Understanding the Hidden Workforce: Discouraged Workers
A discouraged worker is a person who is eligible for employment and capable of working but is currently unemployed and has not sought employment in the last four weeks. These individuals have often given up looking for work due to a lack of available job options or repeated rejections.
Key Insights
- Discouraged workers have ceased their job search because they couldn’t find suitable employment or faced constant rejection.
- The reasons behind worker discouragement are varied and often multifaceted.
- Discouraged workers are excluded from the primary unemployment count but are included in alternate measures like U-4, U-5, and U-6.
- Policymakers utilize these alternate measures to formulate strategic plans to reintegrate discouraged workers into the workforce.
Defining Discouraged Workers
According to the U.S. Department of Labor’s Bureau of Labor Statistics (BLS), discouraged workers are individuals not actively participating in the labor force, despite their desire and availability for work. They haven’t searched for a job in the four weeks preceding the survey, attributing this to the belief that no jobs are available or that they wouldn’t qualify for the ones that are.
Given that they are not actively seeking employment, these workers are excluded from the active labor force count, which impacts the headline unemployment rate.
Why Workers Become Discouraged
The causes for worker discouragement are diverse and complex. Technological changes, such as the switch to computer numeric control (CNC) machines during the Great Recession, have displaced senior staff unable to operate new technology. Labor market expert Nick Eberstadt and economist Alan Krueger also cite increased reliance on disability insurance and job market barriers, such as those faced by formerly incarcerated individuals, or the perception that certain jobs are not attainable for specific genders, as contributing factors.
Counting Discouraged Workers
In June 2022, there were 386,000 discouraged workers in the United States, demonstrating a substantial but often unaccounted-for subset of the labor market.
BLS Accounting for Discouraged Workers
To better capture the scope of labor underutilization, the BLS has developed alternative measures:
- U-4: Total unemployed plus discouraged workers.
- U-5: Total unemployed, plus discouraged and other marginally attached workers.
- U-6: Total unemployed, all marginally attached workers, and those employed part-time for economic reasons seeking full-time work.
From Q3 2021 to Q2 2022, the seasonally adjusted U-4 rate stood at 4.4%, slightly higher than the headline unemployment rate of 3.6%. Historical context, such as the 9.7% U-4 rate during the 2009 Great Recession, shows the variability of this measure.
Helping the Discouraged
The U-4 rate assists in quantifying the population of discouraged workers, enabling policymakers to analyze and design specific interventions. This might include specialized training programs, educational subsidies, or tax credits to incentivize companies to hire long-term unemployed individuals.
In Conclusion
Discouraged workers are a critical yet often overlooked segment of the labor force. With thoughtful policies and supportive measures, governments and organizations can help reintegrate these workers, benefiting both individuals and the broader economy.
Related Terms: unemployment rate, labor force participation, marginally attached workers.
References
- U.S. Bureau of Labor Statistics. “Labor Force Statistics From the Current Population Survey: Discouraged Workers”.
- U.S. Bureau of Labor Statistics. “Alternative Measures of Labor Underutilization for States, Second Quarter of 2021 Through First Quarter of 2022 Averages”.
- Federal Reserve Bank of St. Louis. “Accounting for Discouraged Workers in the Unemployment Rate”.
- U.S. Bureau of Labor Statistics. “How the Government Measures Unemployment: What Are the Basic Concepts of Employment and Unemployment?”
- Time Magazine. “America’s Unseen Social Crisis: Men Without Work”.
- Krueger, Alan B. “Where Have All the Workers Gone? An Inquiry Into the Decline of the U.S. Labor Force Participation Rate”, Brookings Papers on Economic Activity, 2017, pp. 1-87.
- Prison Policy Initiative. “Out of Prison & Out of Work: Unemployment Among Formerly Incarcerated People”.
- International Labour Organization. “The Gender Gap in Employment: What’s Holding Women Back?”
- U.S. Bureau of Labor Statistics. “Table A-16. Persons not in the labor force and multiple jobholders by sex, not seasonally adjusted”.
- U.S. Bureau of Labor Statistics. “The Employment Situation–June 2022”, Page 1.
- U.S. Bureau of Labor Statistics. “Alternative Measures of Labor Underutilization for States, Third Quarter of 2021 through Second Quarter of 2022 Averages”.
- U.S. Bureau of Labor Statistics. “Alternative Measures of Labor Underutilization for States, 2009”.
- U.S. Bureau of Labor Statistics. “The Employment Situation - June 2022”, Page 5.
