Previous Year Question

Disguised unemployment is a situation in which more workers are engaged in an activity than are actually required. Some workers can be withdrawn without causing any reduction in total output.

The marginal productivity of these surplus workers is zero.

Where:

ΔQ= change in total output

ΔL= change in the quantity of labour

If removing an additional worker produces no change in output:

ΔQ = 0 ⇒ MPL = 0

For example, suppose five workers are sufficient to maintain the existing output of a farm, but eight family members work on it. If three persons can be withdrawn without reducing production, those three persons are disguisedly unemployed.

Important characteristics of disguised unemployment include:

• The worker does not visibly appear unemployed because the person remains engaged in some activity.

• The worker’s additional contribution to output is zero or nearly zero.

• It is commonly observed in agriculture and family-operated small enterprises in India.

• Total production may remain unchanged even after the number of workers is reduced.

• Shifting surplus labour to another productive activity can increase the economy’s aggregate output.

Examination of the options:

• Option (a): A large number of persons remaining without work describes open unemployment.

• Option (b): Lack of alternative employment may explain why disguised unemployment persists, but it is not its definition.

• Option (c): Zero marginal productivity of surplus labour is the defining economic characteristic.

• Option (d): Low productivity is not the same as zero marginal productivity. A worker with low productivity may still make a positive contribution to output.