Readers Question: what is the difference between disguised unemployment and involuntary unemployment
Definition of disguised unemployment. This is when people do not have 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 redunancy
- Disguised unemployment could also include people doing jobs that are completely unproductive, i.e. they get paid but they don’t have a job.
- 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 ‘ie. 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
4 comments ↓
In 1980, what was the economy’s biggest risk–inflation or unemployment?
wel, it was inflation due to unemployment.
[...] land efficiently, but because of no other work, the remaining three also stay back. This is called Disguised Unemployment. And probably the answer to our question lies here. We need to fight disguised [...]
When a person is skilled but is employed for doing unskilled job – What type of situation is it called? Is it also defined as a type of unemploymet. This is since the person is capable to doing better job but he is not able to do better job because of lack of time for doing unskilled job.
Thanks.
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