Disguised unemployment: Definition and kinds

[ecis2016.org] What is disguised unemployment and how is it different from regular unemployment? We examine the differences.

Disguised unemployment meaning

Disguised unemployment is a situation where part of the labour force is left without jobs or working in places where maximum productivity has already been reached. It is unemployment which has no effect on total production. An economy shows hidden unemployment when productivity is poor and too many workers work on few jobs.

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Understanding disguised unemployment

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Disguised unemployment, also referred to as hidden unemployment, occurs in developing countries where huge populations create surpluses in the labour force. It mostly occurs in informal labour markets, which are capable of consuming large labour quantities.

Disguised or secret unemployment can refer to any part of the unemployed population at maximum potential. However, it is still not counted in official unemployment statistics of the national economy. Disguised unemployment includes people who work far below their capacities, those whose jobs have little productivity and those who are not actively searching for jobs but are capable of working.

Another way of describing disguised unemployment is by saying that people are working but not effectively.

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Kinds of disguised unemployment

1. Underemployment: People who do part-time work but wish to and can do full-time jobs, can qualify under disguised unemployment. The same applies to people who accept work well below their skill set. In such cases, hidden unemployment can also be called ‘underemployment’.
2. Illness and disability: Though they may not function as actively as regular employed people, sick and disabled people may be able to contribute to the economy. In the case of illness, this type of disguised unemployment is temporary. People in this category are often not included as part of a nation’s unemployment statistics.
3. No longer looking for work: If a person stops actively searching for jobs, they are often no longer considered unemployed when it comes to measuring the unemployment rate since many nations require that a person should be actively pursuing a job, to be considered unemployed.
4. Redundant jobs: Individuals whose jobs become redundant and have retired early.
5. Unproductive jobs: Individuals whose jobs are unproductive in terms of overall output.

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