Readers Question: what is the difference between disguised unemployment and involuntary unemployment
Definition of disguised unemployment. This is when people do not have productive full-time employment but are not counted in the official unemployment statistics. This may include:
- People on sickness / disability benefits (but, would be able to do some jobs)
- People doing part-time work.
- People forced to take early retirement and redundancy
- Disguised unemployment could also include people doing jobs that are completely unproductive, i.e. they get paid but they don’t have a job. In a developing economy like China, many workers in agriculture may be adding little if anything to overall unemployment, therefore this type of employment is classed as disguised unemployment.
- See: The true level of unemployment
Definition of Involuntary Unemployment
This is when people are unable to work because there are insufficient jobs available in an economy. For example, during a great depression. Classical economists argue unemployment is voluntary ‘i.e. wages are too high’ but involuntary unemployment says that people are unemployed for a lack of aggregate demand. Keynes argued a cut in wages would not solve unemployment because it would only reduce AD further.
Involuntary unemployment would be measured by government statistics. E.g. in the 1930s, unemployment rose to 25% in the UK. This was involuntary unemployment.
Note: the definition is somewhat disputed. Some economists would say that if you are working part-time rather than full-time, a better definition would be to say under-employment – rather than unemployment.