Peter Pankovic and his twin sister Paula provide examples of marginally-attached workers. Both were once employed at the HyFy Electronics Company (a leading record-player manufacturer). But when HyFy Electronics Company went bankrupt, Paula and Peter both lost their jobs. Each actively sought employment for several months, without success.

• Peter took this lack of employment success as a sign that employers actively discriminated against people named Peter, concluding that further efforts to seek employment would be futile. So he simply gave up. Peter has resigned himself to sleeping on his sister's sofa and eating left over pizza crust. This makes Peter a discouraged worker.


• Paula, in contrast, considered her lack of success in finding employment as an opportunity. She converted her life savings into travellers checks and begin hitchhiking across the country, taking notes for a novel. During the course of her travels, Paula is actually able to work, she is willing to work, and if someone offers her a job, she will take it, but she never actually seeks employment. Paula is not officially considered a discouraged worker, but she remains marginally-attached to the labor force.

Including all marginally-attached workers to the unemployment rate calculation adds about a full percentage point (such as from 5.0% to 6.0%). However, the number of marginally-attached 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, workers are less likely to remain away from the labor force. As such, their inclusion in the unemployment rate adds something less than a full percentage point.


• During business-cycle contractions, when the economy is shrinking, jobs are few and far between, and finding employment is relatively hard, workers are more likely to remain marginally-attached to the labor force. As such, including marginally-attached workers to the official unemployment rate calculation would add more than a percentage point.