Reviewed by Sep 30, 2020| Updated on
Disguised unemployment occurs when part of the labour force is either left without jobs or operates redundantly, such as the productivity of the workforce is effectively zero. It is unemployment which has no impact on aggregate production. An economy shows hidden unemployment when productivity is poor, and too many workers also occupy few jobs.
Disguised unemployment often occurs in developed countries whose large populations generate labour-force surpluses. It can be distinguished by low productivity and mostly follows informal labour markets and agricultural labour markets, capable of consuming large labour quantities.
Disguised, or secret, unemployment can refer to any portion of the non-employed population at maximum potential. Still, it is often not counted within the national economy in official unemployment stats. This may include those who work far below their capacities, those whose jobs have little overall productivity benefit, or any category that is not currently searching for a job but is capable of doing value work.
Another way of talking about disguised unemployment is to say that people are working but not very effectively.
1. Underemployment In certain conditions, people who do part-time work can qualify as disguised unemployment if they wish to obtain and can do a full-time job. It also includes those who accept work well below their skill set. In such situations, hidden unemployment can also be called "underemployment," including those who operate at some capacity but not at maximum capacity.
2. Illness and Disability Another category which can be included is those who are sick or partially disabled. Though they may not function actively, they may be able to be successful within the economy. In the case of disability, this type of disguised unemployment is temporary and classified while someone is seeking assistance with disabilities. That means the individual is often not regarded as part of a nation's unemployment statistics.
3. No Longer Looking for Work Whatever the cause, if a person ceases searching for jobs, he or she is often no longer considered unemployed when it comes to measuring the unemployment rate. Many nations require that an individual actively pursue employment to be counted as unemployed.