State the meaning of `Disguised Unemployment'.
State the meaning of `Disguised Unemployment'.
Official answer
Disguised unemployment is a situation where more people are engaged in an activity than are actually required, so that the marginal productivity of the extra workers is zero (or near zero).
- Removing such workers would not reduce total output.
- It is common in Indian agriculture, where family members work on small landholdings even though fewer hands could produce the same output.
Marking scheme
- 1.1 mark for a correct definition stating that disguised unemployment exists when more workers are engaged than needed and their marginal productivity is zero/negligible, typically illustrated with agriculture.
Hint
Focus on 'zero marginal productivity' of surplus workers — the classic example is Indian family farms.
Quick oral answer
Disguised unemployment means more workers are engaged in a job than actually needed, so the extra workers add nothing to output — their marginal productivity is zero, as seen commonly in Indian family-run farms.
Common mistakes
- 1.Confusing disguised unemployment with seasonal unemployment or open (visible) unemployment.
- 2.Forgetting to mention 'zero/negligible marginal productivity', which is the defining criterion examiners look for.
- 3.Giving only an example (e.g. 'farmers') without stating the actual meaning/definition.
Analysis and explanation
Disguised unemployment is a hidden form of unemployment — the workers appear to be employed, but they are not adding to production.
Concept
- Marginal Product of Labour (MPL) of the surplus workers is zero or negative.
- It is invisible because everyone looks "busy", unlike open unemployment.
Exam trap
- Students often confuse it with seasonal unemployment (which arises only in certain seasons like sowing/harvesting). Disguised unemployment is a year-round structural problem rooted in surplus family labour on land.
- A precise one-line definition scores the full 1 mark; do not add unrelated causes of unemployment.
Interesting facts
Disguised unemployment was first analysed in the Indian context by economists Ragnar Nurkse and W. Arthur Lewis in their surplus-labour models of underdeveloped economies.
According to NITI Aayog and Economic Survey estimates, a large share of India's agricultural workforce is disguisedly unemployed, contributing to low per-capita farm productivity despite high employment numbers.
Disguised unemployment explains why India's agriculture sector employs roughly 45% of the workforce but contributes under 20% of GDP — too many workers producing too little extra output.
Question details
Q33 of 37 questions
- Board
- CBSE
- Class
- Class 12
- Subject
- Economics
- Year
- 2026
- Section
- Section B
- Marks
- 1
- Type
- Very Short Answer
- Chapter
- Employment: Growth, Informalisation and Other Issues
- Topic
- Disguised Unemployment
- Bloom's level
- remember
- Syllabus topic
- Unit 4: Current Challenges facing Indian Economy — Employment: Types of Unemployment (Disguised Unemployment)
- Author
- CBSE
- Reviewed by
- Padhantu Academic Team
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Frequently asked questions
What is the key difference between disguised and open unemployment?
In open unemployment, a person has no job at all and is visibly out of work. In disguised unemployment, the person appears employed (e.g. working on the family farm) but contributes nothing extra to output because their marginal productivity is zero — the unemployment is hidden rather than visible.
Why is disguised unemployment mainly found in agriculture?
Small, fragmented landholdings and the joint family system mean many family members work on the same plot of land. Since farming does not require that many hands, most of them add little or no extra output, making agriculture the classic sector for disguised unemployment in India.