What is the Concept of Disguised Unemployment?

We often hear that the major problem hovering over India today is unemployment. India has been blessed with a demographic window of opportunity, but because of a lack of planning, moderate growth of businesses, a lack of skill training among individuals, and the slow entrance of foreign multinational corporations, India cannot take advantage of it. Simply put, the demographic window of opportunity means that the proportion of dependent people, primarily children and the elderly, is lower than the proportion of earning people. It means that India is currently dominated by working-age people. This is the time in which India can dominate other nations by producing skilled youths, but here we are facing the problem of unemployment and disguised unemployment.

The Concept of Unemployment

Unemployment simply means that a working-age individual who is capable of working and wants to work cannot find work for various reasons.

Unemployment rate = (total number of unemployed people divided by the total number of workers)

Various Types of Unemployment

  • Open Unemployment − A large section of society cannot get a job that may yield a regular income. This situation occurs when the growth rate of the economy is slow.

  • Seasonal Unemployment − This occurs because not all businesses operate in all seasons. Hence, the factory may lay off individuals when it is shut down. For example, umbrella and ice cream manufacturers.

  • Cyclical Unemployment − This occurs when the economy or business experiences a recession or depression.

  • Technological Unemployment − This type of unemployment occurs when, because of technological advancement, human capital is not needed.

  • Structural Unemployment − This occurs when there is a mismatch between the worker's skills and the job's requirements. This may occur when a business gets technologically advanced or decides to restructure.

  • Frictional Unemployment − In this type of unemployment, there are job seekers with the skills and there are companies that are searching for such job seekers, but because of a lack of information, the demand and supply cannot meet.

  • Disguised Unemployment − This is a type of unemployment that is not visible to the naked eye. There is a problem of surplus manpower, so even if some of the resources are removed from the process, production is not hampered.

The Concept of Disguised Unemployment

Disguised unemployment, also known as hidden unemployment, is a type of unemployment in which more resources are allocated to the job than are actually required. Some of the resources here have negligible or zero productivity. Hence, if these resources are removed from the process, there will be no production or project deliverables hampering. Here, the resources are not working at their full capacity. Disguised unemployment is not calculated in unemployment statistics.

Disguised unemployment in India occurs mostly in the agriculture or unorganized sector. Although agriculture employs 51 percent of India's labor force, it only accounts for 12–13 % of the economy's gross domestic product (GDP). Reading such data helps us understand that there is something majorly wrong in this scenario. Let’s dive deep into this scenario.

  • According to the 2011 census data, 70% of India’s population resides in rural areas.

  • Because there is limited intervention by companies and large corporations in rural areas, we frequently face the problem of open, seasonal, and frictional unemployment.

  • Factory owners hire blue-collar employees as needed, denying them a regular source of income.

  • There is also a lack of resources and capital in rural areas among working individuals.

  • Because of a lack of resources and capital, the families cannot buy resources like land, pesticides, big machines, or tractors, or invest in their child’s skill enhancement process.

  • The youth cannot find decent jobs because of a lack of skills, and because of family love, they are not ready for relocation as well.

  • These kids are then employed in the family’s agriculture work; hence, the individuals now work at a lesser capacity.

  • The total production has not increased, even by marginal quantities, and now we have too many dependents on one land. resulting in disguised unemployment and a call for a poverty

The Different types of Disguised Unemployment

  • Disguised unemployment also happens in a scenario where the employee or an individual is underworked. It means the resource has the capacity to work in bigger and more challenging roles but cannot find work because of loss of morale, limited opportunities, or other reasons.

  • Disguised unemployment also occurs when a person who desires and is capable of working a full-time job opportunity is limited to part-time, freelancing, or other internship opportunities. It happens when the economy is unable to meet the demand for the job.

  • It is difficult for disabled and sick individuals to get a job even though they have the desire and the skills to perform the job. It happens when the economy and companies are not flexible enough to adapt to changes or diversification.

  • Disguised unemployment occurs when an individual is tired of looking for job opportunities that meet his reasonable criteria and hence give up.

How to Prevent Disguised Unemployment?

  • Birth Control Measures − We notice that the major reason for disguised unemployment is the excess supply of labor. Sometimes companies have too many options, and other times the companies or the economy as a whole are unable to meet the ever-increasing demand for jobs. The economy can plan the birth control measure so as to ensure that there is less weightage to create jobs and that there are not numerous job seekers added every year.

  • Skill Enhancement − Disguised unemployment is generally seen in the rural sector of India, so if the schools, colleges, and government work together, they can ensure a youth that has the skills to perform the different jobs and is hence employable by the companies. This ensures that they are not wasting their crucial learning years on something that will not be useful when they seek jobs in the outside world.

  • Mobility of the Workforce − There is always going to be a gap between demand and supply in various states, so individuals should prepare themselves for mobility so as to ensure a better standard of living for themselves and their loved ones.

  • Self-Employment − Instead of relying on businesses and the government to provide jobs, individuals should create jobs for themselves. Individuals must cultivate a sense of self-entrepreneurship in order to be successful.

In this article, we were able to take a deep look into the concept of disguised unemployment hovering over India today and how the same can be solved by various measures at the individual, business, and government levels. It is high time that we seek and create solutions for ourselves rather than victim-blaming the whole situation. Businesses and foreign investors should understand and try to take advantage of India’s demographic windows of opportunity.