How Private And Social Costs Of Unemployment Affect Country’s Economy From The Inside Losing a job can lead to a number of serious changes in a person’s life as most people depend on their labour earnings to keep afloat in today’s world. When workers get laid off not only they loose the source of income but also a sense of personal accomplishment. When you don’t have a job your standard of living falls and you feel anxious about your future. Unemployment does not only affect workers singularly but impacts on a country’s standard of living as well. The less workers are kept unemployed in the country the lower the level of GDP of this country becomes.
This essay will argue that the government should distribute subsidies for some people who are able to work, but cannot find a jobs to reduce economic problems, improve the standard of living of the unemployed, and even reduce crime. Unemployment basically means people who lack of seeking jobs. “The unemployed are people able, available and willing to work at the going wage rate but cannot find a job despite an active search for work” (Riley, 2012). Unemployment occurs when an expansion in demand rates, while the economic growth goes downward and layoff starts increasing because of a depression from the economy (Hardman, 1999). High rates of joblessness are the main obstacle that is damaging the social development as a whole.
Human wants are generally insatiable, yet the means of ensuring these wants are limited simply because the world has only limited amounts of resources which comprise of human wants that are grossly limited both in number and skills (this is where unemployment arises). Recession happens if output in the economy reduces, this is to say that growth becomes negative. When people spend less, shops will be left with unsold stocks, which will result in purchasing less from the producers, which in turn will cut down on production. Unemployment is likely to result from cutbacks in production. When firms produce less, they need fewer employees.
To be counted as unemployed, someone must be out of work, but still actively looking for work. When someone is unemployed, the government provides monetary assistance which is partly untaxed. A high unemployment rate means that the government has to shell out more money from the budget to support a large number of unemployed people. This creates a heavy burden on the budget and cutbacks in other areas since unemployment assistance is intended to help support the basic necessities. Wealth is drained from the economy for unproductive purposes and economic growth slows down as there are fewer funds for infrastructural development.
Because the firms ¡°cut back and produce less¡± when they experience recessions, they will employ fewer workers. Therefore, the unemployment rate rises. This increase in unemployment caused by recessions and depressions is called cyclical unemployment. Recessions cause social consequences. During the recessions, the unemployed suffers a lot.
In industrialized countries in which most people can earn a living only by working for others, being unable to find a job is a serious problem. Because of its human costs in deprivation and a feeling of rejection and personal failure, the extent of unemployment is widely used as a measure of workers' welfare. The proportion of workers unemployed also shows how well a nation's human resources are used and serves as an index of economic activity. Economists have described the types of unemployment as frictional, structural, and cyclical. The first form of unemployment is Frictional unemployment.
Underemployed can be described as being inadequately employed, such as a low-paying job that requires fewer skills than one possess. (Daly, Hobijn, and Kwok 2015) Making ends meet can be difficult for one who has been affected by this economy over the past few years. America still has a high unemployment rate since the decline of the current job market. And many Americans are struggling to establish the skills needed for employment, or the underemployed are force to lower they skill to make a profit. America’s economic status has force the underemployed and unemployed to make ends meet with the current jobs available.
Effect of unemployment on economy Some of the well-known effects of unemployment on the economy are: Unemployment financial costs The government and the nation in many countries the suffer. Government has to pay the unemployed some benefits. The greater the number of the unemployed or the longer they are without work the more money the government has to shell out. The nation not only therefore, has to deal with the lost income and decreased production but also with additional cost. Spending power The spending power of an unemployed person and his/her family decreases drastically and they would rather save than spend their money, which in turn affects the economy adversely.
Government has to pay the unemployed some benefits. The greater the number of the unemployed or the longer they are without work the more money the government has to shell out. The nation not only therefore, has to deal with the lost income and decreased production but also with additional cost. Spending power The spending power of an unemployed person and his/her family decreases drastically and they would rather save than spend their money, which in turn affects the economy adversely. Reduced spending power of the employed Increased taxs and the insecurity about their own work may affect the spending power of the working people as well and they too may start to spend less than before north ayrshire affecting the economy and also the society in a negative manner.
Different factors would be responsible for the different consequences. But the consequences are mainly from the first two factors. The first factor inflation would probably responsible for fall in real incomes where people with a fixed wage or contract would get the same nominal value of money while the real value has decreased or the people getting poorer if they have saved their money in saving accounts where the interest rate is lower than the inflation rate. The second factor, unemployment, would also be responsible for different economic problems too. These problems may include the loss of real output(real GDP) as the economy has unused labor so its producing inside the PPC curve, a loss of tax revenue for the government as unemployed people don’t pay taxes and this is also followed by costs to the government for unemployment benefits which it provides for unemployed people.