Question

Elaborate the meaning of disguised unemployment with the help of a suitable example.

Hint:

Disguised unemployment occurs when more people are employed than are actually needed, leading to inefficiency, especially in rural and agricultural areas.

Answer 1

Disguised unemployment refers to a situation where more people are employed than actually needed for a task or activity. It typically occurs in sectors where labor productivity is low, and the workforce is overstaffed, leading to an inefficient allocation of resources. The workers in such situations appear to be employed, but they do not contribute effectively to production.
Example:
In rural India, agriculture is a common area where disguised unemployment is prevalent. For instance, if a family owns a small piece of land and all its members (including children and elderly) are involved in farming, it may appear that all members are employed. However, the actual work could be done by fewer people, as the land is small, and additional labor does not contribute to an increase in output. The extra workers are technically employed, but they are not efficiently contributing to agricultural production. This results in underutilization of labor, with the extra workers being "disguisedly unemployed."
Disguised unemployment limits economic growth as it leads to inefficient resource use, and is especially common in agricultural and informal sectors.