Disguised Unemployment or Hidden Unemployment refers to the kind of employment wherein the marginal productivity of a person is zero and he does not contribute to the production process. When such a person is withdrawn from the industry, the productivity will remain unaffected. 

Disguised unemployment refers to a situation where individuals appear to be employed but are not actually productive. It occurs when there are more workers engaged in a particular activity than are required, resulting in a situation where some workers are not contributing significantly to the overall output. This concept is commonly associated with the service sector. Let's explore why disguised unemployment generally exists in the service sector.

1. Nature of Service Sector:
The service sector encompasses a wide range of activities such as healthcare, education, finance, retail, hospitality, and transportation. Unlike the manufacturing sector or small-scale industries, which have specific production targets and require a certain number of workers to achieve those targets, the service sector is often characterized by a more flexible and subjective approach to productivity.

2. Labor-Intensive Nature:
The service sector is labor-intensive, meaning it requires a significant amount of human resources to deliver services. However, the productivity of individual workers in the service sector may not always be easily measurable or quantifiable. This makes it difficult to determine the optimal number of workers required for a particular service.

3. Low Productivity Jobs:
Many jobs in the service sector involve low productivity tasks that do not fully utilize the skills and capabilities of the workers. For example, in a retail store, there may be multiple salespersons attending to a relatively small number of customers, resulting in some workers being idle or not making a substantial contribution to the overall sales.

4. Lack of Skill Matching:
The service sector often faces challenges in matching the skills of the workforce with the demands of the job. This can lead to situations where workers are employed in positions that do not fully utilize their qualifications or expertise. As a result, they may be underemployed or engaged in tasks that do not require their full capacity.

5. Lack of Technological Advancements:
Compared to the manufacturing sector, the service sector has been relatively slow in adopting technological advancements to improve productivity. This can result in a situation where more workers are employed than actually required due to the absence of labor-saving technologies.

6. Informal Economy:
The service sector often includes a significant portion of informal or unorganized activities. These informal jobs may involve multiple workers engaged in the same task, leading to disguised unemployment. For instance, street vendors or small-scale service providers may be operating in close proximity, resulting in a surplus of workers in a particular area.

In conclusion, disguised unemployment generally exists in the service sector due to the nature of the sector, labor-intensive nature of jobs, low productivity tasks, lack of skill matching, limited technological advancements, and the prevalence of informal employment. These factors contribute to a situation where some workers may appear to be employed but are not making a substantial contribution to the overall output.