Effects of unemployment

The effects of unemployment are the negative economic, social and psychological effects of unemployment, mainly long-term ones.

Short-term unemployment may also cause positive effects, which are a natural effect of a dynamically developing economy.

The highest costs are borne by the unemployed person, it is the sum of lost earnings, i.e. the difference between the amount of remuneration received and the unemployment benefit. Added to this are unmeasurable costs of stress and gradual loss of qualifications.

Economic effects of unemployment

From an economic point of view, you can count on the effects of unemployment:

• difference between the amount of GDP possible to achieve with full employment (assuming friction unemployment) and the amount of GDP
• actually achieved in a given period of time
• decrease in production level - labor force resources are not fully used
• development of the so-called gray zone - employees do not pay taxes and social security contributions
• reduction of revenues to the state budget - reduced tax and social insurance revenues
• increasing state budget expenditure on social benefits for the unemployed, maintaining employment agencies and combating unemployment
• deepening of the budget deficit as a result of significant state expenditures for unemployment-related purposes, which may result in higher taxes and public dissatisfaction
• loss of human capital - the disappearance of qualifications and skills under the influence of long-term unemployment
• lowering income in households, which leads to a reduction in global demand.

Social consequences of unemployment

Unemployment, especially long-term unemployment, also causes a number of social consequences, perceived by the unemployed on an individual basis. However, several of the most frequently occurring effects can be distinguished:

• sense of exclusion from society, felt both by the unemployed and his family
• loss of the current social position
• loss of contact with friends
• unwillingness to participate in the life of the local community, as well as political and cultural
• conflicts in the family, sometimes leading to breakups and even divorces
• postponing the decision about marriage and starting a family by the unemployed
• transferring bad designs to imitating children - continuing by children to stay out of work, disappearing respect for work
• the excess of free time in the unemployed and the disturbed rhythm of the day
• deterioration of the health of the society
• social pathologies, such as alcoholism, drug addiction, crime
• lowering qualifications and disappearing skills, which results in the need to retrain
• reduced standard of living, sometimes leading to poverty and divorces
• labor emigration, which may also adversely affect family ties and result in the breakdown of marriages.

Psychological effects of unemployment

The occurrence of psychological effects of unemployment depends on many individual factors, including from sex, the age of the unemployed person, time of being out of work, attitudes towards work, as well as family support. In this category, the following effects of unemployment are mentioned:

• emotional disorders in people who are unemployed
• depression
• little satisfaction with life
• helplessness, helplessness, blame
• frustration, disappointment
• loss of self-esteem, being considered worse than others
• lack of faith in own abilities
• greater susceptibility of the unemployed to various diseases and illnesses
• problems with concentration
• sense of lack of perspectives
• restricting the freedom of action, which results from the limited budget of the household
• the tendency of the unemployed to suicidal thoughts and suicides
• stress
• reconciliation with one's fate as an unemployed person and reluctance to look for a job.

Positive effects of unemployment

Sometimes, in addition to negative effects, unemployment can also produce positive results. This usually happens in the case of short-term unemployment. Then you can talk about the following consequences:

• careful work by employees who are afraid of losing their jobs
• high work efficiency
• high work discipline
• increased competition between employees in the labor market
• willingness to improve professional qualifications by employees
• better allocation of labor resources
• easier fight with inflation - unemployment weakens employees' wage requirements.

Effects of unemployment — recommended articles

Natural rate of unemployment — Breaking the glass ceiling — Absenteeism in the workplace — Illegal work — Employment — Effects of employee departure — Gary S. Becker — Level of development — Demand shock

References

• Christiano, L. J., Eichenbaum, M. S., & Trabandt, M. (2016). Unemployment and business cycles. Econometrica, 84(4), 1523-1569.
• Kroft, K., Lange, F., Notowidigdo, M. J., & Katz, L. F. (2016). Long-term unemployment and the Great Recession: the role of composition, duration dependence, and nonparticipation. Journal of Labor Economics, 34(S1), S7-S54.
• Kaplan, G., & Menzio, G. (2016). Shopping externalities and self-fulfilling unemployment fluctuations. Journal of Political Economy, 124(3), 771-825.