What is Underemployment and Why Does it Matter?

In my Christmas and New Year downtime, I finally had a chance to have a look at the November labour force statistics and something caught my eye. It wasn’t that the unemployment rate has generally been steady all year (3.8%) or that the sharp increase in the participation rate has continued to climb and has now just snuck past 67% (the highest ever recorded), it was the underemployment rate.

Underemployment isn’t really something that I’ve paid much attention to and thought it may be worth looking into. That’s when I discovered not a lot of information on the topic. It had me curious; why is it that when we’re seeing an all time low unemployment rate, unfilled job vacancies everywhere and boomers are retiring left right and centre, that for the past three years, 10% of the workforce say they want to work more but can’t find suitable jobs?

It turns out underemployment is a complex topic, which is probably why it isn’t touched on often. Even trickier is that the unemployment rate only really tells part of the employment story. To be defined as employed you only need to work 1 hour a week – and this is why taking into account underemployment matters.

So what is underemployment? In a nutshell It’s someone who is currently employed, but would like to and is available to work additional hours. In a lot of cases they may have one or more jobs already, but there is still a shortfall between their preferred number of hours and their actual hours worked.

Studies have shown that underemployment can have a costly effect on society and can lead to for individuals:

  • Anxiety and depression
  • Financial hardship
  • Health issues

There’s another consideration though: under-utilisation of skilled workers already in the workforce. As skilled worker globally are becoming scarcer, taking advantage of under-utilised workers wanting to work more hours could assist in solving Australia’s productivity and skills shortage. But how do employers take advantage of the opportunity this under-served segment of the workforce represents?

There are three main ways this can be achieved if practical for the employer:

  • Flexible hours
  • Job sharing
  • Other assistance – i.e. transport, relocation assistance, on site child care etc…

Of course, this isn’t a one size fits all solution for employers and that’s why other parts of the recruitment toolkit may need to be used which includes (but is not limited to): up-skilling of new entrants to the workforce through government incentives and taking advantage of migrant workers to immediately fill skilled gaps in your labour force.

Further information:

Definition of underemployment from bureau of statistics: https://www.aph.gov.au/About_Parliament/Parliamentary_departments/Parliamentary_Library/pubs/rp/rp1819/Quick_Guides/Underemployment
Labour force statistics: https://www.abs.gov.au/statistics/labour/employment-and-unemployment/labour-force-australia/nov-2023