Question

What happens to the unemployment rate when unemployed workers are reclassified as discouraged workers?

Short answer

The unemployment rate will decline.

Step-by-step solution

Step 1. Definition

Discouraged workers are defined as the workers who have discontinued their looking for a job as they are not finding employment options and failed to be nominated for a job. Because of this they are discouraged and classified under discouraged workers.

Step 2. Explanation

Discouraged workers are neither employed nor unemployed. They are also out of the labor force.

Step 3. Conclusion

So, when unemployed workers are classified as discouraged workers the total workforce decreases, and in turn, the unemployment rate dips as the unemployed population declines because the unemployed are now classified under discouraged workers.