Background
Disguised unemployment, also referred to as hidden unemployment, pertains to a situation where individuals possess employment but their roles do not fully exploit their skills or capabilities. Consequently, workers are less productive than they could be, resulting in an apparent dilution of labor. While they may be deemed employed, these individuals ideally seek more appropriate or more rewarding opportunities. This scenario is commonly observable in developing economies where excessive labor is often employed in traditional sectors, especially agriculture.
Historical Context
The concept of disguised unemployment finds its roots in the study of labor markets within developing economies, sparking particular interest post-World War II. Esteemed economists like Ragnar Nurkse and Joan Robinson were prominent in popularizing it within the discourse surrounding economic development. The term has since become integral in the analysis of labor utilization and structural inefficiencies across various economies.
Definitions and Concepts
In economics, disguised unemployment involves several dimensions:
- Underemployment: A key aspect where workers are employed below their potential skill level.
- Surplus Labor: Fragmentation within sectors such as agriculture, where the labor force exceeds functional necessity.
- Hidden Dimensions: Jobs providing less than ideal work conditions, compensation, or future growth, intertwining with the quest for better opportunities.
Major Analytical Frameworks
Classical Economics
Classical economists paid limited attention to disguised unemployment, focusing more on natural rates of unemployment and market self-correcting mechanisms.
Neoclassical Economics
Neoclassical perspectives may treat disguised unemployment as inefficiency and market failure issues, suggesting possible governmental role to mitigate such disparities.
Keynesian Economics
According to Keynesian economics, disguised unemployment can be symptomatic of inadequate aggregate demand, suggesting policy interventions to stimulate fuller employment.
Marxian Economics
Marxian theory presents disguised unemployment as a diagnostic tool for understanding labor surplus and capitalist exploitation, characterizing it as a reserve army of labor that stabilizes wages.
Institutional Economics
This school sees disguised unemployment within the lens of organizational inefficiencies, where institutional standards and regulations potentially challenge effective labor utilization.
Behavioral Economics
Behaviorally, cognitive bias, inaccurate representations of job markets, and psychological factors amidst job selection reflect disguised unemployment patterns.
Post-Keynesian Economics
A more tailored Keynesian derivation which emphasizes ameliorating demand shortfall, with state intervention to enhance job creation and worker productivity.
Austrian Economics
Austrian views emphasize market freedom, suggesting misleading governmental actions and regulations may lead to disguised unemployment formations.
Development Economics
Central to development economics, exploring mismatches in labor skills and job market requisites alongside policies demanding structural employment transformation.
Monetarism
Monetarists may argue that disguised unemployment relates to underemployment phenomena accompanying rigid wage and price controls.
Comparative Analysis
Disguised unemployment exhibits various forms in different economy sizes – from rural and predominantly agricultural to more advanced industries where applicable underemployment prevails due to sectoral transformations and technology dynamics.
Case Studies
Illustrative examination includes India’s rural employment scenario, South East Asian labor markets, and facets within transitional economies encountering technological upgrading.
Suggested Books for Further Studies
- “Development with Surplus Labor” by Siri Terjesen
- “Economic Development in Historical Perspective” by David S. Landes
- “Keynesian Economics: Beyond the Simple Model of Aggregate Demand” by Dudley Jackson
Related Terms with Definitions
- Underemployment: Employment in fractions of desired hours or skills.
- Structural Unemployment: Mismatches due to economic structural changes.
- Cyclical Unemployment: Joblessness arising from economic downturns.
- Frictional Unemployment: Short-term transitional unemployment phase.
- Natural Rate of Unemployment: Minimal constant job surplus rate dictated by invariant labor market friction.
