Consequences of Unemployment

Unemployment denotes employable individuals who are actively seeking a job but cannot find one. It also constitutes individuals working inappropriate jobs. Unemployment is a significant problem, especially in developing and third-world countries. It has both short-term and long-term impacts on individuals, society, and the economy. The post explorers the diverse consequences of unemployment.

Reduced income

A job provides people with a regular income. Joblessness contributes to income loss and a reduction in finances an individual has to spend. For example, the unemployment caused by the Covid-19 pandemic took away people’s wages and salaries, leaving millions without earnings. Some people solely rely on employment income, and losing a job forces them to use savings or borrowed money to pay bills and buy food and clothing. Income loss has a devastating impact on an individual’s personal life, especially when one is the primary breadwinner.

Slow economic growth

Unemployment hampers economic growth. Unemployed persons lack a disposable income to spend on goods and services, meaning that they contribute less to the economy. Reduced goods’ demand forces manufacturing companies to scale down production, cut employee wages, and pay fewer taxes to the government. Unemployment undermines economic activities by curtailing money circulation. Moreover, unemployment slows economic growth by lowering gross domestic product. High unemployment creates a decline in the goods and services produced in a country as skilled workers are jobless and unutilized.

Loss of tax revenue

Unemployment causes the government to lose tax revenue. Employed people remit taxes, allowing the government to increase budgetary allocation on infrastructure and other development projects. In contrast, an unemployed population does not only fail to pay taxes but relies on government assistance. For example, the unemployment caused by the Covid-19 pandemic mandated governments to support unemployed persons through stimulus packages or other financial aid. The government losses substantial tax revenue when thousands or millions of its workforce are unemployed. The government also losses revenue when manufacturing companies cannot produce and sell many goods due to unemployment.

Increase in government expenditure

Unemployment increases government expenditure. Governments support the unemployed by providing benefits, health insurance, housing, and food assistance. Providing these services increases government spending, and the situation may force states to borrow funds. Unemployment creates serious monetary problems for a government due to a decline in tax revenue and a rise in expenditure.

Poverty and homelessness

Unemployment contributes to poverty by cutting or reducing incomes. Income loss due to joblessness exposes people to financial challenges as families strive to meet living expenses with little or no pay. Although the government provides unemployment benefits, such support is not sufficient to sustain a household. After depleting savings or borrowed money, an unemployed person may be forced to make sacrifices such as selling personal belongings or becoming homeless. Other individuals are evicted after failing to pay rent, resulting in homelessness.

Increased criminal activities

Unemployment fosters crime. Unemployed people, especially youths in deprived neighborhoods, might view crime as an alternative income source. Young men opt to join gangs and participate in gang-related activities such as drug distribution, extortion, human trafficking, or other organized crimes. On the other hand, young unemployed women pursue prostitution to earn a living. Moreover, organized crime groups use such women to lure powerful or wealthy individuals and rob them. Unemployed parents lack money to send their children to school, causing them to miss education vital in helping them land a well-paying job in the future. Children from low-income families present an easy target for criminals to recruit.

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