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 significant concern in the mid-20th century, particularly in developing economies with large agrarian sectors. Its importance was first recognized by economists analyzing persistent rural poverty despite high labor participation. Subsequent studies in countries such as India and China revealed that surplus labor masked by traditional employment structures hindered productivity and economic growth. Over time, disguised unemployment has been acknowledged as a persistent barrier to development in both rural and urban informal sectors 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.

Claim

Disguised unemployment is a critical and often overlooked crisis undermining economic progress. It masks the true extent of joblessness, especially in developing countries, where too many people share limited work, stifling productivity and innovation. Ignoring this issue perpetuates poverty and wastes human potential. Addressing disguised unemployment is essential for genuine development, efficient resource use, and social justice. We must confront this hidden problem head-on to build stronger, more equitable economies.