DEFINITION
Disguised Unemployment is when workers are employed, but they are not working or their time is only partially used.
The Key Takeaways
- Underemployment, hidden unemployment or partial unemployment are all terms used to describe disguised unemployment.
- Workers who are “disguisedly unemployed” are those that are either left without a job, working redundantly, or not being used to their maximum potential.
- This type of unemployment is often caused by an increase in the use of technology, a mismatch between demand and supply for certain types workers, or a lack of knowledge about employees’ skills.
- When there is disguised employment, the overall productivity and economic production tend to be lower.
Disguised unemployment: Definition and examples
Underutilization is disguised unemployment. This type of is when there are more people in a particular sector than the resources available to them (i.e. capital, raw materials or technology). This particular labor force is likely to be redundant, which means that the output of this sector would not decrease if some of them quit their jobs.
Alternate name: Underemployment, hidden unemployment, partial unemployment
Note:
It can be hard to determine if someone is faking unemployment, as you need to survey workers and compare their skills to what they are required to do in their current position.
There are two ways that disguised unemployment may occur:
- Workers in the agriculture sector are a good example. There are specific weeks or months of the year that have little activity, usually during winter. In these months workers do not use their skills and craft to the fullest extent.
- Imagine a small manufacturing plant with eight workers doing the same job. The overall output would remain the same if half of these workers quit.
How does Disguised Unemployment work?
In disguised unemployment there may be too many workers to complete current production. It can be due to a combination of an increase in technological advancements, a mismatch between the demand for certain types workers and an imperfect understanding of their skills.
The technology, such as artificial Intelligence (AI), may replace parts of the worker’s work in tasks like writing, data entry, analysis and problem solving. As a result, workers could be doing less than before and become underutilized. A second reason could be that there are too many qualified workers compared to the number of positions available. This can cause skilled workers to accept jobs below their level of skill or lower paying ones in order to make money.
Employer-employee “imperfect” knowledge can also manifest as disguised unemployment. The employer may not understand the skill sets of the employee while the employee might not be able to provide feedback to improve the production methods. A better sharing of knowledge could help an employer fix the problem that they are not using their employees to the fullest by increasing capital investment or changing production methods.
How is Disguised Unemployment Measurable?
The Current Population Survey (CPS) measures disguised unemployment or underemployment. The U.S. Census Bureau, in conjunction with the U.S. Bureau of Labor Statistics (BLS), conducts a national household survey. Bureau of Labor Statistics. This survey is conducted by the Bureau of Labor Statistics (BLS) and asks about 60,000 households questions regarding the employment and unemployment status of household members who are at least 16 years old. These answers are used to calculate the BLS’s different unemployment rates. 2
U-6 is the broadest measure of underutilization of labor. It measures the rate of real unemployment for all workers, including those working part-time and those unemployed. The underemployed are also included in this measurement, those who work part-time but want to work full-time. This measure is flawed because it doesn’t capture full-time employees who work in jobs that don’t fully utilize their skills or aren’t in positions that do.
Note:
There is no official government statistics available about the total of people who may be disguised unemployed or underemployed.
How common is disguised unemployment?
According to 2021 findings from the agencies, about 40% of recent college graduates are underemployed compared to 33% of total college graduates ages 22-65. According to findings released by the agencies in 2021, approximately 40% of recent graduates are underemployed. This compares to 33% of all college graduates aged 22-65.
