed have been a problem for much longer than you might think, way before the current recession. Even in good economic times there are many people, for one reason or another, who cannot find work to match their talents. Many people do not know what else they could do for work, haven't taken the time for self-evaluation and/or use of a qualified National Career Development Association professional (see www.ncda.org) for help.

Also, there is the assumption that I only need to be a networking person (read, networking is 'personal community development') when I'm looking for work; those who network only when in transition are easily see as 'takers' and not as 'givers'. Another reason is that people assume that traditional, reactionary methods of finding work do work. In fact, many, many more positions are filled from networking and other word-of-mouth methods than are found by classified job ads being run in newspapers and posted on the Internet; the latter method is a matching process, often referred to as a talent pipeline these days by recruiters. The pipeline method does not favor the career changer nor the 'underemployed'.

Ken Soper, MA, MDiv
NCDA Master Career Counselor
(616) 698-3125

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