Discouraged worker

Distribution of the civilian noninstitutional population 16 years and older, first quarter 2009 (US)

Persons not in the labor force selected indicators quarterly averages 1994–2009 not seasonally adjusted (US)

In economics, a discouraged worker is a person of legal employment age who is not actively seeking employment or who does not find employment after long-term unemployment. This is usually because an individual has given up looking or has had no success in finding a job, hence the term "discouraged".

In other words, even if a person is still looking actively for a job, that person may have fallen out of the core statistics of unemployment rate after long-term unemployment and is therefore by default classified as "discouraged" (since the person does not appear in the core statistics of unemployment rate). In some cases, their belief may derive from a variety of factors including a shortage of jobs in their locality or line of work; discrimination for reasons such as age, race, sex, religion, sexual orientation, and disability; a lack of necessary skills, training, or experience; or, a chronic illness or disability.^[1]

As a general practice, discouraged workers, who are often classified as marginally attached to the labor force, on the margins of the labor force, or as part of hidden unemployment, are not considered part of the labor force, and are thus not counted in most official unemployment rates—which influences the appearance and interpretation of unemployment statistics. Although some countries offer alternative measures of unemployment rate, the existence of discouraged workers can be inferred from a low employment-to-population ratio.

United States

Discouraged Workers (US, 2004-09)

In the United States, a discouraged worker is defined as a person not in the labor force who wants and is available for a job and who has looked for work sometime in the past 12 months (or since the end of his or her last job if a job was held within the past 12 months), but who is not currently looking because of real or perceived poor employment prospects.^[2][3][4]

The Bureau of Labor Statistics does not count discouraged workers as unemployed but rather refers to them as only "marginally attached to the labor force".^[5][6][7] This means that the officially measured unemployment captures so-called "frictional unemployment" and not much else.^[8] This has led some economists to believe that the actual unemployment rate in the United States is higher than what is officially reported while others suggest that discouraged workers voluntarily choose not to work.^[9] Nonetheless, the U.S. Bureau of Labor Statistics has published the discouraged worker rate in alternative measures of labor underutilization under U-4 since 1994 when the most recent redesign of the CPS was implemented.^[10][11]

The United States Department of Labor first began tracking discouraged workers in 1967 and found 500,000 at the time.^[12] Today, In the United States, according to the U.S. Bureau of Labor Statistics as of April 2009, there are 740,000 discouraged workers.^[13][14] There is an ongoing debate as to whether discouraged workers should be included in the official unemployment rate.^[12] Over time, it has been shown that a disproportionate number of young people, blacks, Hispanics, and men make up discouraged workers.^[15][16] Nonetheless, it is generally believed that the discouraged worker is underestimated because it does not include homeless people or those who have not looked for or held a job during the past twelve months and is often poorly tracked.^[12][17]

According to the U.S. Bureau of Labor Statistics, the top five reasons for discouragement are the following:^[18]

1. The worker thinks no work is available.
2. The worker could not find work.
3. The worker lacks schooling or training.
4. The worker is viewed as too young or too old by the prospective employer.
5. The worker is the target of various types of discrimination.

Canada

In Canada, discouraged workers are often referred to as hidden unemployed because of their behavioral pattern, and are often described as on the margins of the labour force.^[19] Since the numbers of discouraged workers and of unemployed generally move in the same direction during the business cycle and the seasons (both tend to rise in periods of low economic activity and vice versa), some economists have suggested that discouraged workers should be included in the unemployment numbers because of the close association.^[19]

The information on the number and composition of the discouraged worker group in Canada originates from two main sources. One source is the monthly Labour Force Survey (LFS), which identifies persons who looked for work in the past six months but who have since stopped searching. The other source is the Survey of Job Opportunities (SJO), which is much closer in design to the approach used in many other countries. In this survey, all those expressing a desire for work and who are available for work are counted, irrespective of their past job search activity.^[19]

In Canada, while discouraged workers were once less educated than "average workers", they now have better training and education but still tend to be concentrated in areas of high unemployment.^[1][19] Discouraged workers are not seeking a job for one of two reasons: labour market-related reasons (worker discouragement, waiting for recall to a former job or waiting for replies to earlier job search efforts) and personal and other reasons (illness or disability, personal or family responsibilities, going to school, and so on).^[1]

