Disguised unemployment

What is Disguised Unemployment?

Disguised unemployment is when a portion of the workforce is not working or is being employed in redundant ways so that worker productivity becomes essentially zero. Unemployment is not a factor in aggregate output. If productivity is low or too many workers fill too few jobs, an economy has hidden unemployment.



  • Disguised unemployment refers to unemployment that doesn’t affect aggregate economic output.
  • This happens when productivity is low or too many workers fill too few jobs.
  • It could refer to any portion of the population not working at their full potential.

Understanding disguised unemployment

In countries with large populations, disguised unemployment is common. This can lead to low productivity. It often occurs alongside informal labor market or agricultural labor markets, which can absorb large amounts of labor.


Hidden or disguised unemployment refers to any group of people not working at their full potential. However this segment is not often included in the official unemployment statistics for the country. These include people who work below their potential, those whose jobs provide little in the way of productivity, and any group that isn’t currently seeking work but can do work of value.


Another way to look at disguised unemployment is to say people are employed, but not in an efficient manner. They are unable to use their skills, have jobs that don’t suit their needs (possibly because the market is inefficient and doesn’t recognize their abilities), or they are not working as hard as they would like.

There are many types of hidden unemployment. These include people who work in jobs that are not their skills, disabled or ill workers, job seekers who feel discouraged by the lack of work they have found and who give up looking for it.

Different types of disguised unemployment


Part-time workers may be considered disguised unemployment in certain situations if they are unable to perform full-time work. This includes people who accept work that is below their skills. These cases may be called “underemployment” or “misleading unemployment”. It refers to those who work in some capacity, but not their full potential.


A person who has a master in business administration (MBA) and accepts a full-time position as a cashier because they are unable to find work in their area of expertise may be considered to be underemployed. A person who is working part-time in their field but wants to work full-time may also be considered underemployed.


Illness and disability

Others who are disabled or ill may also be considered. They may still be able to contribute to the economy, even though they are not actively working. This type of disguised unemployment can be temporary in cases of illness. It is categorized when someone receives disability assistance. This is a way that the individual is not included in the national unemployment statistics.


No Longer Looking for Work

When a person stops searching for work, it is often not considered unemployed in the calculation of the unemployment rate. To be considered unemployed in many countries, a person must be actively looking for work. A person who stops looking for work, on a long-term or short-term basis, is no longer considered unemployed. If a person is discouraged by long searches and stops looking for work, this can be considered disguised unemployment.

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