Economic Snapshot | Jobs and Unemployment

Lack of jobs, not lack of skills, explains underemployment rate

Some have suggested that part of the reason the unemployment rate remains stubbornly high is that too many American workers lack the skills and education currently demanded by employers. This so-called “skills mismatch” theory for today’s high unemployment, however, does not fit well with some basic labor market facts, particularly the growth trends in underemployment across all education levels.


The underemployment rate is a more comprehensive measure of labor market slack than the unemployment rate because it includes not just the officially unemployed but also jobless workers who have given up looking for work and people who want full-time jobs but have had to settle for part-time work. As the chart shows, there was a very large increase in underemployment even among workers with a bachelor’s degree or more education, growing from 3.9% in December 2007 to 8.4% in March 2011. In fact, the percentage increase in this underemployment rate was greater for workers with a bachelor’s degree or more than for all other education categories.

The fact that the economy’s best-educated workers have seen a more than doubling in their underemployment rate is just one of many pieces of evidence suggesting that the anemic recovery reflects a general lack of job growth rather than a deficit of skills or education among its workers.

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See more work by Andrew Green and Josh Bivens