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What is disguised unemployment?

AS, A-Level, IB
AQA, Edexcel, OCR, IB, Eduqas, WJEC

Last updated 20 Jul 2023

Disguised unemployment refers to a situation in which a larger number of people are employed in a particular sector or occupation than is actually necessary for the efficient functioning of that sector. It occurs when the productivity of additional workers is nearly zero or negligible. In other words, these surplus workers are not contributing much to the overall output or productivity of the sector

The term "disguised" unemployment implies that the unemployment is not immediately apparent because these surplus workers appear to be engaged in some form of employment. However, their actual contribution to the productive output of the industry is minimal, and they could be better utilized in other sectors where their skills are in demand.

This phenomenon is often observed in agriculture and certain other labour-intensive industries, especially in developing countries. In such cases, too many people may be employed on a farm or in a particular activity, leading to lower overall productivity and income per worker. Disguised unemployment can hamper economic growth and development by inefficiently allocating human resources and preventing workers from moving to more productive sectors where their skills can be put to better use.

Efforts to reduce disguised unemployment may involve promoting skill development, encouraging labour mobility, and creating opportunities in more productive sectors of the economy. By doing so, the overall productivity and efficiency of the economy can be enhanced, leading to higher economic growth and better standards of living for the population.

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