Economic Approaches to Studying Underemployment

Abstract

Labor economists have long been interested in why it is that markets for labor do not behave like markets for many other goods and services. In particular, many labor markets are characterized by the imbalance between demand and supply, meaning that the available labor resources are not fully utilized, and these imbalances are often persistent. For economists, such outcomes are inefficient; labor services cannot be stored and hence if at any time they are not being used, the output that could have resulted is lost forever. The underutilization of labor also imposes significant costs on affected individuals and their families, and not just in terms of foregone income.