When most people think of unemployment benefits they traditionally believe those benefits are available only to individuals who become completely unemployed. However unemployment benefits, and many other types of general welfare benefits, can be available to individuals who are partially unemployed and are only experiencing underemployment. Underemployment is traditionally defined as someone having work and earning an income that is sufficient to sustain individual or household lifestyle on a long-term basis. A few common examples of underemployment include individuals who only have part-time work or people who work full-time hours but receive a reduced wage.
Underemployment can have a significant effect upon the general economic health of the United States. During the recent economic difficulties the country has experienced, not only has significant numbers of people become totally unemployed but many have experienced some form of underemployment, which is placed an added strain upon the economic health of the U.S.
Beyond the traditional definition of unemployment described above, the term can also refer to people who are working in jobs that they are away overqualified to be in. An extreme example of this would be an individual who has a law degree working as a trash man or a former chief executive of a large company now working as a janitor. Another definition that is less thought of includes “labor hoarding” by companies or even entire industries. “Labor hoarding” refers to businesses employing more employees than they actually need to keep them out of the reach of other competitors were to avoid losing them to other industries. Because the business over-employs and has a bloated staff force the amount of work available for each employee is significantly less and generally equates to the individual employee having a part-time job. This type of hoarding is commonly found in industries where hiring is done on a seasonal basis, such as farming.
Availability of Unemployment Benefits
Many people erroneously believe that state unemployment benefits are only available to individuals who become completely unemployed. However, most states do offer unemployment benefits to people who are only partially employed due to underemployment. Of course, the different rules and regulations regarding partial unemployment benefits very state to state, but all states will recognize the fact that someone is earning less than they can and help in making up the difference through a weekly unemployment payment. Many states will define underemployment for purposes of unemployment benefits as only working so many hours per week (such as 20 or less) or will base its underemployment criteria on the percentage of hours reduced by the employer from the former work schedule the employee had. For example, an individual who has two thirds of his work week reduced will qualify for unemployment benefits in many states under the states’ underemployment rules and regulations.
Effect On Unemployment
The effect of underemployment upon the general unemployment numbers of the United States can be significant. As individual worker salaries are reduced the amount of available discretionary income those workers have spent throughout their local and national economy is also reduced. Therefore, underemployment sets in motion a ripple effect which leads to higher unemployment and companies having to further reduce work hours of employees through underemployment. This cycle can be difficult to reverse as we have seen in recent years in the United States. However, such legislation as the American Reinvestment and Recovery Act (more information can be found about this act at Recovery.gov) can help in alleviating the cycle.
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