Sectors of the Indian Economy — Question 13

Disguised unemployment refers to a situation where more people are engaged in a task or occupation than are actually required for its efficient functioning. It often occurs in both rural and urban areas. Disguised unemployment leads to inefficiency, under-utilization of labour, and reduced overall productivity.

Example from rural area : Imagine a small family farm where five people work together to cultivate crops. However, the land is not large enough to require all five workers for efficient production. If two of these workers leave the farm for some other job, productivity remains the same and family income increases.

Example from urban area : A small retail shop in a crowded market with six salespersons to attend to customers while the need is of only three persons is an example of disguised unemployment.