Underemployment is a big feature of the current global employment picture. Although more people are finding work, it would appear that a lot have given up any chance of finding work. So I thought it would be a good idea to tackle some of the issues that are raised by having a large slice of the “prime working age” population out of work. Here’s the key points :
- The driving concern about underemployment is that careful analysis suggests it could be even more prevalent in the future. At least, that’s what I derive from my reading of the issue. The United States is the best developed country example, so I will draw heavily on the USA experience in this post. If you hold with the idea that Australia follows US trends – eventually – then there are lessons in underemployment that must be learned if we are to have any chance of avoiding the US situation.
- As a father though, what my reading of underemployment has highlighted is the need for ever-higher levels of education and employment flexibility for my children, if they are to not only survive but to prosper in the future world of employment and income-earning.
- At the broader level, predictions for advancement in Artificial Intelligence (“AI”) have the potential to increase underemployment, and if the more worrying predictions play out then the impact could be massive. This is part of the story behind what has evolved into a global push to more readily consider some form of “universal income”.
Underemployment – what is it?
Underemployment can be roughly defined as a broader measure of unemployment. It includes an estimate of people who are not looking for work – these are people who do not usually show up in standard “unemployed” measures. The United States Bureau of Labor Statistics includes a straight-forward list of the types of unemployment and underemployment on their website, which can be found here. The 6 main measurement levels are shown below, and the official unemployment rate is highlighted.
- U-1, persons unemployed 15 weeks or longer, as a percent of the civilian labor force;
- U-2, job losers and persons who completed temporary jobs, as a percent of the civilian labor force;
- U-3, total unemployed, as a percent of the civilian labor force (this is the definition used for the official unemployment rate);
- U-4, total unemployed plus discouraged workers, as a percent of the civilian labor force plus discouraged workers;
- U-5, total unemployed, plus discouraged workers, plus all other marginally attached workers, as a percent of the civilian labor force plus all marginally attached workers; and
- U-6, total unemployed, plus all marginally attached workers, plus total employed part time for economic reasons, as a percent of the civilian labor force plus all marginally attached workers.
Underemployment – who does it impact most?
And here is a chart of underemployment broken down to reflect the education levels of those who are underemployed.
Underemployment is a hidden worry
Underemployment in the United States in recent times has been overshadowed by the very strong drop in unemployment rates. As you would have noticed, unemployment rates are often quoted in media and for anyone who has been paying attention, those rates have fallen quite dramatically in the United States – and remain quite low here in Australia at a national level. Underemployment levels are rarely reported in mainstream media, which means that during an otherwise positive economic environment, there will be a lot of people who will feel their fate is not being recognised, which in turn, leads to higher levels of dissatisfaction generally. And that is an outcome that any society should want to avoid wherever possible.
Underemployment in America rose significantly following the Global Financial Crisis – as illustrated by the earlier chart. A lot of study and research went into investigating the causes and impacts around this time and in subsequent years as the economy very, very slowly recovered. One such study – from Leif Jensen of the Louisiana State University – can be found here. For the nerdy and sleep-deprived, it’s a great read.
Underemployment – the Australian experience
The Australian Government website includes an excellent page defining and discussing underemployment as it applies in Australia. If you click on the image below, the link will take you to the relevant page.
A chart on the site includes the latest figures for underemployment levels in straight-forward numbers (as opposed to percentages, which so easily hide the human side of any issue).
Over 1.000,000 people. You can see the scale of this issue. And the trend is clearly visible – this is an issue that needs to be tackled at every level.
Underemployment – what can be done?
Good question. This is not a straight-forward issue. Underemployment involves issues of opportunity, bias, income, education, geographic locations and a full range of demographic variables. It is not an easy subject to wrap your head around, so I’ve included a link below to an excellent research report prepared for the US government back in 2016.
The report highlights a number of areas, including education, race and incarceration rates. Although I have not researched the topic, I would expect that Australia does not jail as high a proportion of its population as the US does.. here is an extract from that report.
Another unique feature of the U.S. experience has been the rapid rise in incarceration, especially affecting low-skilled men. By one estimate, between 6 and 7 percent of the prime-age male population in 2008 was incarcerated at some point in their lives. These men are substantially more likely to experience joblessness after they are released from prison and in many States are legally barred from a significant number of jobs
Let’s hope that Australia does not catch up with the USA in this statistic.
Artificial Intelligence impact on underemployment
It’s a fascinating outcome of the potential for AI that humans can best compete by being ‘more human’. Even with artificial intelligence taking the strides that it is, there remains a high level of need for human interaction. There is a huge amount of news stories being generated on this topic right now – when you have a moment, just Google Artificial Intelligence and jobs.. Here is just a small sample of current or recent discussion:
Become a human – Competing with machines
All of this seems to me to indicate a need for prospective job entrants to be very flexible and to continue to expect to need to study and learn new things well after they qualify for whatever their initial job objective may be. Underemployment could be made substantially worse in a world of AI and machines of even higher capability. These machines could be expected to take over more and more of the “easily automated” jobs and roles. Financial planners are already facing this possibility with the rise of so-called “Robo-advice”. It’s still in its infancy and the regulation of this aspect of financial planning is somewhat ‘clunky’ but there is no doubt that a good deal of financial planning could be automated for dramatic increases in efficiency and hopefully reduced cost of providing those services.
Regardless of the rise of AI, it will be the human element that will make a difference. Conversing with a machine over the phone or via an online portal may seem no different from dealing with a human – and if this can be done at human level then that’s great. However, direct contact with AI will require some form of “agent”, and it would appear to be far into the future before we have robots or androids that people will interact with comfortably or without that “creepy” feeling.
Some commentators see robots and AI as likely to help humans, which is a positive outlook.
I’m not so sure. Past experience suggests that humans are slow to adapt to incremental change – it’s our preference to wait until an issue is big and clear and bold in front of us before we act. This post is my attempt to poke you into thinking about the future, and how it is likely to impact you and most especially how it is likely to impact your children (if you have any) and your family and friends. It’s a big issue, and one that needs to be discussed in far more detail.
A post i wrote some time ago on housing should really be amended to include more detail on concentrating on jobs and education rather than worrying about house prices!
The impact of Artificial Intelligence on employment and therefore unemployment and underemployment is likely to be very large. It’s a popular topic and any web search or news search will quickly locate extra reading.
One impact that is very interesting is the possibility of governments implementing a “universal income” to try to address potential underemployment. It’s a huge area that I might cover in more detail in the future but for the moment, here are some links to help you gain a bit of an insight into just what this means and how it might work.
Personally, I’m far from convinced. There would seem to be a lot of disagreement of just what “universal basic income” really is, and there is the fundamental issue of effort and reward. You can expect to read a lot more of this topic into the future.
The Great Disclaimer
Please remember the Great Disclaimer – nothing on this site or in this post is to be taken to be personal financial advice. It is general advice only and to my mind, shouldn’t even be thought of as general advice. It’s more my musings and ponderings – and like most musings, there’s not always a lot of direction, and I can be quite superficial in covering this or that point. So you must not act on any of the content of this post or site without undertaking your own substantial research or obtaining a professional opinion and recommendation.