Disguised unemployment is a phenomenon where a portion of the labor force either remains unemployed or works in positions that contribute very little to overall productivity. Interestingly, despite the presence of such unemployment, it does not negatively impact a nation’s aggregate economic output. In essence, it’s a situation where too many workers are occupying too few valuable job positions. Thus, an economy should improve upon these factors to reduce high levels of hidden unemployment. Thus, in the case of seasonal unemployment, workers are aware of the period they will be unemployed and contribute by increasing the overall output when the demand is high. On the contrary, even an abundance of labor cannot produce additional output in the case of disguised unemployment.

1. This is the essential difference between open unemployment and disguised unemployment.
2. Disguised unemployment extends beyond the absence of full-time employment; it encompasses anyone who isn’t making full use of their skills or isn’t engaged in work that aligns with their capabilities.
3. Unemployment is the number of people that don’t currently have a job, but are actively looking for a job and have done so within the past four weeks.
4. Thus, the people working as trainers and tourist guides will be doing part-time jobs for 3-4 months, generating more revenue with higher productivity.
5. If a person gives up looking for employment, whether on a short- or long-term basis, they are no longer counted until resuming the pursuit of employment options.
6. An example would be someone with a law degree working as a legal clerk or paralegal.
7. This article aims to shed light on the concept of disguised unemployment, its underlying causes, and its various forms that often go unnoticed in official labour statistics.

UPSC Mains Test Series: With Answer Key, Evaluation, and Personal Feedback (Online and Offline)

In addition to open unemployment, many educated people are underemployed since their qualifications do not fit the position. If you’re unemployed, it’s important to check on eligibility for unemployment benefits. Information on qualifying and how to apply is available on your state unemployment website. Use CareerOneStop to find local resources that can provide assistance and explore job openings and training programs. Your state unemployment office may also have resources to help unemployed workers get back into the workforce.

1. For instance, during certain cropping seasons, labor demand is high in agro-based industries, including food processing and manufacturing.
2. Another way to think about disguised unemployment is to say that people are employed but not in a very efficient way.
3. Bureau of Labor Statistics found that persons having any disability are more likely to be self-employed than those who are not disabled.
4. As a result, some workers’ potential remains idle or irrelevant in the total output.
5. This kind of unemployment develops as a result of substantial adjustments made to a nation’s economic structure.

Disguised unemployment, also known as hidden unemployment, highlights low marginal productivity or inefficiencies in the labor force. It occurs when workers are a part of the labor force but function beneath their actual potential. A high level of hidden unemployment is a grave concern for an economy as it can hurdle the realization of higher GDP or total output.

Structural Unemployment

On the other hand, disguised unemployment is mainly found in the unorganised sector where work is not consistently available or too many people are employed for some work that does not require so many hands. This is the essential difference between open unemployment and disguised unemployment. Especially in developing countries, governments cannot maintain such an intrinsic data set on hidden unemployment. The labor market is huge in developing economies, and the governments lack adequate resources to maintain this data. As a result, this problem remains outside adequate policy formulation and implementation, especially in rural areas. There are many causes of disguised unemployment, but these underlie a few broad ones.

It can also occur when a worker is qualified for a more senior position in their field but hold a lower-level job. An example would be someone with a law degree working as a legal clerk or paralegal. Sometimes, the term “underemployment” is used when talking about people who are working in a lower capacity than one in which they are qualified. However, most often, underemployment is connected to jobs that are lower-paid or for a limited number of hours. If you find yourself in a position where you’re underemployed, there are things you can do to improve your situation. Make sure that all your skills and work experiences are well-represented.

Interrelationship Between Unemployment and Underemployment

Unsuccessful labour market adjustments between supply and demand lead to frictional unemployment. This kind of unemployment develops as a result of substantial adjustments made to a nation’s economic structure. These adjustments may have an impact on a production factor’s demand or supply. In this case, more individuals are working than is truly necessary.

Mismatch of Skills

If a business is struggling that may declare bankruptcy and close its door, putting employees on the unemployment line. An individual with advanced skills working in a job far below their capabilities, like a highly qualified person in a low-paying job. It is a temporary form of unemployment that occurs as a natural part of certain industries or regions’ work cycles, such as agriculture or tourism. For each of the sectors that we came across in this chapter why should one focus on employment and GDP? In 2016, World Bank data said that year by year the proportion of jobs threatened by automation in India is 69%.

There can be a number of different reasons why you could be underemployed. Some of them are lack of education or training, disabilities, serious physical, or mental illnesses. Any of these can greatly impact your ability to earn a good income. The terms unemployment and underemployment are used a lot by economists, newscasters, and pundits.

It occurs when the workforce increases at a much faster rate as compared to the number of opportunities in the country. Once a person stops looking for work, regardless of the reason, they are often no longer considered unemployed when it comes to calculating the unemployment rate. 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, they are no longer counted until resuming the pursuit of employment options. This can count as disguised unemployment when the person wants to find work but has stopped looking due to being demoralized by a long search. In conclusion, disguised unemployment is a complex issue that extends beyond traditional unemployment statistics.

In such a scenario, people take up a position that needs less educational qualification. That means people are difference between underemployment and disguised unemployment unable to untap their potential and settle for lesser work because of the lack of employment opportunities. It is the outcome of some technological advancement in production methods, which could not need a lot of labour.