In present economic scenario many people are underemployed even though the unemployment rate is low i.e. workers are less unemployed but still the underemployment rate is high. This underemployment is a social problem. It affects the job growth, poverty levels, business growth and career growth.
Unemployment rate is the fraction of the labor force that is out of work and looking for a job or expecting a recall from a layoff. But underemployment is the measure of employment and labor utilization in the economy i.e. the way the labor force is utilized in terms of skill , expertise and availability of work. As under means beneath of something so underemployment means the employment of those workers who are employed in a particular job below their education or skill level. The worker who are skilled workers involved in low paying jobs , low skill jobs and part time workers willing to work as full timers are the unemployed workers(Dornbush,145).
Many developed and developing countries generally consider the unemployment rate and try to reduce it by implementing various strategies . This is due to the fact that mostly the country is worried about the people who are unemployed and cannot earn a living for himself and his family. In many cases it is found that though the unemployment rate is low in developed country i.e. more employs are employed for an employer but the underemployment rate is high.
The unemployment rate of U.S. for the last six months is between 4.9 and 5 percent. This is a good sign for the country and implies that the number of people who are jobless are few and consistent with the stable inflation. But the underemployment rate was high at 9.8 percent in 2010 and now decreasing. As per the data by Bureau of Labor Statistics the underemployment rate was at 7 % in 1990 then increased to 8% during 2006-2007 and again decreased to 8.5 % in 2014-2015 from the year 2010. But still the rate is high. The author discusses various reasons of increase in underemployment in a developed country like U.S(“Low unemployment, check. Low underemployment, not check”).
The high underemployment is due to the worse economic conditions of the global recession where the demand of workers was less and the supply of workers was more. Due to recession there was unequal supply and demand of workers , increased layoffs , technological changes which ultimately displaced many workers from their jobs. This led many skilled workers to look for various kinds of jobs and accepting part- time or low skilled jobs just to earn a living and meet the basic requirements.
The Bureau of Labor Statistics has defined U3 as the official unemployment rate and U5 the discouraged workers and all other marginally attached workers while U6 is defined as those workers who work part-time due to economic conditions. U6 includes the unemployed, part-time workers looking for full time jobs and the marginally attached workers. They have reasoned that the high underemployment rate are due to the involuntary part time workers(IPT). Again these IPT workers are divided into voluntary and involuntary(“Low unemployment, check. Low underemployment, not check”).
So the autho, Bernstein discusses that the main reason of increase in involuntary part time (IPT) workers is due to the fact that before the start of Obamacare the workers had to work hard to obtain the health insurance. As health insurance being one other major expense for any family in U.S. the workers had to pay the premiums even though the employer company is not providing insurance benefits(“Low unemployment, check. Low underemployment, not check”).
But after the implementation of Obamacare where through the Affordable Care Act (ACA), the health insurance is paid by the government to support and facilitate the low income group people and this benefit has encouraged many workers to shift from full time jobs to part time jobs. Though this reason is not a valid reason as it has been argued that this cannot be the only reason of increased part time workers(“Low unemployment, check. Low underemployment, not check”).
The nature of the job change that occurred after recession, change of jobs more towards service industry than the manufacturing industry, employers employing younger workers who prefer to work as part timers and the jobs that involve shifts in many industries have increased IPT.
Bernstein states that this underemployment is a cyclical problem and that can reduced by tightening the job market and there has to be better job opportunities and openings for the workers. So even though the economy reaches full employment still there will be problems of underemployment .Thus if the government and the federal reserve apply the right monetary policies and avoids recession then this problem of high underemployment will be reduced(“Low unemployment, check. Low underemployment, not check”).
Works Cited
Dornbush, Rudiger. Macroeconomics. New Delhi: Tata McGraw-Hill, 2004.
Bernstein,Jared “Low unemployment, check. Low underemployment, not check.” The Washington Post Version (2016): Pages. April 5 https://www.washingtonpost.com/posteverything/wp/2016/04/05/low-unemployment-check-low-underemployment-not-check
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