There
are many people who are looking for work but not in the official records of
unemployed. This is because they are either married women or part-time
employed. This unemployment is referred to as hidden unemployment.
The
poverty and unemployment trap arises when people become worse off when they
seek to improve their living standards by working more hours or gaining higher
paid employment. This will affect relatively a small group of people often with
large families, who find that the amount they receive in benefits when
unemployed exceed s what they could earn in employment.
There
are some possible consequences or costs
of unemployment. These consequences or cost are affecting
both on individuals and on the economy as a whole.
The
major costs on individual are as
follows.
1)
Unemployed people experience a fall in
income so the times to pursue leisure activities are constrained by lack
of money.
2)
The unemployed also suffer a loss of
status.
3)
Unemployment may also cause nervous
breakdowns, such as bad health, divorce and likely to attempt suicide.
4)
Long periods of unemployment reduce the
value of human capital in the form of loss of skill and missing out of
training for up grading new production technology.
5)
Finally, it is very difficult to find
another job while unemployed.
Advantages of a fall in unemployment.
Increased
output, that is, more people in work will enable more products to be produced –
this will cause PPC to move to right side.
Reduced
poverty: more people in work will reduce number of people leaving without
income and an income will raise tax revenue. At the same time it will
reduce the expenditure to reduce poverty
Increased
tax revenue may be spent on a other purposes such as infrastructure
and will in turn reduce a budget deficit
Fall
in government spending or unemployment benefits which will in turn enable
government to reduce tax rates.
The
main cost to the economy as a
whole is the output which is lost.
1)
This is the opportunity cost of unemployment. The lost output can never be regained. The country will be
producing inside its production possibility curve.
2)
When unemployment rises the government will experience a fall it its tax revenue at the same
time they will have to increase the
spending on unemployed related benefits.
3)
In the recent years there has been increased evidence of a link between crime and unemployment.
4)
Moreover the burden of unemployment is
not borne (suffered) evenly by society.
The
benefits to those unemployed are
that they can pursue more time for leisure
activities and to explore better
job opportunities. These can be considered as benefits only if the
advantages of unemployment exceed the disadvantages.
Unemployment benefits to society as it creates greater flexibility
to expand with suitably qualified
unemployed workers. It also reduces
cost push inflation by lowering wage claims. Moreover workers are willing to accept new methods and reluctant
to take trade union actions. Here also it is considered as a
benefit only if the advantages of unemployment exceed the disadvantages.
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