The effects of high unemployment rate :
While economists and academics are convinced that there is a
certain natural level of unemployment that cannot be erased,
elevated dunemployment imposes significant costs on the individual,
the society, and the country. The economic and societal damages
caused due to unemployment are of the dead loss variety, where
there are no offsetting gains to the costs that everyone has to
bear.
Unemployment has an adverse effect on the individual and the
society as a whole. Unemployment causes the following problems:
- Health Issues : This though an individual
effect, is still a serious problem. Being unemployed, especially
for long durations, can lead to depression, low self-esteem,
anxiety and a host of other mental health issues. Tension and
uncertainty can cause stress and strain on the body. Mental illness
is one of the major reasons for suicide. A country with high
unemployment rate will see a rise in its suicide and self-harm
statistics. Unemployment also leads to people ignoring their
physical health problems until they become serious and require
immediate and emergency hospital admissions, thus causing
previously avoidable problems to now become life threatening and
thus cause higher strain on the country's healthcare system.
- Economic Issues : Unemployment means no source
of income, which leads to poverty. It increases the debt burden and
leads to more economic problems. When a country has a problem of
high rate of unemployment, the federal and state governments have
to step in and pay unemployment benefits. With more people
requiring unemployment benefits and other such financial aid, the
government has to borrow more to pay for these benefits or cut its
spending in other areas.
- Social Issues : Most crimes are committed by
individuals who are unemployed and/or livinh in poverty. With a
rise in unemployment rates, there is also a subsequent rise in
crime rate. Burglary and other smaller crimes rise first, followed
by an increase in the murder rate as people become more desperate
for money.
- Homelessness : Loss of income leaves people
without sufficient income to meet housing costs or even rent. High
unemployment rates lead to a rise in the rate of homelessness.
- Harms Future job prospects : Those who are
unemployed will find it much more difficult to get work in the
future. Companies prefer hiring freshers (people who have joined
the workforce recently) compared to hiring someone who is currently
unemployed.
- Lower GDP : High unemployment rate indicates
that the economy is operating below capacity and is inefficient.
This leads to lower output and incomes. The unemployed, who lack
the financial resources to purchase goods and services, contribute
to lower spending and lower output. A rise in unemployment causes a
negative multiplier effect.
- Political Instability : A period of mass
unemployment can lead to social unrest. After World War 1, millions
of young people in all major countries became jobless. It led to
the rise of dangerous political ideologies. Young people flocked to
leaders who promised a quick solution to all their problems. This
led to the rise of Hitler and his Nazi ideology in Germany and of
Mussolini and Fascism in Italy. Periods of high unemployment
exacerbate problems of poverty, alienation, and levels of
inequality.
- Lost human capital : High rates of
unemployment can reduce labour productivity. If someone has been
unemployed for a couple years, they miss out on the latest work
practices and trends.