Underemployment Analysis: Causes, Effects, and Solutions

This essay provides an analysis of underemployment in Australia, examining its causes, effects, and potential solutions. The essay identifies the rise of part-time employment, industrial shifts, and preference for flexible work as key contributors to underemployment. It explores the negative consequences, including financial insecurity, financial instability, psychological problems like depression, and slow wage growth. The essay references multiple sources to support its claims, highlighting the impact of underemployment on individuals and the broader economy. The essay concludes by suggesting the Australian government introduce measures to create more full-time employment opportunities, provide social security for part-time laborers, encourage the utilization of labor skillset and support wage growth through fiscal and monetary policies, and promote technological training. The essay emphasizes the need to address underemployment due to its adverse effects on individuals and society.

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Underemployment 1
Fundamentally, underemployment is a form of unemployment. Equally, the causes of
underemployment and unemployment are similar. Specifically, underemployment is a type of
unemployment. Noteworthy, underemployment is caused by the rising demand for part-time
employment, the industrial shift in mainstream sectors of the economy, preference of part-time
work over full-time employment, slow rate of wage growth, and technological changes. Notably,
underemployment is revered because it promotes poverty, causes job dissatisfaction, financial
insecurity, and financial instability. Further, underemployment is responsible for psychological
problems such as depression, anger and low esteem. Also, underemployment is brought about by
downturn in business cycles .Overall, Underemployment causes lead to negative personal and
economic outcomes globally.
Worth noting, underemployment rates have risen due to the rapid growth of
part time employment opportunities as compared to full time employment (Berger, 2019).The
availability of more part-time jobs has contributed to underemployment. The rapid growth of
part-time employment has been supported by the rising demand of the same according to ABS
labor force statistics of 0ctober 2018(Hobday, 2019).Also, industrial shift of former dominant
industries such as manufacturing to health and tourism sectors has contributed to the part time
nature of employment thus underemployment (Berger, 2019).According to the Australian bureau
of Statistics, there are much underemployment in the Retail Trade, Accommodation, and food
service industries thus raising the perception that an industrial shift in the economic sector is
partly responsible for underemployment in Australia.

Underemployment 2
Further, the lack of full-time employment has contributed to the rise of underemployment.
The ready availability of part-time employment has enhanced underemployment in the sense that
laborers are able to work fewer hours or choose a job they are not skilled to do just because they
are available. Apart from the availability of part-time jobs, preference is to blame for the
flourishing nature of part-time work. Arguably, some workers choose to work part-time
(Campbell 2013).Despite the existence of full-time employment, some laborers choose part-time
employment due to the flexibility of working time. Also, low business cycles, a slow growth rate
of employment opportunities and technological relations (Lacmanovic, Buric & Tijanic, 2016).
Usually, harsh business cycles might require businesses to let go of staff or reduce their working
hours hence underemployment and unemployment. Equally, if the creation of more employment
opportunities slows down there will be more laborers and fewer jobs hence unemployment and
underemployment. Due to advanced technological advancement, lack of tech-savvy laborers
might lead to unemployment or underemployment.
Consequently, from underemployment stems financial insecurity at the workplace. That
is to mean unlike full-time employment, part-time jobs lack long term employment benefits such
as longer working hours, insurance and pensionable schemes thus creating a state of insecurity
(Berger, 2019).Moreover, part time employment causes instability of finances. This is to mean
due to the few working hours, workers are not assured of a stable income. Basically,
underemployed workers are paid an hourly rate as contrasted with full time employees who are
paid on a stable monthly rate Also, underemployment is responsible for the slow growth of
wages According to the Reserve Bank of Australia, underemployment has contributed to the
slow rate of wage growth due to the rapid growth of labor market for the existing employment
opportunities (Bell & Keating, 2019). Alongside, slow wage growth, underemployment leads to

