Underemployment in Australia: What It Means for Workers in 2026

Australia’s job market is a tale of two stories: official unemployment is hovering near historic lows, but for a growing number of Australians, getting a job isn’t the same as getting enough work. Underemployment is on the rise, and it’s reshaping how millions manage their finances, plan for the future, and even think about their careers. In 2026, understanding underemployment is crucial for anyone navigating Australia’s evolving economic landscape.

What Is Underemployment—and Why Is It Growing?

Underemployment refers to people who have jobs but want—and are available for—more hours of work. This includes part-timers eager for full-time roles, casuals searching for more shifts, and gig workers whose income is unpredictable. According to the Australian Bureau of Statistics (ABS), the underemployment rate climbed to 6.5% in early 2026, up from 5.8% a year ago, even as unemployment remained steady around 4%.

• Casualisation of work: More businesses are relying on flexible, casual, or contract labour to manage costs in a challenging economic climate.

• Shift to services and digital roles: Many new jobs are in sectors like hospitality, retail, and gig platforms, which often offer fewer guaranteed hours.

• Cost-of-living pressures: As inflation and housing costs bite, more Australians are seeking extra hours to make ends meet, but can’t always find them.

How Underemployment Impacts Personal Finances

Not having enough paid hours means more than just a smaller paycheck—it’s a financial domino effect. Underemployed workers often struggle to build savings, qualify for loans, or plan for big life goals like buying a home. In 2026, with mortgage rates still high and rental vacancy rates at record lows, the squeeze is real.

• Income uncertainty: Variable hours make budgeting tough and leave many living week-to-week.

• Superannuation shortfall: Irregular work leads to lower super contributions, risking retirement security.

• Access to credit: Lenders may view fluctuating income as risky, making it harder to get approved for credit cards, personal loans, or mortgages.

• Mental health toll: Financial stress from underemployment can spill over into anxiety, depression, and strained relationships.

Case in point: Emily, a 29-year-old university graduate from Perth, works three part-time hospitality jobs. She’s never certain how many hours she’ll get each week, making it impossible to save for a house deposit or plan a holiday. “It’s like running in place,” she says. “I’m always working, but never getting ahead.”

Policy Moves and What’s Next in 2026

Both state and federal governments have flagged underemployment as a policy challenge for 2026. The Albanese government’s recent Fair Work reforms aim to improve job security for casuals, including the right to request permanent employment after 12 months. Meanwhile, the Future Skills Fund, expanded in the 2024-25 budget, is designed to retrain underemployed workers for in-demand sectors like clean energy and digital services.

• Fair Work Act updates: These boost protections for gig workers and casuals, aiming to provide more predictable rosters and the option to convert to permanent roles.

• Skills training incentives: Subsidised courses and micro-credentials target industries with worker shortages, helping underemployed Australians upskill for better opportunities.

• Business incentives: Payroll tax discounts for companies that convert casuals to permanent staff are rolling out in several states.

Still, the challenge remains: Australia’s economy is growing, but much of that growth is in roles offering flexibility for employers, not security for workers. The rise of remote work and digital platforms is likely to accelerate the trend.

What Can Workers Do?

If you’re underemployed, there are steps you can take to improve your financial position in 2026:

• Track all income sources and create a budget that handles fluctuating pay.

• Explore upskilling or retraining in sectors with high demand, such as healthcare, tech, or green energy.

• Check your eligibility for government programs or training subsidies.

• Consider joining a union or worker group for support in negotiating better conditions.

Above all, don’t accept underemployment as the new normal. With smart planning and an eye on policy changes, you can position yourself for better opportunities as Australia’s job market continues to evolve.

The Role of Technology in Underemployment

As technology continues to reshape the workforce, its impact on underemployment cannot be overstated. Automation and artificial intelligence (AI) are transforming industries, leading to both opportunities and challenges for Australian workers.

Automation and Job Displacement

While automation can increase efficiency and productivity, it also poses a risk of job displacement, particularly in sectors like manufacturing and retail. Workers in these industries may find themselves with reduced hours or in need of retraining to adapt to new roles that require digital skills.

Upskilling for the Digital Economy

To mitigate the risks associated with technological advancements, workers are encouraged to pursue upskilling opportunities. The Australian government, through initiatives like the Digital Skills Organisation, offers training programs to help workers transition into tech-focused roles. These programs aim to equip workers with skills in data analysis, cybersecurity, and software development, which are increasingly in demand.

The Impact of Underemployment on the Australian Economy

Underemployment not only affects individuals but also has broader implications for the Australian economy. It can lead to reduced consumer spending, lower tax revenues, and increased reliance on social welfare programs.

Consumer Spending and Economic Growth

When workers have fewer hours and lower incomes, their spending power diminishes. This reduction in consumer spending can slow economic growth, as businesses experience decreased demand for goods and services.

Government Revenue and Social Welfare

With underemployment, the government may face challenges in maintaining revenue levels, as lower incomes result in reduced tax collections. Additionally, there may be increased pressure on social welfare systems, as more individuals seek financial assistance to make ends meet.

Practical Strategies for Employers

Employers have a crucial role to play in addressing underemployment. By implementing strategies that promote job security and employee satisfaction, businesses can contribute to a more stable and productive workforce.

Offering Flexible Work Arrangements

Employers can offer flexible work arrangements, such as remote work options or flexible hours, to accommodate workers’ needs. This approach can help retain talent and improve job satisfaction, ultimately reducing underemployment rates.

Investing in Employee Development

By investing in employee development programs, businesses can enhance the skills of their workforce, making them more adaptable to changing job requirements. This investment not only benefits employees but also contributes to the overall success of the company.

FAQ

What is the difference between unemployment and underemployment?

Unemployment refers to individuals who are actively seeking work but are unable to find employment. Underemployment, on the other hand, involves individuals who have jobs but are not working as many hours as they would like or are working in roles that do not fully utilise their skills.

How can I improve my job prospects if I’m underemployed?

Consider pursuing additional training or education to enhance your skills in high-demand areas. Networking and seeking mentorship can also provide valuable insights and opportunities for career advancement.

Are there government programs to help underemployed workers?

Yes, the Australian government offers various programs aimed at supporting underemployed workers, such as skills training initiatives and subsidies for further education. It’s advisable to explore these options to improve your employment situation.

Sources

1. Australian Bureau of Statistics (ABS) - For the latest data on employment and underemployment rates.
2. Fair Work Ombudsman - Information on workers’ rights and recent legislative changes.
3. Australian Taxation Office (ATO) - Resources on tax implications for underemployed individuals.
4. Digital Skills Organisation - Programs and initiatives for digital upskilling.

By understanding the complexities of underemployment and taking proactive steps, both workers and employers can navigate the challenges of the evolving job market in Australia.