The Real Unemployment Issue is Underemployment

We’ve been seeing some heartening numbers on unemployment from the Bureau of Labor Statistics, which currently places the unemployment rate at a very low 4.9%. However, while this number demonstrates substantial economic recovery since the Great Recession of 2008, overall public opinion isn’t so optimistic. In fact, Rasmussen Reports reveals that only 31% of Americans feel that the country is “heading in the right direction,” and this number has been significantly low for several years now.

While economic struggles and unemployment are only a part of the problems facing American workers, they’re a large driver of general discontent. I’m sure we all know someone who is struggling to find the caliber of work they would prefer or to find a job at all, and the stress this places on individuals and families is enormous. With unemployment rates so low, why might this be the case?

The Disconnect Between Statistics and Sentiment

There is a clear disconnect between the stated unemployment rate and the reality of worker confidence, as betrayed by low public sentiment about the direction of the United States economy. My sense is that the unemployment rate as reported by the Bureau of Labor Statistics doesn’t take into account the large number of Americans who are underemployed, and is therefore totally misleading.

Gallup offers a more comprehensive picture. By incorporating the reality of underemployment into their calculations, they conclude that the “Real Unemployment” metric is 9.7% of Americans. This figure seems much more in tune with the kind of public sentiment that Rasmussen reports, as well as the stated experience of those around us. So what is the reality of underemployment and how does it affect workers and the economy?

The Reality of Underemployment

As explored recently in The Washington Post, the underemployed in America are comprised of three distinct groups: “the unemployed, part-time workers who’d prefer full-time jobs (workers who are literally underemployed), and ‘marginally attached’ workers (a small subset of people… who would be willing to work if there were more good opportunities available).” These groups of people combined make up Gallup’s 9.7% (although some would argue that the real rate of underemployment is much, much higher).

The most significant members of this group are the part-time workers who would prefer full-time jobs, also known as “involuntary part-timers.” A number of trends may contribute to the large numbers of people who find themselves feeling trapped in part-time jobs, including the rise of service industry jobs (in which I would include certain “sharing economy” gigs), seasonal workers, and growing dependence on part-time workers to reduce costs in employee health care or other areas. What is certain is that underemployment takes a significant toll on workers’ confidence in themselves and the economy as a whole.

The Effects of Underemployment

The psychological effects of being chronically underemployed won’t surprise you. Depression, anxiety, and low-self esteem are common issues for those who struggle to make ends meet or who feel they are not able to live up to their full potential in their work. Additionally, the stress of searching and competing for the full-time positions that are available contributes to the dissatisfaction we see reflected in Rasmussen’s 31% of Americans.

This dissatisfaction not only negatively affects individuals and their communities, it impacts the economy as well. Underemployed people are understandably less likely to make major purchases such as cars and homes (perhaps a contributing factor to low rates of home ownership among millennials), to buy non-essential or luxury items, or to invest their money. They struggle to afford adequate health insurance and often neglect to address health problems that are non life-threatening.

This “scarcity mindset” in chronically underemployed workers leads to a significant lack of confidence in the economy, in employers, and in the future of the United States.

Creating “Good Jobs”

How can we address the problem of underemployment? First of all, the lack of data around underemployment must be addressed in order to create broader understanding of the problem and encourage development of wide-reaching solutions. Those of us who have the ability to create jobs should focus on the quality of work over the quantity of positions.

What is clear is that we can’t ignore the reality of underemployment in our quest for ever-lower unemployment numbers. While putting more people to work is important, it is vital that the jobs that are created are “good jobs,” which Gallup defines as “working 30 or more hours per week for an employer that provides a regular paycheck.” Creating more of these jobs is a necessary ingredient in increasing consumer confidence and turning around the discontent that continues to grip the American people over the direction of the economy and the country as a whole.

Once we see larger numbers of Americans expressing confidence in the future of the country, low unemployment metrics will be truly meaningful.

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