Underemployment:
Implications for Organizations
By Malak Kazan
Senior Associate
(800) 627-3697 - [email protected] - www.erieri.com
Copyright© 2012 ERI Economic Research Institute - 8575 164th Avenue NE, Redmond, WA 98052
With the unprecedented and persistently high unemployment rates of 7.3%, 9.3%, 9.6%, and 8.9% from 2008
through 2011 respectively, the labor market has been a buyers’ market, giving employers the advantage of potentially getting the best talent at a “value.” Employers are also staffing up cautiously by using part-time workers. The
resultant underemployment has two by-products of these market conditions: underutilized workforce and involuntary part-time staff.
This paper will review the effects of underemployment in terms of the impact on organizations and some of the
proactive approaches which companies can use to sustain the benefits of these market advantages. We will also
review and analyze some industry sectors and related jobs losses to gain insight to the underemployment labor
market composition while also analyzing occupations that have a promising outlook. Data from the Bureau of
Labor Statistics, ERI Economic Research Institute, as well as independent analysis of 10-K, proxy statements, and
academic research will serve as the basis of this report.
First, let’s look at underemployment by defining the two by-products for the purpose of our analysis:
1. Underutilized or “overqualified” labor force consists of workers with high education, skill levels, and/or
experience who are employed in jobs that do not require such abilities.
2. “Involuntary part-time” or underused labor force constitutes workers who could (and would prefer to) be
working a full-time job.
Underutilized workforce is a difficult statistic to evaluate, and most research currently is academic. However, we
can tie the involuntary part-time definition to a related measure of unemployment, U-6. This measure includes
individuals who are unemployed (also referred to as U3), plus discouraged workers, marginally attached workers
(e.g. those who want and are available for a job, have recently looked for work, or not currently looking), as well as
the involuntary part-time workers just explained. We will derive involuntary part-time workers by deducting the
unemployed, discouraged, and marginally attached from the overall U6 reported statistics. As shown in the below table, underemployment for the period 2008 thru 2011 is 5.0%, 4.8%, 5.8%, and recently at 6.6%, respectively.
Involuntary part-time workers are a significant portion of the workforce.
Underemployment in the U.S.
2008 to 2011
U3
U4Δ
U5Δ
(U6 - U3 - U4Δ – U5Δ)
Year
U6
Unemployed
Discouraged
Workers
Marginally
Attached
Involuntary Part-Time
2011
2010
2009
2008
15.90%
16.70%
16.20%
13.50%
8.90%
9.60%
9.30%
7.30%
0.20%
0.60%
1.20%
0.40%
0.20%
0.70%
0.90%
0.80%
6.60%
5.80%
4.80%
5.00%
Copyright© 2012 ERI Economic Research Institute
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Employee Engagement
Why should organizations pay attention to underemployment and employee engagement? Employers strive
to hire talent who are engaged in their work, self-motivated, and help the organization accomplish its goals.
Engaged employees positively impact the bottom line in terms of profitability, customer service, and employee
retention. Having engaged employees is a key competitive advantage for many high performance organizations.
Underutilized and part-time workers are an effective source of talent as long as the workers voluntarily choose
to be in these said jobs. An underemployed workforce introduces business risks to organizations that may result
in disengaged employees. Although underutilized workers are difficult to measure, various studies suggest these
types of workers are correlated with high job performance, but also job dissatisfaction and turnover rate1. Companies need to proactively address the risks associated with underemployment to prevent the negative effects in
terms of low productivity, high turnover, low morale and loyalty, high customer churn, and workplace stress.
Industry Analysis
For organizations to better understand the untapped capacity of the underemployed, it is essential that they understand the potential source of this workforce. What is the composition of the underemployed workforce? Identifying the industry sectors which experience the greatest change in job loss can aid in defining the source of these
underemployed workers. The table below summarizes the five sectors with highest job losses in the U.S. between
2008 and 20112.
Top Job Loss by Industry Sector (in thousands)
Sector
Manufacturing
Construction
Retail Trade
Financial
Wholesale Trade
2008
-897
-787
-697
-227
-242
2009
-1,387
-1,053
-536
-316
-324
2010
109
-149
99
-65
7
2011
192
26
122
-12
67
Cumulative
Increase
2008-2011
-1,983
-1,963
-1,011
-620
-491
The manufacturing, retail, and wholesale sectors seem to be rebounding with jobs added consecutively in 2010
and 2011. The manufacturing, wholesale trade, and retail sectors, from a supply change perspective, are interrelated. What happens in manufacturing will “trickle down” to wholesale trade first, then retail. With the push at
the federal level to “bring manufacturing jobs to the States” and the “Made in America” campaign, the numbers
for the manufacturing sector will likely improve. The construction sector had some job gain in 2011 only. The
financial sector job losses are lessening yet continuing.
