Toward a More Comprehensive Measure of Labor Underutilization: The Alabama Case

Workers in occupations that underutilize their education or training, experience, and skills are underemployed. This worker underemployment presents economic development opportunities through selective job creation and industry growth. Businesses benefit because such underemployment information provides more realistic estimates of the available labor pool in an area. It also provides the potential to improve firm output and profits by using the information to enhance productivity and performance, as well as reduce turnover. However, the U.S. Bureau of Labor Statistics’ (BLS) measures of labor underutilization do not consider underemployment among full-time workers and thus provide incomplete information on the full extent of underemployment. Four surveys on Alabama's working age population show that underemployment is present among full-time workers and is a multiple of the unemployment rate. We combine underemployment estimated from the surveys with the U-5 BLS measure of labor underutilization to develop a more comprehensive measure called CMLU5. The methods developed in this study can be applied to labor markets at the county level and above anywhere in the United States.