The discouragement rate: an index of discouragement-induced hardship

ABSTRACT

In 1979, the Levitan Commission identified discouragement as one of three main sources of economic hardship, and recommended the development of an index to measure the extent of the problem. Over 40 years later, no such index exists. This letter proposes an index of discouragement-induced hardship and documents its evolution over time and across demographic groups.

KEYWORDS:

• Discouragement
• Levitan Commission
• Current Population Survey
• hardship indices

JEL CLASSIFICATION:

• B22
• C82
• J64

Disclosure statement

No potential conflict of interest was reported by the author.

Notes

¹ National Commission on Employment and Unemployment Statistics, Counting the Labour Force. G.P.O., 1979.

² Discussion of labour underutilization measures (U3, U4, U5, etc.) and efforts to improve on these (e.g. David and Mustre-del Rio (2013) and Ravikumar and Shao (2014)) echo Chapter 4.

³ 77: ‘Economic hardship … may result from: (1) low wages among employed workers; (2) unemployment (including partial unemployment because of slack work); (3) limited participation in the labor force by persons who desire more participation.’ Subsequent discussion in Chapter 5 clarifies that this third source of hardship refers specifically to discouraged workers, rather than marginally-attached workers more broadly.

⁴ An alternative is the share of discouraged workers among all non-participants. However, it is unclear whether this would measure discouragement-induced hardship for two reasons: First, the CPS contains no information on perceived labour market prospects of not-offiicially-discouraged non-participants, so one cannot determine whether such workers are also experiencing hardship from a perceived inability to find work. Second, even if such workers believed they could find work, because they report not wanting a job, it is unclear whether this belief would translate into hardship.

⁵ See Cohany, Polivka, and Rothgeb (1994) for further discussion.