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In one usage, it describes the employment of workers with high skill levels in low- wage jobs that do not require such abilities. For example, someone with a college degree may be tending bar or driving a cab. Alternatively, a skilled machinist may be working at a fast-food outlet.
This may result from the existence of unemployment, which makes workers with bills to pay (and responsibilities) take almost any jobs available, even if they do not use their talents. This can also occur with individuals who are being discriminated against, lack appropriate certification (such as a high school or college diploma), or have served time in jail. Some types of skills -- such as those associated with doctorates in literature or philosophy -- are valued very poorly by the marketplace, so that people often end up taking jobs that do not employ their education.
A related kind of underemployment refers to "involuntary part-time" workers, who could (and would like to) be working for the standard work-week and can only work a fraction of this.
These kinds of underemployment arise because labor markets typically do not " clear" using wage adjustment. Instead, there is non-wage rationingRationing is the controlled distribution of resources and scarce goods or services: it restricts how much people are allowed to buy or consume. Rationing, for whatever reason, controls the size of the ration one's allotted portion of the resources being d of jobs.
The term can also be applied by regional planner s to describe localitiesThe term locality has different meanings in different disciplines: Geography In geography, a locality is a place. This is the primary meaning of the term, from which other uses derive. Specifically, the term "locality" is used by the United States Board o where economic activity rates are unusually low. This can be induced by a lack of job opportunities, trainingTraining refers traditionally and meaningfully to what many folk now grandiloquently term professional development. Educational training tends to the vocational or practical and relates to specific useful skills. It forms the core of apprenticeships and p opportunities, or services such as childcareChildcare is the act of caring for and supervising minor children. It is traditional in western society for children to be looked after by one or both of their parents, but the need for two-job households means that childcare is often delegated, at least and public transporttaxi serving as a bus Public transport comprises all transport systems in which the passengers do not travel in their own vehicles. It is also called public transit or mass transit . While it is generally taken to mean rail and bus services, wider definition. Such difficulties may lead residentA resident is a person who lives in a particular place permanently, or for an extended period of time, i. who maintains a residence or a domicile in that place. A resident alien is a person who is living in a particular foreign country for an extended pers to accept economic inactivity rather than register as unemployed or actively seek jobs because their prospects for regular employment appear so bleak. (These people are often called discouraged workers and are not counted officially as being "unemployed.") The tendency to get by without work (to exit the labour force, living off of relatives, friends, personal savings, or non-recorded economic activities) can be aggravated if it is made difficult to obtain unemployment benefits.
Relatedly, in macroMacroeconomics is the study of the entire economy in terms of the total amount of goods and services produced, total income earned, the level of employment of productive resources, and the general behavior of prices. Macroeconomics can be used to analyse economics, "underemployment" simply refers to excess unemployment, i.e., high unemployment relative to full employment or the NAIRU. Thus, in Keynesian economics, reference is made to underemployment equilibrium. Economists calculate the cyclically-adjusted full employment unemployment rate, e.g. 4% or 6% unemployment, which in a given context is regarded as "normal" and acceptable. Sometimes, this rate is equated with the NAIRU, also known as the natural rate of unemployment. The difference between the observed unemployment rate and cyclically adjusted full employment unemployment rate is one measure of the societal level of underemployment. By Okun's Law, it is correlated with the gap between potential output and the actual real GDP. This "GDP gap" and the degree of underemployment of labor would be larger if they encorporated the roles of underemployed labor, involuntary part-time labor, and discouraged workers.