What is 'Disguised Unemployment'

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. It is unemployment that does not affect aggregate output. An economy demonstrates disguised unemployment when productivity is low and 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. It can be characterized by low productivity and frequently accompanies informal labor markets and agricultural labor markets, which can absorb substantial quantities of labor.

Disguised, or hidden, unemployment can refer to any segment of the population not employed at full capacity, but it is often not counted in official unemployment statistics within the national economy. This can include those working well below their capabilities, those whose positions provide little overall value in terms of productivity, or any group that is not currently looking for work but is able to perform work of value.

The Underemployed

In certain circumstances, people doing part-time work may qualify if they desire to obtain, and are capable of performing, full-time work. It also includes those accepting employment well behind their skill set. In these cases, disguised unemployment may also be referred to as the underemployment, covering those who are working in some capacity but not at their full capacity.

For example, a person with an MBA accepting a full-time cashier position because he cannot find work in his field may be considered underemployment since he is working below his skill set. Additionally, a person working part-time in his field but who wants to work full time may also qualify as underemployed.

Illness and Disability

Another group that may be included is those who are ill or considered partially disabled. While they may not be actively working, they may be capable of being productive within the economy. At times, this form of disguised unemployment is temporary in the case of illness, and categorized when someone is receiving disability assistance. This means the person is often not considered part of the unemployment statistics for a nation.

No Longer Looking for Work

Often, once a person stops looking for work, regardless of the reason, he is no longer considered unemployed when it comes to calculating the unemployment figures. Many nations require a person to be actively seeking employment to be counted as unemployed. If a person gives up looking for employment, whether on a short- or long-term basis, he is no longer counted until the time he attempts to pursue employment options again.

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