1 For more information, go to http://www.careerharmony.com/PDF/Fine&Nevo_PerceivedOQ_IJHRM_In_press.pdf
2 For more information on Bureau of Labor Statistics, U.S. Department of Labor job loss statistics, see links under references.
Copyright© 2012 ERI Economic Research Institute
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Organizations can assess the transferability of work experience in one industry sector to another by looking at the
occupational characteristics of a specific job. ERI Economic Research Institute's Occupational Assessor makes
available updated job descriptions and current assessments for each job in terms of their selected characteristics
for occupations (SCO). Below is an example of a manufacturing worker job description and the corresponding
SCO assessment:
Selected Characteristics for Occupations
ERI Occupational Assessor
Industry Manufacturing
Occupational Code 590-Processing Products From
Assorted Materials
Worker Functions
Data Comparing
People Taking Instructions-Helping
Things Handling
Additional Measures
Creativity* Occasionally
Administrative Activity* Occasionally
Discretion/Independent Judgment* Frequently
Specific Vocational Preparation Over 1 month up to and including
3 months
Education Level Equivalent to 8th grade plus
additional classes
Literacy Demands Mathematics Level Level 1
Language Level Level 2
Reasoning Level Level 2
Temperaments
DIRECTING, controlling, or planning activities of others
Performing REPETITIVE or short-cycle work
Attaining precise set limits, TOLERANCES, and standards
Working UNDER specific instructions
Dealing with PEOPLE
Mental & Stress Demands
Understanding & Memory
Memory* Frequently
Short Instruction Memory* Frequently
Detailed Instruction Memory* Frequently
Sustained Concentration & Persistence
Short Instruction Carrying Out* Frequently
Detailed Instruction Carrying Out* Occasionally
Concentration & Attention* Frequently
Work Schedule* Frequently
Work Routine* Frequently
Work Distractions* Occasionally
Work Decisions* Frequently
Work Completion* Frequently
Social Interaction
Public Interaction* Occasionally
Assignment/Assistance* Frequently
Work Review* Peer Interaction* Work Behavior* Occasionally
Frequently
Occasionally
Adaptation
Adaptation to Change* Occasionally
Hazard Awareness* Occasionally
Travel* Occasionally
Independent Planning* Occasionally
Aptitudes
General Learning Ability 3-Medium
Verbal Aptitude 3-Medium
Numeric Aptitude 3-Medium
Spatial Aptitude 2-Low
Form Perception 3-Medium
Clerical Perception 2-Low
Motor Coordination 2-Low
Finger Dexterity 3-Medium
Manual Dexterity 3-Medium
Eye-Hand-Foot Coord. 2-Low Color
Discrimination 2-Low
(An asterisk (*) indicates a field that is an added, enhanced
measure not found in abandoned 1991 DOT.)
In this example, by reviewing the SCO assessment, one can understand the worker function, vocational preparation, literacy demand, education level, temperament, mental stress demands, and aptitudes of manufacturing
workers, then translate these to the current needs of their organization.
Copyright© 2012 ERI Economic Research Institute
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Occupation Outlook
Those organizations experiencing the fastest growing occupations can look to those sectors with the highest job
losses as a viable labor pool, especially if they are already utilizing them in an underemployed capacity. The following table from the Bureau of Labor Statistics shows the fastest growing occupations in the U.S., the average pay levels benchmarked with data from ERI’s Salary Assessor, and Education/Training requirements for the occupations.
# Occupations
new
jobs
Education/training category
ERI job title
ERI
Mean
Wages in
2011
(000s)
Home health aides
460.9 Short-term on-the-job training
Home Health Aide
$26,093
Food prep. /serving workers/fast food
394.3 Short-term on-the-job training
Fast Food Worker
19,708
Personal and home care aides
375.8 Short-term on-the-job training
Personal Aide
25,872
Retail salespersons
374.7 Short-term on-the-job training
Retail Sales Clerk
25,865
Office clerks, general
358.7
Short-term on-the-job training
Clerk, General
33,285
Truck drivers, heavy & tractor
232.9 Short-term on-the-job training
Truck Driver Heavy
41,696
Landscaping & grounds keeping
217.1
Short-term on-the-job training
Groundskeeper
28,087
Receptionists and information clerks
172.9 Short-term on-the-job training
Receptionist
30,480
Customer service reps
399.5 Moderate-term on-the-job training
Customer Service
Reps (general calls)
35,736
Construction laborers
255.9 Moderate-term on-the-job training
Construction Worker
36,742
Bookkeeping, accounting, and auditing
clerks
212.4 Moderate-term on-the-job training
Audit Clerk
35,284
Carpenters
165.4 Long-term on-the-job training
Carpenter
(gen/maint)
46,256
Executive secretaries and administrative assistants
204.4
Work experience in a related occupation
Executive Secretary
43,951
276 Postsecondary vocational award
Nursing Aide
28,695
Registered Nurse
67,699
Nursing aides, orderlies, and attendants
Registered nurses
581.5 Associate degree
Accountants and auditors
279.4 Bachelor’s degree
Accountant
54,940
Elementary school teachers
244.2 Bachelor’s degree
Elementary School
Teacher
59,584
Computer software engineers, applications
175.1 Bachelor’s degree
Computer Software
Engineer
86,982
Management analysts
178.3
Management
Configuration Analyst
78,719
Postsecondary teachers
256.9 Doctoral degree
Teacher College/
University
64,063
Bachelor’s or higher degree, plus
work experience
Analysis of these highest growth occupations shows a total of 5,816,300 job gains, with 11 of the 20 occupations
having pay levels less than $37,000, and most of the retooling required is on-the-job training. The remaining nine
occupations on the list have a pay range of $41,696 to $86,982, and most require a college degree. Almost 30% of
the occupations are in the health care field, 23% are administrative (across all sectors), and 14% are in retail.
