Final answer:
Underemployment is when workers work below their capacity and are often part of the broader term hidden unemployment, which includes discouraged workers and those in mismatched jobs.
Step-by-step explanation:
When workers are perceived to be purposefully working below their capacity, this is known as underemployment. Underemployment occurs when individuals are working in a position that is below their skills level or educational qualification, often resulting in part-time or temporary work when they desire full-time, permanent roles.
This can contribute to hidden unemployment, a broader term that encompasses several scenarios where people are either counted as employed or out of the labor force incorrectly. Examples of hidden unemployment include discouraged workers, who have stopped looking for employment due to the lack of suitable positions, and those who are under-skilled for their current job but are still counted as employed.
These situations lead to an inefficient use of the workforce where the labor force participation rate does not accurately reflect the real condition of the job market.