Disguised Unemployment

DEFINITION of 'Disguised Unemployment'

Unemployment that does not affect aggregate output. Disguised unemployment exists where part of the labor force is either left without work or is working in a redundant manner where worker productivity is essentially zero. An economy demonstrates disguised unemployment where productivity is low and where too many workers are filling too few jobs.

BREAKING DOWN 'Disguised Unemployment'

Disguised unemployment exists frequently in developing countries whose large populations create a surplus in the labor force. Where more people are working than is necessary, the overall productivity of each individual drops. Disguised unemployment is characterized by low productivity and frequently accompanies informal labor markets and agricultural labor markets, which can absorb substantial quantities of labor.

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