Disguised unemployment

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.

Further reading

8 thoughts on “Disguised unemployment

  1. 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.


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