Measuring underemployment : does the cut-off point really matter?

Unemployment and underemployment are the most pressing problems in Asia today, as reflected in the widespread underutilization rate of about 29% of the total labor force. Most labor forces in developing countries cannot afford to be completely unemployed and the standard labor force framework currently in use worldwide is biased toward counting the labor force as employed rather than unemployed. This systematically undervalues the full extent of the unemployment problem. The underemployment indicator is then introduced to overcome the issue but the existing guidelines for measuring time related-underemployment using the cut-off point for working full-time, set the threshold too low, resulting in the considerable under-representation of underemployment. This paper suggests a better way of determining the threshold using the cluster method. The robustness of its results is assessed and the overall results suggest that the proposed cut-off point of 40 working hours per week is the best one. (J Asia Pac Econ/GIGA)