Social cost of unemployment, Managerial Economics

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The Social Cost of Unemployment

i.      For the individual, there is the demoralizing effect which can be devastating particularly when they are old.  This is because as some job seekers become more and more pessimistic about their chances of finding a job, so their motivation is reduced and their changes of succeeding in finding jobs become even more remote.

ii.     Many of the longer-term unemployed become bored, idle, lose their friends and suffer from depression

iii.    There is also evidence of increased family tension leading in some cases to violence, infidelity, divorce and family breakups.

iv.    Unemployment may also lead to homelessness, as in some circumstances building societies may foreclose on a mortgage if the repayments are not kept up.

v.     Long-term unemployment may also lead to vandalism, football, hooliganism and increases in the crime rate and insecurity in general.

The cost to the exchequer (Ministry of Finance)

There is increasing dependency ratio on the few who are employed in the form of:

The loss of  tax revenues which would otherwise have been received:  This consists mostly of lost income tax but also includes lost indirect taxes because of the reduction in spending.

The loss of national insurance contributions which would otherwise have been received.


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