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disguised unemployment meaning: What Is Unemployment? Understanding Causes, Types, Measurement

agricultural sector

“Overqualification”, or “overeducation”, or the employment of workers with high education, skill levels, or experience in jobs that do not require such abilities. For example, a trained medical doctor with a foreign credential who works as a taxi driver would experience this type of underemployment. Underemployment is the underuse of a worker because a job does not use the worker’s skills, is part-time, or leaves the worker idle. Examples include holding a part-time job despite desiring full-time work, and overqualification, in which the employee has education, experience, or skills beyond the requirements of the job.

If some of those farm-workers left, total production would remain the same. These articles, the information therein and their other contents are for information purposes only. All views and/or recommendations are those of the concerned author personally and made purely for information purposes. Nothing contained in the articles should be construed as business, legal, tax, accounting, investment or other advice or as an advertisement or promotion of any project or developer or locality.


The term ‘disguised unemployment’ may seem a bit strange at first, but it is not too difficult to understand. The most common form of disguised unemployment is when an individual has taken on a part-time job or two in order to make ends meet. This is a type of unemployment when there are not enough jobs for everyone who wants to work. It includes situations when people are unable to find a job at all.

How Prevalent Is Disguised Unemployment?

Disguised unemployment – Definition and explanation of disguised unemployment – people who are not counted in official statistics but are not productively employed. This indicator is measured in numbers of unemployed people as a percentage of the labour force and it is seasonally adjusted. The labour force is defined as the total number of unemployed people plus those in civilian employment. For example, Graduates and post-graduates are stumbling from pillar to pillar in search of work.

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Structural unemployment is a longer-lasting form of unemployment caused by fundamental shifts in an economy. Disguised unemployment is when the individual is not working up to his/her full capacity. This term refers to people losing their jobs because of dips in the business cycle. For example, in many developing nations, farms have too many workers.

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The same report also highlighted that in 2021 in the United States,29%of disguised unemployment meaning with a disability were employed in a part-time job, while part-time workers with no disability made up16%of the labor force. Individuals with illness or disability but who can perform certain tasks also fall under disguised unemployment. It is because they may be able to work certain jobs but are typically not included in the national unemployment statistics of a country. Moreover, one way of looking at disguised unemployment can be a consideration that people are not efficiently employed.

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People as a resource is defined as the people who is a part of the workforce and play a significant role in economic growth by contributing to the productive resources of the country. A country also needs people who can put those resources to good use and increase production along with various other resources. Sen’s result on the existence of surplus labour can be reinforced by introducing a number of assumptions as shown by Stiglitz. He showed that Sen did not consider the seasonal labour utilisation pattern. In most agricultural activities , the relationship between peak season labour utilisation and slack season labour utilisation is one of complementarily, rather, than substitutability. It is sometimes asserted that the existence of surplus labour requires certain types of production functions with limited possibilities of facts substitutability.

Thus, the overall labor productivity is very low as too many workers are doing the same job, or too few jobs are available. On the other hand, seasonal unemployment arises when work or jobs are scarce during a period or year. For instance, during certain cropping seasons, labor demand is high in agro-based industries, including food processing and manufacturing. The concept of disguised unemployment explains various causes of why an economy faces such unemployment.

Hidden unemployment – definition and meaning

All meanings involve under-utilization of which is missed by most official definitions and measurements of unemployment. Frictional unemployment includes people who are in between jobs. They are sending resumes , attending interviews, and researching new job opportunities. Disguised unemployment includes people who are working but are making no difference to total production. Hidden unemployment refers to people who are jobless, but official unemployment figures do not include them.

  • The most common form of disguised unemployment is when an individual has taken on a part-time job or two in order to make ends meet.
  • For the class 10 students, Sectors of the Indian Economy is considered as an important chapter in Economics.
  • It can be distinguished by low productivity and mostly follows informal labour markets and agricultural labour markets, capable of consuming large labour quantities.
  • Other categories of unemployment include discouraged workers and part-time or underemployed workers who want to work full-time but, for economic reasons, are unable to do so.
  • Browse the use examples ‘Disguised Under Employment’ in the great English corpus.
  • As a result, the labor force, which includes people working or actively seeking job opportunities, has very low total productivity.

Thus, disguised unemployment is not costless and self-financing as stated by Nurkse. Say, a production process needs 35 hours of labour for its completion and the work is done by 7 workers initially. Then, if two workers are removed, the remaining 5 workers work longer than 5 hours each. It is, thus, the marginal productivity of the labourer, so as to say that is nil over a wide range and the productivity of labour may be just equal to zero at the margin. And, thus, the removal of these extra workers will lead to no change in the total productivity even without any change in the method of production. Such an unemployment crisis leads to poor labor force productivity in an economy.

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When there are a lot of individuals working in a sector when compared to the amount of capital, raw materials, or technological know-how they have access to (i.e., during inflation), this type of unemployment may occur. Unless there are clear incentives for people to register as unemployed then the official unemployment figure may considerably understate the actual level of unemployment. In the vast majority of legal systems across the world, there is a “binary divide” between employment and self-employment, with “employment” serving as the basis for labour regulation. However, some employment relationships can be ambiguous when the rights and obligations of the parties concerned are not clear, or when there are “grey areas” in the law. The rise of the “gig” or “on-demand” economy in recent years, whereby work is mediated through online web platforms or apps, has brought renewed attention to dependent self-employment and disguised employment relationships.


In addition, it comprises individuals who are employed in occupations for which they are overqualified. It also includes those who accept employment below their skill level. In these situations, disguised unemployment is sometimes known as “underemployment,” referring to those who are working in some capacity but not to their full potential. Disguised unemployment definition can be stated as a type of unemployment where too many individual workers are filled with few job requirements.

Given this definition, some economists proceeded to define disguised unemployment as a situation in which marginal product of labour over a wide range is zero. In defining surplus labour or disguised unemployment, one has to distinguish between labour and labourers . Disguised unemployment generally means that people are working but are not as productive as they could be. This can occur for a variety of reasons, such as employment in jobs that are not useful or low-paid. Or it may be due to a workplace that does not make full use of their skills and abilities. Whatever the reasons, disguised unemployment, which is also called the hidden one, is a severe problem in many countries, including India.

The unemployment rate is the percentage of the labor force that is unemployed. This includes people who are actively looking for work but cannot find a job. The unemployment rate does not include people who are not looking for work, such as homemakers, students, and retirees. Disguised or hidden unemployment is any portion of the population that is not working at maximum capacity, but it isn’t usually tabulated in national labor force statistics.

Key Differences Between Open and Disguised Unemployment

Again disguised unemployment may be present in one sector of the economy but not in others. The content provided by Binomo Blog does not include financial advice, guidance or recommendations to take, or not to take, any trades, investments or decisions in relation to any matter. The content provided is impersonal and not adapted to any specific client, trader, or business. There are inherent risks involved with trading, including the loss of your investment.


In terms of GDP, the Indian economy is ranked as the sixth-largest economy in the world. In terms of PPP India is ranked as the third largest country in the world. The GDP of India is estimated to be approximately 3.25 trillion dollars in 2022.

New report finds that bachelor’s degree recipients whose first job does not require degree are more likely to remain “underemployed” five years later — and women fare worse than men. When unemployment is high, however, they are in more of a hurry. People who are doing part-time work are underemployed if they want to and can do full-time work.

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