Glossary term
Disguised Unemployment: Meaning and Definition
Reviewed and approved by Dr. Anamika ShrivastavaPublished Last updated
Disguised unemployment is a situation in which more people are employed in a job than are needed, so that removing some would not reduce output. The workers appear employed but add nothing to production. It is common in Indian agriculture where family members share too little land.
In more detail
The surplus workers contribute nothing to output, so shifting them to other work would not reduce production. It is common on small family farms where jobs are scarce elsewhere. Creating non-farm work is the remedy, so that surplus labour can move and add to output.
Example
A farm that needs two workers but employs five, with family members, has three disguisedly unemployed.
Key points
- Marginal productivity of surplus workers is zero.
- Common in agriculture.
- Different from open and seasonal unemployment.
Common mistake
Counting disguised unemployment in the official unemployment rate.
Related terms
Where it is explained
This term is explained in Class 11 Indian Economic Development Chapter 7: Employment: Growth, Informalisation and Other Issues.