Economic and social consequences of unemployment. It is sheer wastage for the society. – Loss of output in the economy because unemployed persons only live as consumer not as producers. – Thus living only as consumer will add up the consumption not the production. They don’t earn nor do they save for investment; thus capital formation is low.
How does unemployment affect the cost of Labor?
Lower wage costs – Unemployment in an economy increases the supply of labour available for firms to employ. This creates a downward pressure on wages as labour is less scarce and more people are willing to get a job at a slightly lower wage.
What are the consequences of high unemployment in the UK?
The recent figures on poverty in the UK are testimony to the social damage that high unemployment can have. Exam questions quite often ask students to discuss some of the effects of a sustained rise in unemployment. Good answers will include AD-AS analysis on the economic impact and also make a distinction between economic and social consequences.
What are the negative multiplier effects of unemployment?
2.Negative multiplier effects: The closure of a local factory with the loss of hundreds of jobs can have a large negative multiplier effect on both the local and regional economy.
