What is a discouraged worker?
A discouraged worker is someone who is eligible for work and can work, but who is currently unemployed and has not attempted to find work in the past four weeks. Discouraged workers have generally given up looking for work because they have found no suitable job option or have been unable to find a job when they applied.
Key points to remember
- Discouraged workers are workers who have stopped looking for work because they have found no suitable job option or have not been screened when applying for a job.
- The causes of workers’ discouragement are complex and varied.
- Discouraged workers are not included in the total number of unemployed. Instead, they are included in the U-4 and U-6 unemployment measures.
Understanding discouraged workers
The Labor Statistics Office (BLS) of the Department of Labor (DOL) defines discouraged workers as “people who are not in the workforce and who want and are available for work and who have looked for work during in the past 12 months (or since their last job ended if they held one in the past 12 months), but who are not currently looking because they think there are no jobs available or there are none for which they would be eligible. “
Since discouraged workers no longer seek employment, they are not counted as active in the labor force. This means that the overall unemployment rate, which is based only on the number of active workers, does not take into account the number of discouraged workers in the country.
The causes of workers’ discouragement are complex and varied. In some cases, workers leave the labor market because they are not equipped to deal with technological change in their workplace. An example of this occurred during the Great Recession, when the manufacturing sector fired senior workers who were unable to work on new CNC machines at their workplace. Nick Eberstadt of the American Enterprise Institute attributed the “work leak” to the lack of skilled, capable and willing workers and the increasing use of disability insurance. His theory is supported by Alan Krueger’s research in 2020, which found that self-reported pain and disability insurance was higher among discouraged workers. Other possible reasons for discouraging workers include restrictions that limit job opportunities for formerly incarcerated people and jobs perceived to be inaccessible to a specific sex.
BLS counts discouraged workers
To better analyze unemployment in the United States, the BLS has created alternative measures for the underutilization of the workforce. U-4, U-5 and U-6 capture discouraged workers. As defined: U-4 is equal to the total number of unemployed and discouraged workers as a percentage of the civilian labor force plus discouraged workers; U-5 is equal to the total number of unemployed, plus discouraged workers, plus all other marginally attached workers, as a percentage of the civilian labor force plus all marginally attached workers; and U-6 equals the total number of unemployed, plus all marginally attached workers, plus total part-time workers for economic reasons, as a percentage of the civilian labor force plus all marginally attached workers.
In December 2020, the U-4 rate was 4.4%, compared with an overall or official unemployment rate of 4.1%. The number U-4 is far from the rate of December 2009, which stood at 10.2% in the throes of the Great Recession.
Help the discouraged
The U-4 rate helps to quantify the number of discouraged workers and to keep an eye on the evolution of their number. A more in-depth analysis of age groups, race and geographic location is also made possible by U-4 measurements. Federal, state or local policymakers can use these figures to formulate plans to help them. These plans can consist of training programs, education grants, or tax credits for businesses that hire long-term unemployed.