Definition & Disguised Unemployment Example

Disguised Unemployment

What is Disguised Unemployment? 

Disguised unemployment is a term that refers to those who are out of work but still seeking employment. The idea behind disguised unemployment is that there are two types of unemployed people, the first being those individuals who had never worked before and, secondly, those people who lost their jobs for one reason or another.

The term ‘disguised unemployment’ may seem a bit strange at first, but it is not too difficult to understand. The most common form of disguised unemployment is when an individual has taken on a part-time job or two in order to make ends meet. This person might be working more than one job and still remaining unemployed because they cannot find anything better.

Unemployment is a complicated issue with many different perspectives. Unemployment can be caused by people who don’t want a job and individuals unable to find employment, or underemployed individuals. Unemployment can also be caused by people who refuse to take on a low-paying job.

These people are in disguised unemployment and are focusing their attention on something other than employment. There are many reasons for an individual to want to focus on something other than employment.

Causes of Disguised Unemployment

Disguised unemployment can be caused by any of the following:

• A mismatch between the skills workers have and those that employers require.
• The unwillingness of unemployed workers to accept jobs in their field or take a job at a lower wage than previously earned.
• Employers are “hiring” current employees on a contract basis instead of as permanent staff to avoid paying them benefits.
• Workers failing to actively search for jobs because they feel rejected by the job market.

Disguised Unemployment Example

Example of disguised unemployment in urban areas;

Example of disguised unemployment in urban areas:

Disguised unemployment is seen in towns and urban areas where painters, plumbers, and electricians cannot find jobs regularly and work much less than their capabilities.

Another example of disguised unemployment in urban areas includes people who are standing outside of bars, and alcohol is being served everywhere. Many people on the street can’t be classified as just “walking” — they’re moving in every direction in haste at a certain time of day.
Outside of the buildings, you see people sitting on the sidewalks in front of banks and shops, looking disheveled or acting completely normal. They fall asleep when it gets dark. Some have cardboard signs that say “hungry, homeless, anything helps.”
This is a common scene in a lot of places — in America especially. But what’s going on here? The people who are walking around, talking, and standing outside of the bars at a certain time of day aren’t just taking a stroll after work. They’re not working either.

This is an example of disguised unemployment in urban areas because there is no way actually to make a living. To be more specific, they’re unemployed in disguise.

Distinguish Between Open Unemployment and Disguised Unemployment

Open unemployment is the number of people who are unemployed and actively looking for work. In contrast, disguised unemployment is when a person has given up on finding a job because they think there are not any available or suitable jobs to apply for.

Open unemployment is when a person is actively seeking work and has not found any yet. Disguised unemployment occurs when people are working but want to be doing something else or underemployed.

The difference between open and disguised unemployment can be hard to determine because it relies on the individual’s self-reporting.

This is the difference between open and disguised unemployment. Open unemployment occurs when a person is actively looking for work but has not found a job or given up on finding one. Disguised unemployment occurs when people are not actively looking for work, so they are not considered unemployed by the Bureau of Labor Statistics (BLS).

People can be disguised as unemployed through various circumstances such as not looking enough for work, not being willing to take a job after finding one and having little or no job searching activity.

Disguised Unemployment and Seasonal Unemployment

A difference between disguised unemployment and seasonal unemployment is how long they last and what the causes are. Disguised unemployment is usually long-term, but the cause can be anything that makes workers unproductive. Seasonal unemployment, on the other hand, is short-term. The causes of this are natural circumstances like weather.

Disguised unemployment is caused by a combination of many factors. One factor is a mismatch between employers’ needs and the skills of the current workforce. There are also structural causes that limit flexibility (or what economists call “non-accelerating inflation rate of unemployment” or NAIRU). For example, minimum wage laws may make employers reluctant to hire low-skilled workers because they will face legal repercussions for doing so.

Seasonal unemployment typically occurs during periods of low activity. This includes what we call a “winter recession” or “seasonal slowdown.” Essentially, this type of unemployment is temporary and expected.

For example, many people get seasonal unemployment during the summer because they are not needed at work. This is caused by a lack of workers in some industries (such as construction) and increases in hiring in other industries (such as retail).

Disguised unemployment is not restricted to one gender or race. It can happen to anyone who has lost their job. The US Bureau of Labor Statistics defines disguised unemployment as the aggregate of involuntary part-time workers and marginally attached workers. According to the BLS, “At any one time, a majority of part-time workers would prefer full-time employment.” Disguised unemployment is typically equal to approximately six percent of U.S. workers.

Disguised unemployment can last a long time in certain industries, such as construction. The U.S. Department of Labor states that “in many cases, workers who lose a job in a construction-related industry may find employment in another construction-related industry or may simply leave the labor force if they cannot find suitable work.”

Seasonal unemployment can be highly volatile. It can range from virtually zero to ten percent of the workforce, depending on activity levels. For example, during the Great Recession, seasonal unemployment was as high as six percent due to increased layoffs and decline in auto sales, according to the U.S. Bureau of Labor Statistics.

Disguised unemployment can occur in different industries but most commonly occurs in construction, manufacturing, and retail trade. The U.S. Bureau of Labor Statistics reports that “the industries with the highest levels of disguised unemployment in 2011 were Construction (9%), Manufacturing (8%), and Retail Trade (6%).”