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September 18, 2018 

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IMPLICIT OPPORTUNITY COST: An opportunity cost that does NOT involve a money payment or a market transaction. This should be contrasted with explicit cost that DOES involve a money payment or a market transaction. The common misconception among non-economists out there in the real world is that the term "cost" is synonymous with the term "payment," that is, all costs are explicit costs, to be a cost you have to give up some money. Well, I'm here to tell you that this isn't true. Cost is opportunity cost. It's the satisfaction NOT received from activities NOT pursued. It's the value of foregone production. And not all opportunity costs involve a money payment.

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DISCOURAGED WORKERS:

People who are willing and able to engage in productive activities, but due to their overwhelming lack of success have stopped seeking employment. Discouraged workers believe that any effort to find a job will be fruitless. Discouraged workers fall within the broader category of marginally-attached workers, people who are willing and able to work, who have either held a job or searched for employment within the last year, but are not actively seeking employment. People are marginally attached to the labor force for a variety of reasons, discouraged workers achieve their designation because they believe search efforts would not be worthwhile.
The Bureau of Labor Statistics (BLS) officially designates someone as a discourage worker if they have not been actively seeking employment for one of the following reasons: (1) they believe there are no jobs available in their area or line of work, (2) they just could not find work, (3) they feel that they lack the skills, training, or education needed for available jobs, (4) they think employers feel they are too young or too old, or (5) they feel they are subject to some other type of discrimination.

Peter Pankovic provides an example of a discouraged worker. Peter once had a job, a well-paying job at the HyFy Electronics Company (a leading record-player manufacturer). But when HyFy Electronics Company went bankrupt, Peter lost his job and has not been able to find another. During the first six months of unemployment, Peter actively searched for other jobs. But none were found. So he simply gave up. Over the past year, Peter has resigned himself to sleeping on his sister's sofa and eating left over pizza crust. He would like to work. And someday he will once again seek employment. But for now, he does nothing.

Discouraged workers are excluded from the estimation of the "official" unemployment rate. Because discourage workers are NOT actively seeking employment, the Bureau of Labor Statistics relegates them to the not in the labor force category, meaning they are not officially considered to be unemployed persons nor in the civilian labor force. Excluding discouraged workers means the official unemployment rate tends to understate the severity of unemployed labor resources in the economy. However, the BLS does provide an alternative measure of unemployment (officially labeled U4) that includes discouraged workers.

Including discouraged workers in the unemployment rate adds up to one-half a percentage point (such as from 5.0 percent to 5.5 percent). However, the number of discouraged workers, and their impact on the unemployment rate, changes over the course of the business cycle.

  • During business-cycle expansions, when the economy is growing, jobs are aplenty, and finding employment is relatively easy, fewer workers become discouraged. As such, their inclusion in the unemployment rate adds only one to two-tenths of a percentage point (such as from 4.5 percent to 4.6 percent).

  • During business-cycle contractions, when the economy is shrinking, jobs are few and far between, and finding employment is relatively hard, more workers are prone to become discouraged. As such, their inclusion in the unemployment rate adds a half of a percentage point or more (such as from 7.0 percent to 7.5 percent).

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Recommended Citation:

DISCOURAGED WORKERS, AmosWEB Encyclonomic WEB*pedia, http://www.AmosWEB.com, AmosWEB LLC, 2000-2018. [Accessed: September 18, 2018].


Check Out These Related Terms...

     | unemployment rate, measurement problems | marginally-attached workers | part-time workers | alternative unemployment rates | Current Population Survey | Bureau of Labor Statistics | labor force | civilian labor force | employment rate | employment-population ratio | labor force participation rate | employed persons | unemployed persons | not in the labor force |


Or For A Little Background...

     | unemployment | unemployment rate | macroeconomic problems | macroeconomic goals | factors of production | full employment | business cycles | contraction | expansion |


And For Further Study...

     | unemployment sources | natural unemployment | unemployment problems | unemployment reasons | unemployment, production possibilities | full employment, production possibilities | macroeconomic sectors | Bureau of Labor Statistics | gross domestic product | macroeconomic markets | resource markets | inflation | stabilization policies | government functions | underground economy | business cycle indicators |


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