Underemployment 3
negative personal outcomes such as depression, lack of fulfillment and attachment loss to
meaningful work relationship (Milner et.al N.d).
Due to the temporary nature of the job, workers are unable to form meaningful work
relations. Owing to the few working hours, part-time workers are unlikely to forge meaningful
bonds at the workplace. Also, because of the poor fit of jobs to personal skillset, there is the
likelihood of depression, anger, low self -esteem and lack of job fulfillment among part-time
laborers due to fewer working hours leading to lower income and under-utilization of labor
skills. This goes to show underemployment affects the psychological and economic wellbeing of
part time laborers in Australia’s labor market. Based on official Australian Bureau Statistics at
least 14% of the Australian workplace is being underutilized (Awa & Nsikhe 2016).Basically,
underemployment is responsible for the negative psychological challenges similar to
unemployment.
In a way, underemployment contributes to rising poverty levels .Due to the few working
hours as compared to fulltime employees, the income is relatively lower hence likely to lead to
high poverty levels. Due to underemployment, there has been a slow growth rate in wages with
increasing costs of health, energy, and transportation above the consumer prompts the need for
increased social security on the federal budget (Warren, 2015).This is an indicator of increased
government expenditure. Simply, underemployment might encourage budget deficit due to the
income inadequacy of part-time workers. The fact that part-time laborers are allotted fewer
working hours leads to wastage potential especially for educated laborers(Warren,
2019).Through a few working hours, some labor skills could go unutilized hence wastage of
worker potential. Additionally, with few working hours, comes low rates of job satisfaction this

Underemployment 4
is because a worker might feel undervalued and might be working on a job they lack expertise in
thus the low satisfaction rate at the workplace (Li, Duncan & Mirani, 2012).
Simply put, underemployment is a type of unemployment. Due to the negative impacts of
underemployment such as financial insecurity and instability, low economic living standards,
depression, underutilization of labor skillset and psychological problems such as anger and
depression, it is necessary that the Australian government introduce measures to create more full
time employment opportunities, introduce social security for part-time laborers to introduce
financial security. Further, the Australian government should encourage the utilization of labor
skillset by providing affordable technological training to reduce instances of underemployment
due to skill mismatch among the labor force .In case the Australian government supports the
growth of wages through fiscal and monetary policies, then workers might prefer full-time
employment over part-time .Overall, underemployment is a challenge that should be addressed in
the Australian labor market due to the negative effects it has on individuals and society.

Underemployment 5
References
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Awa, C.O & Nsikhe, A. (2016).Unemployment and Underemployment on Economic development in Imo
state, Nigeria: Effect and Defects. 10SR Journal of Economics and Finance,Vol 7 ,Issue 6 ,pp 01-
08
Bell S & Keating, M. (2019).Low wage growth: Why it matters and how to fix it. Australian Economic
Review. Retrieved from https://onlinelibrary.wiley.com/doi/abs/10.1111/1467-8462.12343
Berger T. (2019). The rise of Underemployment in Australia.Aimn.com. Retrieved from
https://theaimn.com/the-rise-of-underemployment-in-australia/
Campbell, I. (2013).The housing security consequences of underemployment. Melbourne Institute.
Retrieved from https://melbourneinstitute.unimelb.edu.au/assets/documents/hilda-bibliography/
other-publications/2013/
Campbell_etal_housing_security_consequences_of_underemployment.pdf
Li J., Duncan, A & Miranti, R. (2012). Underemployment among Mature Age Workers in Australia. The
University of Canberra .Retrieved from https://www.murdoch.edu.au/School-of-Business-and-
Governance/_document/Australian-Conference-of-Economists/Underemployment-among-
mature-age-workers-in-Australia.pdf
Milner, A., King ,L. T.,LA Montagne ,D. A., Aikens ,Z, Petrie ,P & Kavanagh, M.A.(N.
d).Underemployment And its impacts on mental health among those with disabilities: Evidence
from Hilda Cohort. Journal of Epidemiology Community Health, Vol 71, Issue 12

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Warren, T. (2015).Work-time underemployment and financial hardship: Class inequalities and recession
in the UK. Journals.Sagepub. Vol 29(2), 191-212