Refers to a measure of the number of individuals in an economy who are unwillingly working in lower-skill and/or lower-paying jobs, or who are employed part-time because they cannot obtain full-time jobs that use their skills. Both underemployment and unemployment are counted in U.S. government reports in order to provide a truer picture of the health of the job market. The causes of underemployment include economic recessions, rapidly changing workforce needs, lack of alignment between employer needs and education credentialing programs, impacts on hiring that occurred with COVID, and demographic impacts broadly and in specific industry sectors (equal opportunity for many populations – race/ethnicity, gender, age, disability).

There are three types of underemployment:

• Visible underemployment in which an individual works fewer hours than necessary for a full-time job in their chosen field. Due to the reduced hours, they may work two or more part-time jobs to make ends meet.
• Invisible underemployment in which an individual is unable to find a job in their chosen field. They work as a result in a job that is not commensurate with their skill set and, in most cases, pays much below their customary wage.
• Dropping/stopping out: individuals unable to find work in their chosen field have quit the workforce altogether (they have not looked for a job in the last four weeks, per the Bureau of Labor Statistics' definition of "not in the labor force")/

In addition to these categories, researchers also measure underemployment using education-based approaches. In this framework, workers may be classified as underemployed if they hold a degree (such as a bachelor’s degree) but are working in occupations typically requiring less formal education. Some methodologies also consider earnings outcomes, recognizing that workers may receive wage premiums even when employed outside fields traditionally aligned with their level of education. Because these approaches rely on different assumptions about job requirements, worker qualifications, and earnings, published estimates of underemployment can vary significantly.

Recent research, including analysis from Georgetown University’s Center on Education and the Workforce, highlights how different methodological approaches can lead to varying interpretations of underemployment and labor market alignment.