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.

Informal sector

Where it is explained

This term is explained in Class 11 Indian Economic Development Chapter 7: Employment: Growth, Informalisation and Other Issues.