Friday, April 17, 2009

Problems of Unemployment

With UK unemployment forecast to rise to 3.2 million by 2010 - what will the economic and social costs be?

1. Lower incomes for the unemployed. Although insulated by unemployment benefits (and other benefits like housing benefit) many will see a substantial drop in income which makes paying bills and loan repayments difficult. It will force a change in lifestyle for many.

2. Rise in Home Repossessions. The rise in unemployment will cause a rise in home repossessions. This is one of the most stressful and painful experiences for those concerned, but, also will lead to further house price falls and losses for banks making future lending difficult.

3. Negative Mulitplier Effect. The unemployed will spend less causing a further fall in consumption and lower economic growth. This makes economic growth more difficult

4. Cost to Government. Higher unemployment leads to an increase in spending on benefits. The government also receive less income tax and VAT. This is particularly problematic because of the unemployment concentrated in high paying finance jobs. The impact will be a sharp rise in public sector borrowing

5. Demotivation. There is strong evidence long periods of unemployment make it difficult for the unemployed to re-enter the labour market. Older workers who are unemployed often end up leaving the labour market altogether, sometimes moving to other benefits like sickness or disability allowance. - creating disguised unemployment

6. Social Instability. The high unemployment of the early 1980s shocked the country in being a contributory factor behind riots such as the Brixton riot. Here the unemployment was highly localised. But prolonged unemployment can be a trigger to social unrest.

7. Unemployment can take a long time to fall. Unemployment is said to be a lagging indicator. Even when economy recovers unemployment is likely to keep rising. This is known as the hysteresis issue. - Periods of high unemployment create a higher natural rate of unemployment (underlying rate of unemployment) - certainly a feature of the 1980s.


Anonymous said...

i totally agree about it , unemployment is a very serious problem that have to be taken as a seroious threat ...
But in other hand , this will also reduce at a very high rate the inhabitant of U.K , since they are going to seek for a better life eslewhere ... and that is very bad for the country further

Anonymous said...

I totally agree abt impacts of unemployment and some of da countries r under great dangers 'grown ups n children r starving ........Bt as a reminder for all dat no one in dis world is poor god has given every human beings 2 hands n 2 legs n no one cn complain abt in...and if one cn du a certain job dn y cnt others.PLIZ WORK HARD.