Unemployment is a problem of every other economy and is universally considered as undesirable. Unemployment has seen record-high surges during this novel coronavirus pandemic, which left 10 million Americans jobless just in its first two weeks. Seeing the uncertainty and massive economic destruction, the unemployment benefits under The Coronavirus Aid, and Economic Relied, and Economic Security Act (CARES) have been expanded to include self-employed and part-time workers as well. This has been made possible through Pandemic Emergency Unemployment Assistance. It provides benefits up to 39 weeks beginning on or after Jan. 27, 2020 and ending on or before Dec. 31, 2020.
Several economic and academicians through all time zones and across all countries have made convincing arguments claiming that a natural level of joblessness in any economy cannot ever be entirely erased. But, after this natural level is crossed, the elevated unemployment inflicts significant extra costs on the individual, the society, and the country as well and the biggest problem is that majority of these costs fall under the dead loss category. In other words, there are no offsetting gains to the costs that the people shall bear.
The jobless people not only struggle financially and economically but also come across several physical and mental health-related challenges. Some other costs of unemployment to the society could prove to be pretty dangerous as higher the unemployment, higher shall be the level of crime in the region. Rate of volunteerism may also see a drop in that case. Moreover, the costs bore by the governmental goes way beyond the payment of benefits to the loss of the production of workers. This, in turn, leads to a fall in the gross domestic product (GDP). Thus, we can say that the unemployment level in an economy has costs to a society that are more than just financial.
What are the costs of unemployment to an Individual?
The cost of unemployment to a jobless individual comes pretty simple and is not hard to determine or imagine. A person who has recently been thrown out of his job would have a major change in his standard of living and consumption pattern.
The average savings rate in the United States before the Great Recession was steeping down towards zero and even went negative sometimes. It is also said that the situation was so serious that an average person was only a few weeks away from getting into financial trouble without a paying job.
no doubt the government tried its best to provide the unemployment Benefits to the jobless. but the circumstances were such that even for those eligible for the benefits and other forms of government assistance could not keep themselves afloat financially because these benefits could replace only 50% or less of their regular income Making people consume far less than what t used to consume before the unemployment hit their pockets. However, the consequences of unemployment are not just restricted to consumption and standard of living. to sail through these hard times, several people turned to their retirement savings, which even though save them today had draining ramifications in the long term.
It is a scientifically proven fact that unemployment has devastating impacts on the mental health and psychological wellbeing of a person and can potentially destroy their physical health in short in their life spans.
apart from this, prolonged unemployment may lead to an erosion of skills in a talented individual, ultimately leading to the economy being robbed of useful talents. and on a wider scale, the experience of unemployment no matter how bad it was can have a long-lasting impact on how the workers plan for the future. t may perhaps start doubting the importance of learning and encourage scepticism and pessimism about the importance of the same. This may make them less interested in to spend huge amounts in obtaining long years of training required for some jobs or maybe deny educational opportunities to their children as well. This not eliminated the benefits that could be derived from not only the current talented human resource but also their next generation.
What are the unemployment costs to the Society?
The social costs of unemployment, even though real are extremely difficult and complicated to calculate and ascertain. There is a direct relationship between the unemployment rate and calls for protectionism. This means that when unemployment grows there are increased applications for protectionism Asking the authorities to put restrictions on immigration. he even though protectionism looks like an attractive option at that moment, it may have severe impacts on the economy in the long term. Protectionism from one country may initiate a reactive restriction from the other leading to a destructive tit for tat retaliation among countries, ultimately affecting the cooperative global trade.
Several researchers and academicians have conducted studies which prove that at all times when unemployment is at a rise, the region is bound to witness a higher crime and lesser volunteerism. In the cases when a person is not receiving adequate income to fill his stomach, it is natural though unethical for him to reroute himself towards crime in order to meet his economic needs. While the drop in volunteerism could perhaps be tied to resentment towards those who do not have a job or perhaps to the negative psychological impacts of being without a job.
What are the unemployment costs to the Country as a whole?
Unemployment leads to a jump in payments from the state and federal governments under the heads of unemployment benefits, medical aid and food assistance. In the month of July this year, the total payments from state and federal governments to the beneficiaries in the name of unemployment benefits amounted to as much as $18.26 billion. This proves to be a huge financial burden on the chequebooks maintained by the government, especially when the state and federal governments were no longer receiving the same levels of income tax as before. All this forced the authorities to resort to their function of borrowing or cut back on another spending. This deferred the costs and impacts of unemployment into the future.
As much as 70% of what the economy of the United States produces is spent in the form of personal consumption and unemployed workers, making the state of a high level of unemployment dangerous for it. Even after this, the people receiving the benefits are not in a position to continue their prior expenditures. With the rise in unemployment, a reduction in gross domestic product or GDP is seen as the workers who are now jobless are no more producing goods. This moves the country away from its potential efficient allocation of resources. Several economists also say that the production of goods creates its own demand and thus, this fall in the product leads to a fall in demand ultimately affecting the economy as a whole.
Even the companies based in that particular region suffer due to high rates of unemployment. This is because the unemployment benefits that are given to jobless are financed largely by the income tax paid by the businesses. And with the unemployment on a rise, it is natural for the states to look to replenish their exchequers by leveraging a higher percentage of tax from the corporate houses. Counterintuitively, this taxability situation and the fall in demand for their products forces the companies to stop hiring more workers or even lay off some that they already have.