In economics, 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 mean:

1. The employment of workers with high skill levels in low-wage jobs that do not require such abilities, for example a trained medical doctor who works as a taxi driver.
2. "Involuntary part-time" workers—workers who could (and would like to) be working for a full work-week but 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", 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.