Unemployment Essay

Unemployment is a scary thing. The mortgage still has to be paid; the electricity needs to stay on. This is scary for someone out of a job. Having people out of work for long periods of time is frightening for everyone. 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. Also, employment creation for a high percentage of unemployed population becomes challenging.

Circular flow of income is the lifeline of a flourishing economy. Unemployment slows down this flow by the lack of money inflow and outflow. When money is not pumping into the economy, its growth becomes sluggish. An economy may show signs of jobless recovery with a continual increase in the rate of unemployment. Such a growth may lead to a slow recovery from the recession in the future, or may be an indicator of double-dip recession.

Due to increase in competition for jobs and wide availability of labor, the cost of labor decreases significantly. Those who are employed will be severely affected in case of a rise in unemployment in the economy. Noticeably, reduction in wages and salary leads to decrease in the amount of tax collected on the income. This further hinders the scope of availability ...

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...l make the same salary that they had previously. This increases the debt owed by those families. Usually the amount of unemployment benefits is not enough to keep this cycle going. Many people default on credit cards as their debt continues to grow, not unlike our government.

The government extended the unemployment benefits, and has been paying for them. While the government can borrow money indefinitely, I do not think that it is a good idea. I think at some point the government is going to have to become a little more solvent. The people that are getting the unemployment benefits are not paying as much in taxes. They also have less money to spend, which further reduces the amount of money the government is making. Most people on unemployment qualify for tax credits, so the government is actually paying even more out than just the unemployment benefits.