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.

  1. Underemployment

    A measure of employment and labor utilization in the economy ...
  2. Unemployment

    Unemployment occurs when a person who is actively searching for ...
  3. Unemployment Insurance

    Unemployment insurance provides benefits to workers who meet ...
  4. Unemployment Rate

    The unemployment rate is the percentage of the total labor force ...
  5. U-6 Rate

    The U-6 rate is the unemployment rate that includes discouraged ...
  6. Employment Insurance - EI

    An unemployment insurance program in Canada that allows individuals ...
Related Articles
  1. Personal Finance

    Where Unemployment Hits Hardest

    A look at the demographics of unemployment, and what that means for workers around the nation.
  2. Financial Advisor

    How Labor Force Participation Rate Affects U.S. Unemployment

    While a falling unemployment rate sounds like a good thing, it can actually be indicative of people leaving the labor force because they can't find a job.
  3. Personal Finance

    U.S. Labor Participation Rate at Record Lows

    In absolute terms, labor participation hit an all-time low.
  4. Insights

    The Cost of Unemployment to the Economy

    Unemployment carries many costs, both obvious and hidden, for an economy.
  5. Insights

    Leading Economic Indicators: U.S. Bureau of Labor Monthly Stats

    The Bureau of Labor Statistics' monthly employment figures are a key economic indicator. Here's how they work.
  6. Insights

    The True Unemployment Rate: U6 Vs. U3

    Learn how to distinguish between the U-3 and U-6 unemployment rates, and explore which rate provides a truer picture of unemployment.
  7. Personal Finance

    The Best and Worst Countries to Find a Job

    Which countries have the lowest and highest unemployment rates? The answers might surprise you.
  8. Insights

    Jobless Growth: Are You Prepared?

    Economic growth doesn't always mean employment growth. Learn about how the jobless growth economy affects workers and investors.
  1. Is there a natural rate of cyclical unemployment?

    Learn more about cyclical unemployment and find out about the relationship of cyclical unemployment to the natural unemployment ... Read Answer >>
  2. What is the difference between structural unemployment and cyclical unemployment?

    Learn more about about the differences between structural and cyclical unemployment and when cyclical unemployment becomes ... Read Answer >>
  3. How did the Great Recession affect structural unemployment?

    Structural unemployment is difficult to measure, but there are hints in the data that the spike in unemployment following ... Read Answer >>
  4. What is the key difference between the participation rate and the unemployment rate?

    Learn the key differences between the participation rate and unemployment rate, and how they can provide a clearer picture ... Read Answer >>
Trading Center