5 types of employment.

There are many more categories than just employed and unemployed.

It’s easy to determine whether you are fully employed, partially employed or unemployed, but are you underemployed? Or discouraged? Read on to see the details of employment vs. unemployment that most never knew existed.

Underemployment.

Underemployment is a measure of how well the labor force is being utilized with regards to their skills, experience and availability. Highly skilled workers in low wage, unskilled jobs fall into this category. Think of ex-IBM employees who are highly skilled in specific facets of IBM corporate business, but were downsized and don’t have the current skills required in the technology market place and so they end up working retail or construction. You could also count the college grad with a master’s degree in engineering who delivers your pizza, since he isn’t working to his full capability.

Discouraged Worker.

The technical definition of a discouraged worker (from Investopedia) is a person who is eligible for employment, but who hasn’t attempted to find a job “in the last four weeks.” I can understand how job searchers can feel like giving up, but how do they support themselves? I guess the trick is that they don’t. They may be stay-at-home parents or maybe staying at home with their parents! (YIKES!)

Some people point to discouraged workers as a reason why the government’s unemployment rate cannot be trusted as truly representing the real unemployment rate. However, since these people are not trying to find a job, they really shouldn’t be considered in the unemployment rate.

Full Employment.

Full employment is just as it sounds: the largest amount of skilled and unskilled workers that can be employed at any given time. It is important to note however that full employment is not 100% employment (or 0% unemployment). This is because at any given time there are workers who will be in between jobs, but still in the labor force. Economists estimate that the percentage of worker between jobs at any given time ranges from 2-7% of the workforce. This would technically put full employment at a 2-7% unemployment rate.

Natural Unemployment.

Natural unemployment is also called the “non-accelerating inflation rate of unemployment” (NAIRU). It’s essentially the lowest unemployment rate that an economy can sustain long term. Economists theorize that 100% employment would result in high inflation (more jobs than workers = higher disposable income, which means prices rise), but high unemployment means recession or a shrinking economy. Natural unemployment is the equilibrium between 100% employment and recessionary unemployment.

Structural Unemployment.

Structural unemployment results from fundamental changes in the labor market. By definition, these changes open new positions while closing previous opportunities. Jobs replaced by technology are a prime example of structural unemployment. When physical labor is replaced by technology, the worker who once performed the manual labor is out of a job, but the engineer or technician who works with the new technology has a new job opportunity.

I’m fully employed, but my wife is technically a “discouraged worker”. Not sure why she’s discouraged, but she decided to leave the paid work force to pursue the full time, all too often under-appreciated job of stay at home mom (SAHM). It’s had great benefits for our children and family life, but I for one dream of the day she once again joins the paid workforce.

photo by Amen-Ra

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