European Union

Unemployment statistics published according to the ILO methodology may understate actual unemployment in the economy.^[20] The EU statistical bureau EUROSTAT started publishing figures on discouraged workers in 2010.^[21] According to the method used by EUROSTAT there are 3 categories that make up discouraged workers;

• underemployed part-time workers
• jobless persons seeking a job but not immediately available for work,
• persons available for work but not seeking it

The first group are contained in the employed statistics of the European Labour Force Survey while the second two are contained in the inactive persons statistics of that survey. In 2012 there were 9.2 million underemployed part-time workers, 2.3 million jobless persons seeking a job but not immediately available for work, and 8.9 million persons available for work but not seeking it, an increase of 0.6 million for underemployed and 0.3 million for the two groups making up discouraged workers.^[22]

If the discouraged workers and underemployed are added to official unemployed statistics Spain has the highest number real unemployed (8.4 Million), followed by Italy (6.4 Million), United Kingdom (5.5 Million), France (4.8 Million) and Germany (3.6 Million).

List of EU countries hidden unemployment in 2012^[23]

Country	Underemployed Part-time workers Thousands	Jobless persons seeking a job but not immediately available for work Thousands	Persons available for work but not seeking it Thousands	Unemployed Thousands
Belgium	158	100	60	369
Bulgaria	29	270	26	410
Czech Republic	27	62	17	367
Denmark	88	69	24	219
Germany	1,810	582	508	2,316
Estonia	10	41	3	71
Ireland	147	44	13	316
Greece	190	91	36	1,204
Spain	1,385	1,071	236	5,769
France	1,144	285	444	3,002
Italy	605	2,975	111	2,744
Cyprus	20	15	3	52
Latvia	44	67	6	155
Lithuania	37	16		197
Luxembourg	5	13	2	13
Hungary	88	215	11	476
Malta	5	5		12
Netherlands	138	308	85	469
Austria	148	144	39	189
Poland	344	632	102	1,749
Portugal	256	232	29	860
Romania	239	458		701
Slovenia	18	13		90
Slovakia	37	41	13	378
Finland	75	111	63	207
Sweden	237	134	101	403
United Kingdom	1,907	774	334	2,511
Norway	81	67	22	85

See also

• Involuntary unemployment
• NEET
• Labor force
• Unemployment rate
• Workforce
• Types of unemployment

United States

• Bureau of Labor Statistics
• Current Population Survey
• 99ers

Canada

• Labour and Household Surveys Analysis Division of Statistics Canada

References

Further reading

• Blundell, Richard; J. Ham; Costas Meghir (Jan 1998). "Unemployment, discouraged workers and female labour supply". Research in Economics. 52 (2): 103–131. doi:10.1006/reec.1997.0158. 
• Hussmanns, Ralf; Farhad Mehran; Vijaya Varmā (1990). Surveys of economically active population, employment, unemployment, and underemployment: an ILO manual on concepts and methods. illustrated. International Labour Office (2 ed.). International Labour Organization. ISBN 92-2-106516-2. 

External links

• Discouraged workers, OECD Stats extract
• Incidence of discouraged workers, OECD

United States

• Discouraged workers in glossary, U.S. Bureau of Labor Statistics Division of Information Services
• Employment Situation Summary, U.S. Bureau of Labor Statistics Division of Information Services
• Alternative measures of labor underutilization, U.S. Bureau of Labor Statistics Division of Information Services
• Discouraged Worker, Investopedia
• Down And Out: "Discouraged" Workers, Time magazine
• Actual U.S. Unemployment: 15.8%, The Washington Post
• 'Hidden Unemployment' Inflates State's Real Jobless Figures, The Hartford Courant
• Tracking the Long-Term Unemployed and Discouraged Workers, The Heritage Foundation
• Ranks of Discouraged Workers and Others Marginally Attached to the Labor Force Rise During Recession Issues in Labor Statistics, U.S. Bureau of Labor Statistics Division of Information Services
• Discouraged Workers, Drexel
• Jobless statistics overlook many, San Francisco Chronicle
• PROMOTING ECONOMIC OPPORTUNITY AND OWNERSHIP
• Labor force characteristics, Labor Force Statistics from the Current Population Survey

Canada

• Discouraged Workers