Why is Underemployment Important?
In order for Maryland to reach its full economic potential, it must be able to employ its human and economic capital to the fullest extent possible. The economic costs of underemployment are the reduction in actual State output resulting from the underutilization of Maryland’s workforce. When social, transportation, or economic barriers prevent workers from achieving their full employment potential, this represents significant loss to the State’s economy.
How Underemployment has Changed Over the Years?
The economic costs and societal impacts stemming from underemployment have steadily risen over the decades. This may be due in part because of a lack of attention given to systemic underemployment conditions and tracking.
Methodology & Data Sources
The MD-GPI uses work by Leete-Guy and Schorr and the quadratic equation approach since it is easier applied to the State level. It would, however, be generally possible to base calculations on data on labor force underutilization compiled for more recent years by the Bureau of Labor Statistics.
The quadratic equation used by Costanza et. al. was developed via a regression using Schor’s (1997) data, BLS data, and another data point based on an assumption that if there is full unemployment, there would also have to be full underemployment as well.
Unprovided hours were interpolated linearly between 1969 and 1989. Before 1969 and beyond 1989, the national and previous State GPI studies used the assumption of a continued growth of yearly unprovided hours by 0.59 percent per year. While this is a rather insecure assumption that will need to be refined, and cannot be used without limitations, it is the best available estimate. There will need to be updated numbers such as provided by Leete-Guy and Schorr for future years, or a new methodology based on the BLS labor force underutilization data will need to be developed.
Average hourly wage is per capita personal income divided by 52 divided by 40. Per capita personal income is total personal income divided by total midyear population. LAUS data was not available on a yearly basis from 1976 to 2003, so the mean of monthly numbers was calculated.
Equation
(Number of Underemployed Persons, including Unemployed Persons) Multiplied by (Annual Unprovided Hours per Underemployed Worker) Multiplied by (Average Wage Rate)
Points of Contact
Frank Skinner, DLLR
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