Underemployment
The term underemployment describes the practice of firms or economies employing workers who are not fully occupied i.e. who are to some degree surplus to needs.The term can also be applied by regional planners to describe localities where economic activity rates are unusually low, perhaps where the lack of job opportunities, training opportunities, childcare services and/or good public transport leads residents to accept economic inactivity rather than register as unemployed - because their prospects for regular employment appear so bleak. The tendency to get by without work (to exit the labour force) can be aggravated if it is made difficult to obtain unemployment benefit.
Underemployed workers may exist for structural or cyclical reasons:
- For example, in Western economies some firms may be insulated from fierce competitive pressures and have grown inefficient; they may employ more workers than necessary and carry the resultant excess costs and depressed profits. In some countries labour laws or practices (e.g. powerful unionss) may force employers to employ excess labour. In some countries (e.g. Japan) cultural influences (the relatively great importance attached to worker solidarity as opposed to shareholder rights) result in a reluctance to shed labour in times of difficulty.
- Cyclical underemployment refers to the tendency for the capacity utilisation rate of firms (and therefore of their labour forces) to be lower at times of recession and/or depression. At such times underemployment of workers may be tolerated, and indeed may be wise business policy, given the costs both financial and to morale of shedding and then re-hiring staff. For instance, it has been argued that Airbus gained market share from Boeing partly because the latter company, having dismissed a great part of its personnel in lean times, was unable to ramp up production fast enough in more prosperous times. The tourism sector is notoriously cyclical in areas where attractions are weather-related.