The Ranks of the Underemployed Continue to Grow

In September, the number of underemployed workers rose for the third consecutive month.

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While the number of unemployed workers has held steady at around 14 million in recent months, another telling measure of frustration in the labor market—the number of underemployed individuals—rose for a third consecutive month in September, by almost a half of a million people.

Almost 9.3 million Americans are considered underemployed, defined by the Bureau of Labor Statistics as working part-time for economic reasons, such as unfavorable business conditions or seasonal declines in demand. That's up from just over 8 million in July, but down from a peak of about 9.5 million in September 2010. In addition, about 2.5 million individuals are considered "marginally attached to the labor force," meaning they were not in the labor force, wanted and were available for work, and looked for a job sometime in the prior 12 months. (They are not counted as unemployed because they had not looked for a job in the past four weeks prior to the survey.)

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Put together, almost 26 million Americans are either unemployed, marginally attached to the labor force, or involuntarily working part-time—a number experts say is unprecedented.

"The labor force is substantially underutilized relative to what we experienced in most of the post-World War II period," says Patrick O'Keefe, director of economic research at accounting firm J.H. Cohn and former deputy assistant secretary in the U.S. Department of Labor.

From 2003 to 2007, before the latest recession, O'Keefe says the number of people working part-time for economic reasons as a percent of the labor force averaged about 3 percent, or approximately four million people. Over the past 12 months, the average has been about 6 percent.

To get a more accurate understanding of the struggles that many Americans face, that base should be broadened even further, says Paul Osterman, co-author of Good Jobs America: Making Work Better for Everyone. He says it's important to consider people who are working, but at substandard wages. According to Osterman, about 20 percent of adults have jobs that pay poverty-level wages (the poverty line is currently $22,500 a year). "I'd consider that to be another version of underemployment—mainly jobs that are just too low-quality," says Osterman, who is also co-director of the MIT Sloan Institute for Work and Employment Research. Americans who fall below the poverty line make less than $10.50 an hour.

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"The labor market is just not delivering for Americans what it should be delivering," Osterman says. "The weaknesses are on multiple dimensions—one is just the quantity of jobs, and the other is the quality of jobs that do exist."

Economists say the high number of underemployed workers is a sign of the tough economic times. "One of the things that seems to be happening these days is that companies in an uncertain environment are tending to take people on part-time instead of full-time because they don't want to make that full-time commitment," says Dennis Jacobe, chief economist at polling firm Gallup. By taking on part-time employees instead of full-timers, companies aren't forced to pay benefits or bring on employees for extended periods of time. It's also a lot more difficult to let full-time workers go, Jacobe adds.

That's left millions of Americans trying to make ends meet by working multiple part-time jobs. "There are a lot of people today who are self-employed, and they go through periods of their life where they're cobbling together various jobs or projects or consulting assignments or temporary work," says John Challenger, chief executive officer of outplacement firm Challenger, Gray & Christmas.

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Ted Schnell of Elgin, Ill., is one of those people. For the first time in his 27 years as a journalist, the now 52-year-old father of five found himself unemployed in December 2010 after being laid off by Sun-Times Media. Since January, he's worked part-time for a former colleague who started a local news site. Schnell has written about his experiences on his blog Laid off at 51: Seeking joy in change.