Underemployment refers to an employment situation that is insufficient in some important way for the worker, relative to a standard. Examples include holding a part-time job despite desiring full-time work, and overqualification, where the employee has education, experience, or skills beyond the requirements of the job.

Underemployment has been studied in recent decades from a variety of perspectives, including economics, management, psychology, and sociology. In economics, for example, the term underemployment has three different distinct meanings and applications. All meanings involve a situation in which a person is working, unlike unemployment, where a person who is searching for work cannot find a job. All meanings involve under-utilization of labor which is missed by most official (governmental agency) definitions and measurements of unemployment.

Underemployment can refer to:

In one usage, underemployment describes the employment of workers with high skill levels in low-wage jobs that do not require such abilities. For example, someone with a college degree may be tending bar or driving a cab. This may result from the existence of unemployment, which makes workers with bills to pay (and responsibilities) take almost any jobs available, even if they do not use their full talents. This can also occur with individuals who are being discriminated against, lack appropriate trade certification or academic degrees (such as a high school or college diploma), have disabilities, or have served time in prison.