Copyright© 2012 ERI Economic Research Institute
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Retooling
To meet the job growth projections, organizations have to address the issue of underemployment and retooling
in tandem by formulating a workforce plan that incorporates a multi-pronged approach. The plan would entail a
combination of tuition reimbursement coupled with career development, on-the-job training with mentoring, inhouse learning centers, and partnering with local educational institutions to collaboratively integrate some of the
courses to their workforce plan.
Tuition Reimbursement & Career Development
Tuition reimbursement programs are evolving to align employee education needs with career development plans
as well as supporting employee retention by having them sign payback agreements should the employee decide to
exit the organization soon after receiving the tuition reimbursement benefit. Companies with strong performance
culture will have career development discussions with employees on the education they should pursue, the possible career paths available in the organization, while explaining the requirements for each.
On-the-Job Training & Mentoring
This is probably the least costly solution in absolute terms for organizations. It is dependent on flexible business
processes and leadership who can creatively structure work assignments while committing to the learning of the
targeted employee populations. Referring to the occupational outlook analysis, some duration of on-the-job training was required for over 65% of the growth reported. Especially with the underutilized, these are individuals who
essentially have “excess capacity” and, with some investment in the on-the-job training, their contributions can be
increased.
In-House Learning Centers or "Universities"
Requiring the most investment, training employees through in-house programs can create a competitive advantage for a company. These programs are specifically tailored to the needs of the organizations, can be made available across different regions, and often can be “just-in-time” training, especially if technology is leveraged in the
delivery of the programs. Organizations with continuous improvement culture will likely have some variation of
this learning solution.
Partnerships with Education Institutions
Some trade schools, colleges, and universities offer certificate, continuing education, and adult learning curriculum that meet the learning needs of organizations. These learning solutions can be customized, integrated with
learning management infrastructure, and delivered in a just-in-time basis as well.
Summary
Organizations that bring in workers from different industries should be able to foster innovations in terms of process improvement, technology, management, and leadership. Mine the skill sets of your workforce, understand the
capacity that exists, and create a retooling road map to leverage the investment already made in the underutilized
and involuntary part-time workforce. There are industry sectors like education and business services sectors that
support organizations in executing such a road map. To sustain some of the market advantages of the recessionary
economy, be proactive and prevent being blind sided by not having training and qualified human capital available
to respond to business demands.
Copyright© 2012 ERI Economic Research Institute
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References:
Bureau of Labor Statistics, U.S. Department of Labor. Career Guide to Industries, 2010-11 Edition. Retrieved on the Internet at http://www.bls.gov/oco/cg/cgs035.htm (visited March 29, 2012).
Bureau of Labor Statistics, U.S. Department of Labor. Industry Employment. Occupational Outlook Quarterly, Winter 2011-12. Retrieved on the Internet at http://www.bls.gov/opub/ooq/2011/winter/art03.pdf (visited March 29, 2012).
Bureau of Labor Statistics, U.S. Department of Labor. Occupational Outlook Handbook, 2012-13 Edition, Projections Overview,
Retrieved on the Internet at http://www.bls.gov/ooh/about/projections-overview.htm (visited March 29, 2012).
Fine, S., & Nevo, B. Too Smart for Their Own Good? A Study of Perceived Cognitive Overqualification in the Workforce. International Journal of Human Resource Management. Retrieved on the Internet at
http://www.careerharmony.com/PDF/Fine&Nevo_PerceivedOQ_IJHRM_In_press.pdf (visited March 29, 2012).
Morss, E.R. (2011, Sept. 5). The Employment Numbers — What You Should Know. Retrieved on the Internet at
http://www.morssglobalfinance.com/the-employment-numbers-what-you-should-know/ (visited March 29, 2012).
Copyright© 2012 ERI Economic Research Institute
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