Disguised unemployment – all you need to know

When looking at unemployment, we generally think of people who are out of work and actively looking for it. But there is another type of unemployment that is often not considered – disguised unemployment. In this article, we shall discuss the meaning of this phenomenon, its types, and its consequences. Let’s start and define disguised unemployment!

What is disguised unemployment?

It means a situation where people are employed but are not utilizing their skills and potential to the fullest. In other words, they are underemployed. Distinguished unemployment is another name for a disguised one. It is used to describe when people are willing and able to work but cannot find a job.

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Who developed the concept of disguised unemployment? The notion was first used by the British economist Joan Robinson in 1936 as “the adoption of inferior jobs by the workers laid off from their normal jobs due to lack of effective demand”.

The difference between underemployed and disguised unemployment is that the latter is hidden. They often happen in developing countries where there is a lack of investment in education and training.

Where you will find the disguised unemployment most is in India. The meaning of disguised unemployment in the country is so important that it is known in both Hindi and Telugu.

Indian agricultural sector can be a revealing example of disguised unemployment. It employs a large number of people; however, due to the lack of mechanization, only a small percentage of them are able to work to their full potential. As a result, the rest are underemployed.

What do you understand by disguised unemployment?

Disguised unemployment is a type of unemployment that is not openly seen or admitted. However, it has meaning in both micro and macroeconomics. At the micro level, it is a situation where an individual is not able to get full utilization of his/her capabilities. And at the macro level, it refers to a situation where resources are not fully utilized.

Disguised unemployment is an example of surplus labor. This concept describes a situation where there are more workers available for a particular job than are actually needed.

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The leading cause of surplus labor is said to be a lack of investment, which is necessary for creating new jobs and for improving productivity in existing ones.

There is also a concept opposite to unemployment, namely disguised employment. What is it? Disguised employment means the contractors or the self-employed who do not get the full benefits of being employed by a company. This includes things like paid holidays, health insurance, and other benefits. The labor laws also do not apply to them as much. This can often lead to people working overtime.

Types of disguised unemployment

If you are still asking, “What do you mean by disguised unemployment?” let’s refine the  definition by considering the two types of it:

  1. Structural unemployment

This is a type of unemployment when there are not enough jobs for everyone who wants to work. It includes situations when people are unable to find a job at all. Also, there is not much difference between disguised unemployment and underemployment when people are working fewer hours than they want to.

  1. Frictional unemployment

This is when people are “between jobs”. Perhaps they are looking for a place that will better suit their needs. Or they may be waiting to start a new career.

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Frictional unemployment is a normal part of the economy, and it is not necessarily a bad thing. It can be seen as a way for people to find the job that is the best match for their skills.

Now let’s find some examples of the above types of disguised unemployment.

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Illness and disability

With illness and disability, people are not able to work. This can be due to physical/mental illness or an accident.

It is an example of how unemployment can be hidden. People unemployed because of an illness or disability may not look like they are unemployed. But they are not able to work.

No longer looking for work

Another type of hidden unemployment is when people stop looking for work. This can happen for a number of reasons. Maybe they haven’t been able to find a new place for a long time and just stopped trying. 

Whatever the reason, when people stop looking for a new job, they are no longer counted as unemployed. But that does not mean they are not willing and able to work.


Disguised unemployment generally means that people are working but are not as productive as they could be. This can occur for a variety of reasons, such as employment in jobs that are not useful or low-paid. Or it may be due to a workplace that does not make full use of their skills and abilities. Whatever the reasons, disguised unemployment, which is also called the hidden one, is a severe problem in many countries, including India.

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