The New Palgrave Dictionary of Economics

2018 Edition
| Editors: Macmillan Publishers Ltd

Disguised Unemployment

  • Amit Bhaduri
Reference work entry


Marx set out the notion that a ‘reserve army’ of unemployed labour is more or less continuously maintained in the course of capitalistic development. In the initial phases, this reserve army may be created through the destruction of the pre-capitalistic modes of production while, in later phases, a systematic bias in favour of labour-displacing innovations could serve the same purpose. This entails a broad vision of capitalistic development under extremely elastic supply conditions for labour where the actual level of wage employment is usually demand-determined. This means that the supply of labour tends to adjust to its demand through various routes such as, higher participation rate (e.g. as more married women join the labour force or the average schooling period is shortened), interregional and international migration of labour etc., all this taking place against the background of continuous induced innovations. Under these circumstances, it is not very useful to think of a ‘natural’ rate of growth, set by the growth of labour force and of labour productivity, as the maximum feasible growth rate of a capitalist economy (Marglin 1984 pp. 103–8).

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© Macmillan Publishers Ltd. 2018

Authors and Affiliations

  • Amit Bhaduri
    • 1
  1. 1.