What is a Discouraged Worker?

A discouraged worker is a person who is eligible for employment and can 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 or failed to secure a job when they applied.

Key Takeaways

  • Discouraged workers are workers who have stopped looking for work because they found no suitable employment options or failed to be shortlisted when applying to a job.
  • The causes for worker discouragement are complex and varied.
  • Discouraged workers are not included in the headline unemployment number. Instead, they are included in the U-4 and U-6 unemployment measures.

Understanding Discouraged Workers

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, does not take into account the number of discouraged workers in the country.

The causes for worker discouragement are complex and varied. In some cases, workers fall out of the workforce 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 shed senior workers unable to work on the new CNC machines in their workplace. Nick Eberstadt of the American Enterprise Institute has blamed the "flight from work" on lack of supply of skilled, able, and willing workers and an increasing reliance on disability insurance. His theory is backed by Alan Krueger's 2016 research, which found that self-reported pain and disability insurance was higher among discouraged workers. Other possible reasons for discouraged workers include restrictions that limit employment options for formerly incarcerated persons and jobs that are perceived as being inaccessible to a specific gender.

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 Dec. 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 Dec. 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.