What is a Discouraged Worker
A discouraged worker is a person who is eligible for employment and is able to work, but is currently unemployed and has not attempted to find employment in the last four weeks. Discouraged workers have usually given up on searching for a job because they found no suitable employment options and were met with lack of success when applying.
BREAKING DOWN Discouraged Worker
The Department of Labor's (DOL) Bureau of Labor Statistics (BLS) defines discouraged workers as "persons not in the labor force who want and are available for a job and who have looked for work sometime in the past 12 months (or since the end of their last job if they held one within the past 12 months), but who are not currently looking because they believe there are no jobs available or there are none for which they would qualify."
Since discouraged workers are no longer looking for employment, they are not counted as active in the labor force. This means that the headline unemployment rate, which is based solely on the active labor force number, do not take into account the number of discouraged workers in the country.
BLS Accounting for Discouraged Workers
To better analyze unemployment in the U.S. the BLS created alternative measures for underutilization of labor. U-4, U-5 and U-6 capture discouraged workers. As defined: U-4 equals total unemployed plus discouraged workers as a percent of the civilian labor force plus discouraged workers; U-5 equals total unemployed, plus discouraged workers, plus all other marginally attached workers, as a percent of the civilian labor force plus all marginally attached workers; and U-6 equals total unemployed, plus all marginally attached workers, plus total employed part-time for economic reasons, as a percent of the civilian labor force plus all marginally attached workers.
In December 2017 the U-4 rate was 4.4%, compared to the headline, or official, unemployment rate of 4.1%. The U-4 number is a far cry from the December 2009 rate, which stood at 10.2% in the throes of the Great Recession.
Helping the Discouraged
The U-4 rate helps to quantify how many discouraged workers exist and keep tabs on the change in their numbers. Further analysis of age groups, race and geographic location is also made possible by U-4 measures. Policymakers at the federal, state or local level can use these numbers to formulate plans to assist them. Such plans may consist of training programs, subsidies for education or tax credits for companies that hire long-term unemployed individuals.