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Study Notes

Social Costs of High Unemployment

AS, A-Level, IB
AQA, Edexcel, OCR, IB, Eduqas, WJEC

Last updated 8 Jan 2023

The social costs of high unemployment refer to the negative impacts that unemployment can have on individuals, families, and communities.

These impacts can be wide-ranging and long-lasting, and can include:

  • Financial strain: Unemployment can lead to a reduction in income and an increase in financial insecurity, as individuals may not have the resources to meet their basic needs or pay for necessities such as housing, food, and healthcare.
  • Mental health problems: Unemployment can have a negative impact on mental health, as individuals may experience stress, anxiety, and depression due to their financial situation and loss of purpose and social connections.
  • Relationship problems: Unemployment can also strain relationships, as individuals may feel isolated, anxious, or depressed, and may be unable to contribute to the household or support their families.
  • Social disruption: High levels of unemployment can lead to social disruption and unrest, as individuals may feel disenfranchised or disconnected from their communities.

Persistently high unemployment creates negative externalities and can threaten the social fabric that holds communities together.

Another consequence of high unemployment can be a rise in income inequality

High unemployment can contribute to income inequality in a number of ways. When individuals are unable to find work, they may have a difficult time meeting their basic needs, and may be forced to rely on government welfare assistance or other forms of support. This can create a cycle of poverty, as individuals may struggle to improve their financial situation or escape poverty.

At the same time, high unemployment can lead to a reduction in real wages, as employers may be able to find a larger pool of workers who are willing to accept lower pay due to the lack of job options. This can result in a widening gap between low-income workers and those who are able to secure higher-paying jobs.

Income inequality can also be exacerbated by the fact that certain groups, such as racial and ethnic minorities, women, and young people, may be more likely to experience unemployment and discrimination in the job market. This can lead to further disparities in income and opportunities.

Overall, high unemployment can contribute to income inequality by reducing the income and opportunities available to certain groups, and by exacerbating existing disparities in the job market.

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