The measurement of unemployment when unemployment is high

Are jobless persons who want work but are not actively searching, unemployed or out of the labour force? Previous research on this issue has focused on North America and used as the test whether the probability of transition to employment is similar for searching and non-searching jobless persons. This paper develops three new tests as to whether those not searching but wanting work are distinct from the searching unemployed. It asks: are non-searching persons richer, happier, and do they have a lesser impact on local wages, than the searchers? These tests are implemented using data from South Africa, a country in which unemployment is very high and where the treatment of non-searchers really matters for the understanding of poverty and labour market issues. The results favour the 'discouraged worker' view of the non-searching unemployed and the use of the broad, inclusive, measure of unemployment. (c) 2004 Elsevier B.V. All rights reserved.