Disguised Unemployment: Meaning, Types & Impact in Australia (2025)

Australia’s job market has long been a point of national pride. But beneath the surface-level statistics lies a subtler challenge: disguised unemployment. As we move further into 2025, this phenomenon is shaping the way economists, policymakers, and everyday Australians think about what it truly means to be ‘employed’.

What is Disguised Unemployment?

Disguised unemployment refers to situations where people appear to be employed but are actually underutilised. In other words, their contribution to output is marginal—or even nil. This is not the same as being jobless, but rather being stuck in roles that don’t fully use one’s skills or time. In 2025, with the rise of gig work, flexible contracts, and automation, disguised unemployment is becoming harder to spot, yet more relevant than ever.

Common scenarios include:

• Multiple family members working on a small farm where only a few are needed

• Office workers whose roles have been automated but remain on payroll in lesser capacities

• Gig economy participants piecing together minimal hours across platforms without job security

Different Types of Disguised Unemployment

Disguised unemployment isn’t a one-size-fits-all concept. It takes several forms, often overlapping with other labour market issues. Here’s how it typically plays out in Australia:

1. Underemployment

Many Australians in 2025 are working part-time or casual jobs when they would prefer full-time positions. The ABS reported in early 2025 that underemployment remains at historic highs, especially in sectors like hospitality, retail, and the arts. These workers are counted as ‘employed’ in official stats, but their earning potential and skill usage remain far below their capacity.

2. Surplus Labour in Traditional Sectors

Rural Australia is no stranger to disguised unemployment. Farms and family businesses often employ more hands than necessary, especially during off-peak periods. With the agricultural workforce facing slow mechanisation and limited rural job alternatives, the problem persists. This surplus labour adds little to productivity, but it’s not captured in unemployment figures.

3. Hidden Unemployment in the Gig Economy

As digital platforms proliferate, more Australians are turning to gig work to patch together incomes. Many drive rideshares, deliver food, or freelance online. While this flexibility is attractive, it often masks the reality that workers are scraping by with fewer hours than they want or need. In 2025, new Fair Work Commission guidelines aim to clarify rights for gig workers, but disguised unemployment remains a structural challenge.

Why Disguised Unemployment Matters in 2025

Recognising disguised unemployment isn’t just an academic exercise—it has real-world consequences:

• Policy Blind Spots: Official figures may understate true labour market slack, leading to insufficient support for job creation or training.

• Wage Growth Pressure: When workers are underutilised, it suppresses wage growth, affecting household spending and economic recovery.

• Productivity Stagnation: Mismatched skills and roles drag down national productivity, making it harder for Australia to compete globally.

• Mental Health and Wellbeing: Workers stuck in underutilised or insecure roles often report higher rates of stress and job dissatisfaction.

The 2025 federal budget included expanded funding for skills retraining and digital literacy, targeting industries most affected by automation and redundancy. The government’s new National Jobs Strategy also highlights the need to identify and address hidden unemployment, especially among young people and regional Australians.

Spotting and Tackling Disguised Unemployment

Addressing disguised unemployment requires a multi-pronged approach:

• Better Data Collection: The ABS has begun piloting surveys that track not just hours worked, but preferred hours and skill utilisation.

• Retraining Programs: Funding for TAFE and micro-credential courses helps workers shift into higher-demand sectors.

• Support for Gig Workers: New minimum standards for digital platform workers are being trialled in Victoria and NSW, aiming to reduce insecurity and underemployment.

Employers, too, are being encouraged to rethink job design, offering more pathways from casual to permanent roles and aligning staff skills with organisational needs.