Disguised unemployment refers to a situation where more people are employed in a job or sector than are actually needed, resulting in some workers being redundant or underutilized. These workers appear employed but their productivity is negligible or zero, and their absence would not reduce the overall output. This type of unemployment is common in developing countries, especially in agriculture and informal sectors, where surplus labor exists due to low productivity and limited job opportunities
. Key characteristics of disguised unemployment include:
- Workers are employed but not fully utilized, often performing tasks below their skill level or capacity.
- Removing the surplus workers does not affect the total production or output.
- It does not show up in official unemployment statistics because these workers are technically employed.
- It often occurs in labor-intensive sectors with low productivity, such as small family farms or informal businesses.
- It can include underemployment, people who have stopped looking for work but could contribute productively, and those working fewer hours than desired
Examples:
- In rural areas, multiple family members working on the same small farm where fewer workers could maintain the same output.
- In urban settings, shops or small businesses employing more staff than necessary for operations, leading to some workers being redundant
In summary, disguised unemployment is hidden surplus labor where workers are employed but not contributing effectively to economic output, leading to inefficiencies in resource allocation and hindering economic growth
