The third definition of "underemployment" describes a polar opposite phenomenon: to some
economists, the term refers to "overstaffing" or "hidden unemployment," the practice of
businesses or entire
economies employing workers who are not fully occupied (in other words, employees who are not
economically productive, or underproductive, or
economically inefficient). This may be because of legal or social restrictions on firing and lay-offs (e.g. union rules requiring managers to make a case to fire a worker or spend time and money fighting the union) or because they are
overhead workers, or because the work is highly seasonal (which is the case in
accounting firms focusing on
tax preparation, as well as
agriculture and the
hospitality industry). The presence of this issue in
white collar office jobs is described in the
boreout phenomenon, which posits that the major issue facing office workers is lack of work and
boredom. This kind of underemployment does
not refer to the kind of non-work time done by, for instance,
firefighters or
lifeguards, who spend a lot of their time waiting and watching for emergency or rescue work to do; this kind of activity is necessary in case there are multiple simultaneous incidents. This kind of underemployment may exist for
structural or
cyclical reasons. In many economies, some firms become insulated from fierce competitive pressures and grow
inefficient, because they are awarded a government
monopoly (e.g., telephone or electrical utilities) or due to a situation of abuse of market power (e.g., holding a
monopoly position in a certain industry). As such, if they may employ more workers than necessary, they might not be getting the market signals that would pressure them to reduce their labour force, and they may end up carrying the resultant excess
costs and depressed
profits. In some countries, labour laws or practices (e.g. powerful
unions) may force employers to retain excess employees. Other countries (e.g.
Japan) often have significant cultural influences (the relatively great importance attached to
worker solidarity as opposed to
shareholder rights) that result in a reluctance to shed labour in times of difficulty. In Japan, there is a long-held tradition that if a worker commits to serve a company with long and loyal service, the company will, in return, keep the worker on the payroll even during economic downturns. In
centrally-planned economies, layoffs were often not allowed so that some state-run companies would have periods when they had more workers than they needed to complete the organization's tasks. Structural underemployment is especially relevant in
developing and
emerging market economies. In these countries, workers may be employed but not used to their full potential because of labour market distortions. These distortions often stem from institutional factors like restrictions on
household registration,
dualistic labour markets and reliance on informal
insurance within rural communities. Such imperfections act as barriers to
labour mobility, thus hindering the efficient allocation of workers across industries and firms. As a result, many workers remain trapped in low-productivity jobs instead of moving to sectors where their productivity would be higher. This misallocation reduces overall economic efficiency. Estimates suggest that, in major emerging markets, these labour market distortions may lower
potential output by 5–15%, reflecting the underutilisation of workers who are already employed. Cyclical underemployment refers to the tendency for the
capacity utilization of firms (and therefore of their demand for labor) to be lower at times of
recession or
economic depression. At such times, underemployment of workers may be tolerated and indeed may be wise business policy, given the financial cost and the reduction of
morale from shedding and then rehiring staff. Alternatively, paying underused overhead workers is seen as an investment in their future contributions to production. This kind of underemployment has been given as a possible reason why
Airbus gained
market share from
Boeing. Unlike Airbus, which had more flexibility, Boeing was unable to ramp up
production fast enough when prosperous times returned because it had dismissed a great part of its personnel in lean times. Another example is the
tourism sector, which faces cyclical demand in areas where attractions are weather-related. In some tourism sectors, such as the sun and sand tours operated by
Club Med, the company can shed bartenders, lifeguards, sports instructors, and other staff in the off-season because there is such a strong demand for young people to work for the company since its glamorous beachfront properties are desirable places to work. However, not all tourism sectors find it so easy to recruit staff. Some tourism sectors require workers with unusual or hard-to-find skills. Northern Ontario hunting and fishing camps that require skilled guides may have an incentive to retain their staff in the off-season. Another example is companies that run tours for foreign tourists using staff speaking the travelers' native tongue. In Canada, guided tours are available for Japanese and German tourists in their native languages; in some locations, it may be hard for companies to find Japanese- or German-speaking staff and so companies may retain their staff in the off-season. ==See also==