Underemployment is the underuse of a worker because a job does not use the worker's skills, is part-time, or leaves the worker idle. Examples include holding a part-time job despite desiring full-time work, and overqualification, in which the employee has education, experience, or skills beyond the requirements of the job.

Underemployment has been studied 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 of the 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.

In economics, underemployment can refer to:

1. "Overqualification", or "overeducation", or the employment of workers with high education, skill levels, or experience in jobs that do not require such abilities. For example, a trained medical doctor with a foreign credential who works as a taxi driver would experience this type of underemployment.
2. "Involuntary part-time" work, where workers who could (and would like to) be working for a full work-week can only find part-time work. By extension, the term is also used in regional planning to describe regions where economic activity rates are unusually low, due to a lack of job opportunities, training opportunities, or due to a lack of services such as childcare and public transportation.
3. "Overstaffing" or "hidden unemployment" or "disguised unemployment" (also called "labor hoarding"), the practice in which businesses or entire economies employ workers who are not fully occupied; for example, workers currently not being used to produce goods or services due to legal or social restrictions or because the work is highly seasonal.

Underemployment is a significant cause of poverty because although the worker may be able to find part-time work, the part-time pay may not be sufficient for basic needs. Underemployment is a problem particularly in developing countries, where the unemployment rate is often quite low, as most workers are doing subsistence work or occasional part-time jobs. The global average of full-time workers per adult population is only 26%, compared to 30–52% in developed countries and 5–20% in most of Africa.