Underemployment and the Trickle-Down of Unemployment

Abstract

A substantial fraction of workers are underemployed, i.e., employed in jobs for which they are overqualified, and that fraction—the underemployment rate—is higher in recessions. To explain these facts, we build a search model with an endogenous “ranking” mechanism, in which high-skill applicants are systematically hired over less-skilled competing applicants. Some high-skill workers become underemployed in order to escape the competition for high-skill jobs and find a job more rapidly at the expense of less-skilled workers. Quantitatively, the model can capture the key characteristics of underemployment, notably the fact that both the underemployment rate and the wage loss associated with becoming underemployed increase in recessions. (JEL E24, E32, J24, J64)

The Labor Market Impact of Undocumented Immigrants: Job Creation vs. Job Competition

“…This is not only intuitive, but also consistent with evidence concluding that firms usually interview many applicants at once (Barron et al, 1985, Barron andBishop, 1985). The ranking as well as the wage bargaining mechanisms are adopted from Barnichon and Zylberberg (2016). They assume that applicant types are ranked according to the surplus firms can extract by hiring them and when bargaining for the wage with the best type, a firm can threaten to hire the second-best applicant at his reservation wage.…”

“…e −q , where q = u/v is the candidate to vacancy ratio ("queue length"). 19 To fit the model to the data, I introduce a matching efficiency parameter µ, thereby proceeding as Blanchard and Diamond (1994) and Barnichon and Zylberberg (2016). This implies that every period, a worker sends out an application with probability µ. Denoting q i = u i /v the queue length for type i, the probability to be matched with k N natives, k D documented and k U undocumented workers is given by:…”

“…While a difference in wages between otherwise identical workers can also be generated in a standard job search model, the difference in job finding rates is a puzzle for a model with random matching between firms and workers. I therefore include a non-random hiring mechanism (following Barnichon and Zylberberg, 2016) in my framework, which implies that firms can receive multiple applications and choose their preferred candidate among them. This generates higher job finding probabilities for cheaper workers and therefore implies that natives have the lowest and undocumented immigrants have the highest job finding rate as suggested by the data.…”

Towards a more all‐inclusive evaluation of interventions for unemployed youth: A longitudinal investigation of participant, programme, relational and contextual factors

“…Underemployment is, however, common among recent graduates and research shows that programm outcomes tend to improve over time (Card, Kluve, & Weber, 2018). It is nonetheless a significant social problem as it results in additional competition for low-qualification jobs and thus increased unemployment among low educated workers (Barnichon & Zylberberg, 2019). Additionally, when the knowledge and skills of high-educated workers are not utilised, they risk atrophy and the possibility of becoming out-of-date (Fuller, 2015), making full utilisation of knowledge and skills even less likely.…”

Welfare States and Labour Market Change: What is the Possible Relation?

“…It also points to the fact that under‐employment can be witnessed in many and varied professions with no clear relation to gender, age, race or education, and also that it is negatively related to well‐being across a variety of outcomes. Capacity can also be understood in relation to the use of one's qualifications, for example, there might be under‐employment when a highly educated person moves down the job‐ladder, with the implication that that person becomes under‐employed while others become unemployed (Barnichon and Zylberberg ). An indication of this is the percentage of people in the EU in 2014 with a tertiary education self‐declaring that they are over‐qualified, varying from 10.1 per cent in Hungary to 58.2 per cent in Spain (Eurostat, lfso_14loq), thus they are getting jobs that people with less education could be expected to do.…”