Disguised unemployment

Hidden underemployment

Nature

Measured unemployment rates tend to underestimate the true scale of the situation. Disguised unemployment is represented by discouraged workers and people involuntarily employed in part-time jobs. Predominant in this group are women and youths who do not enter the labour market.

Background

Disguised unemployment emerged as a recognized global issue during the mid-20th century, particularly in the context of developing economies with large agrarian sectors. Economists first highlighted its significance in post-colonial South Asia, where surplus labor masked true unemployment rates. Over time, international development agencies and researchers identified disguised unemployment as a persistent barrier to productivity and economic growth, prompting its inclusion in policy debates and labor market analyses worldwide.

Incidence

[Industrialized countries]

An OECD study estimated that more than 13 million people could be in disguised unemployment in Western industrialized nations and Japan by 1994. Japan and the USA account for nearly two-thirds of the 3.7 million discouraged workers recorded in the OECD in 1991. Involuntary part-time workers accounted for a further 9.7 million.

An example of how unemployment is disguised is that in 1982, the UK instituted a change in the criteria by which it compiled its unemployment statistics, since counting as unemployed those who are both out of work, seeking employment and claiming benefit. By deterring, disallowing or liberalizing the access of benefit of various categories of the labour force in a variety of subsequent moves, the change has progressively caused more than a million people either to claim benefit while not defining themselves as looking for work (e.g. on invalid support or other types of benefit), or to withdraw from the labour force altogether. Thus they have ceased to be counted as unemployed and are treated as resting.

[Former socialist countries]

The high employment figures in former socialist countries resulted from the fact that practically all blue and white collar workers were guaranteed employment by the state, usually in their current jobs. In fact, for managerial reasons, jobs do not fully utilize workers' skills and training, so that labour productivity is low.