Discouraged Worker: Definition & Effect

Discouraged Worker: Definition & Effect
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  • 0:01 What Is a Discouraged Worker?
  • 0:53 Effect on Unemployment
  • 2:14 Lesson Summary
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Lesson Transcript
Instructor: Shawn Grimsley
Sometimes unemployed people get so discouraged that they simply quit trying. In this lesson, you'll learn about the discouraged worker and the effect discouraged workers can have on unemployment. A short quiz follows.

What Is a Discouraged Worker?

A discouraged worker is someone who has left the labor force because he or she cannot find work. In other words, discouraged workers are unemployed people that were looking for work but have given up. It may surprise you that discouraged workers are not counted as unemployed and are excluded when calculating the unemployment rate.

The United States Bureau of Labor Statistics uses the following criteria in determining whether a worker is a discouraged worker. The BLS states that a discouraged worker:

  • Is not currently in the labor force
  • Wants work
  • Is available for work
  • Has looked for work in the past 12 months
  • Has not searched for work in the past 4 weeks
  • Is not looking for work because they don't believe jobs are available for them or there are none for which they are qualified

Effect on Unemployment

There is a correlation between the number of discouraged workers in an economy and the relative strength of an economy. During periods of strong economic growth, there are less discouraged workers because more of them decide to enter the labor force and try to find work. On the other hand, during times of economic stagnation or decline, the number of discouraged workers will rise because workers leave the labor force out of frustration in not finding work. Some people argue that discouraged workers are really disguised unemployed people because they are not included in the official unemployment rate calculation.

In fact, discouraged workers can distort the perception people have of the current state of the labor market because they are not counted in the unemployment rate. As odd as it may seem to you, an increase in discouraged workers can actually lower the unemployment rate, and a decline in discouraged workers can actually increase the unemployment rate. Let's take a closer look at the reason why.

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