The massive cost of underemployment

By Felix Salmon
February 11, 2010
Center for Labor Market Studies quantifies the cost of today's unprecedented levels of underemployment on society as a whole; I can't find the version that was emailed to me online, but a shorter version is here.

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Those of us who have learned to always look at the formerly-obscure U6 underemployment measure on the first Friday of every month have long been shocked at the number of people who want to work full-time but who in fact are working part-time. A new study from Andrew Sum and Ishwar Khatiwada of the Center for Labor Market Studies quantifies the cost of today’s unprecedented levels of underemployment on society as a whole; I can’t find the version that was emailed to me online, but a shorter version is here.

In any case, here’s the bottom-line table from the longer version:

underemployment.tiff

This $148 billion number is a good lower bound for the annual dollar cost of underemployment on society. The true figure will be higher: as the paper notes,

There are other important losses to these underemployed workers, including less training provided by employers to part-time workers, a lower return to future wages from part-time employment today, and lower future earnings.

Barbara Kiviat has noted this too: it’s possible to do serious harm to your lifetime earnings by taking a part-time or temporary job today rather than staying unemployed and looking for a full-time job. But of course many people have no choice.

Barbara also picks up on the other main finding of the report: that the costs of unemployment and underemployment are being borne disproportionately by the poor and the unschooled. And so long as these levels of underemployment continue, inequality in the US is going to continue to deteriorate — with attendant negative effects on overall economic and political health, the echoes of which can be felt for decades after the underemployment problem has gone away.

Creating jobs, then, is the single most urgent task facing the Obama administration — and the president was right to focus on it during his State of the Union address. Whether the government has the ability to do it, however, is another question entirely.

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