Impact of Unemployment

• Producers 


  High unemployment can reduce investment as businesses will lose confidence in their future projects.
• Government Spending 


  increased government spending because they will have an increase in benefits to pay, which leads to an increase in the size of the government's budget deficit.
• Consumers 


  a decrease in consumer spending because unemployed workers have less real disposable income and a reduction in AD.
• Employees

  increased relative poverty. High unemployment can lead to increased poverty. Quality of life will decrease for the unemployed as they will be discouraged and might spend a life of crime or drugs.
• Economy suffers a loss of output, which leads to real GDP decreasing. there is disparities in wealth and inequality in terms of income.
• Social Costs of Unemployment

  • Increase in relative poverty and welfare benefit dependency​
  • Extra demands on NHS (e.g. due to stress-related illness)​
  • Link between persistent unemployment and social problems​
  • Divorce rates will increase as couples will be annoyed at each other.
• Beneficial Costs of Unemployment

  • Reduced risk of inflation – lower wage claims and price discounts​
  • Pool of unemployed labour available for growing and starting businesses​
  • Rise in self employment start-ups as an alternative to being unemployed​
• When unemployment happens, the labour force will experience:

  • A loss of skills, gaps in CV's
  • Decline in the quality of human capital
  • Decline in physical health
  • Increase in psychological stress
  • Consumers wont be able to pay high interest rates back
• Policies to Reduce Unemployment – Labour Supply​Reducing occupational mobility​

  • Better funding for and more effective training​
  • Teaching new skills e.g. Coding for gaming, languages​
  • An expansion of apprenticeship / internship programmes
  • Improving geographical mobility​
  • Rise in house-building will help to keep property prices lower and encourage more affordable rents​
  • Active regional policy to create new jobs and businesses​