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April 13, 2021 

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REVENUE EFFECT: The goal of imposing taxes to generate revenue used to finance the operation of government, most notably to finance the provision of public goods. This is one of two reasons, and the primary reason, that governments impose taxes. The other reason is the allocation effect. Governments work the revenue effect because they need access to income and resources to build highways, defend the nation, educate the population, and maintain the legal system. They purchase these resources with tax revenue generated through the revenue effect.

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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. Discouraged workers, people who are willing and able to engage in productive activities, but due to their overwhelming lack of success believe that any effort to find a job will be fruitless so they have stopped seeking employment, fall within this broader category of marginally-attached workers. People can be marginally attached to the labor force for a variety of reasons, discouraged workers, in contrast, achieve their designation specifically because they believe search efforts are not worthwhile.
The Bureau of Labor Statistics (BLS) officially designates someone as a marginally-attached worker if they have not been actively seeking employment for one of two reasons: (1) they believe their efforts would be futile or (2) other reasons. Those who satisfy the first criterion are officially considered discouraged workers, while those who satisfy the second are generally termed other marginally-attached workers.

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.
Marginally-attached workers are excluded from the estimation of the "official" unemployment rate. Because marginally-attached workers are NOT actively seeking employment, the Bureau of Labor Statistics (BLS) 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 marginally-attached 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 U5) that includes marginally-attached workers.

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.

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Recommended Citation:

MARGINALLY-ATTACHED WORKERS, AmosWEB Encyclonomic WEB*pedia, http://www.AmosWEB.com, AmosWEB LLC, 2000-2021. [Accessed: April 13, 2021].


Check Out These Related Terms...

     | unemployment rate, measurement problems | discouraged 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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