Disguised Unemployment Review

(often referred to as hidden unemployment) is a specific type of economic phenomenon where more people are employed in a job or sector than are actually required to perform the task efficiently.

It also hides the true health of an economy. A government might boast a 4% unemployment rate, but if 20% of its workforce has a marginal product of zero, that economy is actually functioning far below capacity. It is like a car with two cylinders firing—the engine is running, but it’s going nowhere fast. disguised unemployment

This is the most prevalent form in developing economies. (often referred to as hidden unemployment) is a

The tragedy is not that these people are lazy. Far from it. They often work grueling hours. The tragedy is that their labor is structurally redundant. They are trapped in a system where the only thing more wasteful than employing them would be firing them—because there is nowhere else for them to go. It is like a car with two cylinders

To understand how disturbing this is, consider a normal job. A barista makes 50 coffees an hour. Hire a second barista; they make 100 coffees. The second barista’s marginal product is positive. Now hire a third. If the coffee machine is maxed out, the third barista just wipes counters and chats. That third barista has a marginal product approaching zero. That’s disguised unemployment.