The Effects of Unemployment and Underemployment on Employment Opportunities

Abstract

The authors use data from a résumé audit to estimate the impact of unemployment and underemployment on the employment prospects of recent college graduates. They find no statistical evidence linking unemployment spells of different durations to employment opportunities. By contrast, college graduates who are underemployed have callback rates that are 30% lower than those of applicants who are adequately employed. The null effects associated with unemployment and the adverse effects associated with underemployment are robust across cities with relatively tight and loose labor-market conditions. Internship experience obtained while completing one’s degree substantially reduces the negative effects of underemployment. The data support the proposition that employers view underemployment as a strong signal of lower expected productivity.