The economic and social costs of unemployment include personal costs (lost income), costs to government (lost tax revenue) and costs to society in general (social problems, lost GDP.
- Loss of earnings to the unemployed. Unemployment is the biggest causes of poverty in the UK
- Potential homelessness. Loss of income can leave people without sufficient income to meet housing costs. Rises in unemployment often exacerbate the rates of homelessness. (BBC)
- Those who are unemployed will find it more difficult to get work in the future (this is known as the hysteresis effect)
- Stress and health problems of being unemployed. Amongst studies of unemployed men, signs of depression, mental anxiety and health problems are noticeably higher. (Effects of unemployment on health (US Library of Health)
- Increased government borrowing. Higher unemployment will cause a fall in tax revenue because there is less people paying income tax and also spending less (hence lower VAT). Also the government will have to spend more on unemployment and related benefits. The government doesn’t just pay unemployment benefit, but a family who has unemployment will be more likely to receive housing benefit and income support. One study shows that the cost to the exchequer for one person being unemployed is £6,243 a year in benefits and lost tax revenue. (Independent)
- Lower GDP for the economy. High unemployment indicates the economy is operating below full capacity and is inefficient. This will lead to lower output and incomes.
- Increase in social problems. Areas of high unemployment (especially youth unemployment) tend to have more crime and vandalism. It can lead to alienation and difficulties in integrating young unemployed people into society.
