Question

1. Explain two economic costs, and two human costs of unemployment

Answer 1

Economic Costs

1. For the individual, the greatest economic cost of unemployment is lost income.

2. For society, the greatest economic cost of unemployment is the decrease in goods and services that occurs as a result of the unemployment.

Human Costs of unemployment

1. Loss of earnings to the unemployed. Unemployment is one of the biggest causes of poverty in the UK. Prolonged periods of unemployment can push households into debt and increase rates of relative poverty.

2. Potential homelessness. Loss of income can leave people without sufficient income to meet housing costs. Rises in unemployment often exacerbate the rates of homelessness.

3. Lost human capital. If people are out of work, they miss out on ‘on the job training’ This is a vital component of human capital and labour skills; high rates of unemployment can reduce labour productivity. If someone is out of work for two years, they miss out on the latest working practices and trends. Being unemployed can also affect the confidence of the unemployed and they become less employable in the future.