Definition: The Disguised Unemployment refers to the work area where surplus manpower is employed out of which some individuals have zero or almost zero marginal productivity such that if they are removed the total level of output remains unchanged.
In other words, More workers employed on a single piece of work than actually required is called as the disguised unemployment. The persons who are employed and remains unproductive throughout the work is said to be disguisedly unemployed.
For example, Suppose a land can be harvested by ten persons effectively, but actually, 14 workers are engaged in similar kind of a job, then the marginal productivity of additional four persons will be zero as they will contribute nothing to the level of output. And, thus, the removal of these extra workers will lead to no change in the total productivity even without any change in the method of production.
The disguised unemployment is very much prevalent in the under developing and unorganized sectors of the economy, such as agriculture, where the population pressure is high, and the job opportunities are few. It is very difficult to track the disguised unemployment as it cannot be measured and shown in the official records of unemployment.