Underemployment

Topic: Employment, Unemployment and Informalisation · NCERT: Class 10, Ch 2 "Sectors of the Indian Economy"; Class 11, Ch 5 "Rural Development"; Class 11, Ch 6 "Employment: Growth, Informalisation and Other Issues"

Meaning

Underemployment is when a person has work, but it is less work, or poorer work, than they are able and willing to do. In NCERT's Class 10 words, it is "working less than what they are capable of doing".

It matters because India's unemployment rate (the share of people in the labour force who have no work at all) is low, at 3.2% in 2023-24 [2]. Much of India's real job problem is therefore hidden inside underemployment, not open unemployment.

Explanation

Two types: visible and invisible

• Visible underemployment: the person works fewer hours than they want.
• Victor (Class 11, Ex. 19) gets only 2 hours of work a day. He spends the rest of the day looking for more work.
• Such people usually do casual odd jobs such as loading, delivery and repairs.

• Urban examples include painters, plumbers and repair workers who do not find work every day.

• Invisible underemployment: the person works full time, but the work is poor in one of two ways.

• Low productivity: the output of each worker is small. The usual case is a crowded family farm.
• Skills are underused: the job needs much less skill than the person has. For example, a graduate working as a peon.
• Other urban examples are cart-pushers and street sellers, who "spend the whole day but earn very little".

Why official data miss it: the survey trap

• PLFS has two ways of deciding whether a person is employed [2]:
• Usual Status (ps+ss) looks back over the last 365 days. A person who did economic work for 30 days or more in that year counts as employed [2].

• Current Weekly Status (CWS) looks back over the last 7 days [2].

• The trap:

• Victor works 2 hours a day, so CWS counts him as employed.
• In reality he is underemployed.

• Neither measure asks whether the work is enough, or whether it uses the person's skills.

• Result: underemployed people are counted as employed. They add to the WPR (Worker Population Ratio) and are not counted in the unemployment rate.

Worked example: low productivity on a family farm (invisible underemployment)

• A family works 4 acres. The work needs only 3 workers.

Workers on 4 acres	Total output (quintals)	Marginal product
3	60	—
4	60	0
5	60	0
6	60	0

• Marginal product means the extra output from adding one more worker.
• Reading the table:
• Everyone works all day, but the work is shared out thinly.
• Output per worker falls from 20 quintals (60 ÷ 3) to 10 quintals (60 ÷ 6).

• Workers 4, 5 and 6 add nothing to output. This extreme case is called disguised unemployment.

• Class 10, Laxmi's family:

• The family has five members. They work 2 ha of unirrigated land, growing jowar and arhar.
• All five work all year because they have nowhere else to go. So no one is fully employed.
• If two members take jobs elsewhere, family income rises and farm output does not fall.

What makes it rise or fall

• Rises when:
• there is no non-farm work, so people crowd onto family farms;
• farm work is seasonal, so people are idle between harvest and the next sowing;
• there is a skill mismatch, so educated people take jobs below their level;

• the poor cannot afford to stay unemployed. They have no savings and no unemployment allowance, so they take any work, even a little.

• Falls when:

• labour-intensive industry and services grow and pull surplus workers off farms;
• farm productivity rises;
• education and training match what employers need.

In India

• Measurement: PLFS (Periodic Labour Force Survey) is run by the NSSO under MoSPI and was launched in April 2017 [2]. It measures employment and unemployment, but it has no separate headline figure for underemployment. Its CWS and usual-status measures count underemployed people as employed [2].
• The CWS gap shows hidden idleness:
• In 2023-24, CWS UR was 4.9%, against 3.2% under usual status [2].
• In rural areas, CWS UR was 4.2%, against 2.5% under usual status [2].

• The 7-day window picks up short spells without work, which is common among seasonal and casual workers.

• Evidence from the ILO-IHD India Employment Report 2024 (published by the ILO with the Institute for Human Development, not by the Government of India):

• Youth underemployment rose between 2000 and 2019 [3].
• Many highly educated youths are overqualified for their jobs. Some take low-skill blue-collar public-sector jobs [3].

• About 62% of unskilled casual farm workers did not earn the minimum wage (2022) [3].

• The COVID-19 shock (a return to farming):

• The long shift of workers out of low-productivity agriculture from 2000 to 2019 slowed and then reversed in 2019-22 [3].
• After 2019, farm employment grew faster than agricultural GVA (gross value added, meaning the value of farm output) [3].

• More workers producing only slightly more output means more surplus labour and more underemployment on farms.

• Low UR, poor jobs: UR was only 3.2% (2023-24) [2]. Yet nearly 82% of the workforce is in the informal sector, and nearly 90% is informally employed (no written contract and no social security) [3].

Don't confuse with

• Disguised unemployment: the extra workers have a marginal product of zero, so removing them does not reduce output. It is the extreme form of invisible underemployment on crowded farms. Underemployment is the wider idea. A visibly underemployed worker like Victor does produce output, but he gets too few hours.
• Open unemployment: the person has no work at all and is clearly looking for it, for example at labour chowks or employment exchanges. It is counted in the UR. An underemployed person has some work and is counted as employed.
• Educated unemployment: an educated person with no job. A graduate working as a peon is not unemployed. They are invisibly underemployed.
• Seasonal unemployment: there is no work for part of the year, between harvest and the next sowing. Underemployment means too little or too poor work while the person is working.

Prelims Hooks

• Definition (Class 10): underemployment means "working less than what they are capable of doing".
• Trap: a person working 2 hours a day is employed under CWS (last 7 days) but is underemployed (Victor, Class 11) [2].
• Visible underemployment means fewer hours than wanted. Invisible underemployment means full-time work with low productivity or underused skills, such as a graduate working as a peon.
• Under Usual Status (ps+ss, 365 days), 30 days or more of subsidiary work makes a person employed. So seasonal and part-time workers drop out of the UR [2].
• The finding that youth underemployment rose (2000-2019) comes from the ILO-IHD India Employment Report 2024, not a Government of India report [3].
• About 62% of unskilled casual farm workers did not earn the minimum wage in 2022 [3].

Mains Points

• The headline UR hides the real problem.
• UR was 3.2% (2023-24) [2], but about 90% of employment is informal [3].
• The poor cannot stay unemployed, so their joblessness shows up as underemployment instead.

• Policy angle: measure and target job quality (hours, wages, contracts, social security), not just the number of jobs. Suggest that PLFS report an underemployment indicator.

• Stalled structural change keeps surplus labour on farms.

• The shift out of agriculture reversed in 2019-22, and farm jobs grew faster than farm GVA [3].
• Chain: too few non-farm jobs → workers crowd onto family farms → output per worker falls → rural incomes stay low.

• Remedies: labour-intensive manufacturing and construction (the Lewis-model route), higher farm productivity, and rural non-farm jobs.

• Skill mismatch wastes human capital.

• Highly educated youths are overqualified for their jobs [3], so society gets little return on what it spends on education.
• Remedies: vocational training and apprenticeships, industry-linked courses, and more jobs to raise female participation. This links to GS-III employment and GS-II education and welfare.

Related concepts

• Unemployment
• Open unemployment
• Disguised unemployment
• Seasonal unemployment
• Educated unemployment
• Youth unemployment
• Rural-urban migration
• Circular migration
• Distress migration
• Reverse migration

Read more

• Unemployment in India: definitions, forms and migration