Costs of Unemployment

Unemployment is universally recognized as an extremely serious problem. That has become even more evident than ever since the beginning of the global Covid-19 pandemic, leaving 10 million Americans jobless in its first two weeks.

While economists and academics convince that a certain natural level of unemployment cannot be fully erased, growing unemployment rates impose significant costs on individual, society, and country levels.

The costs of unemployment to individuals are not hard to imagine. The loss of a job immediately impacts a person’s standard of living.

Even for those entitled to unemployment benefits and other types of government assistance, these benefits often do not replace their entire income. This means that they do not have the opportunity to cater to their needs as they would normally. However, the economic consequences can extend beyond that. The majority of people will turn to retirement or long-term savings, draining them completely.

Prolonged unemployment can lead to an erosion of skills and greater skepticism and pessimism about the value of education and training. It can also affect the mental and physical health of workers and even lead to shorter lifespans.

The social costs of unemployment are no less serious, even though they are quite difficult to calculate. Social costs may include how people interact with each other. Studies have shown that times of elevated unemployment often correlate both with less volunteerism and higher crime.

The level of crimes elevates because of the absence of a wage-providing job as people may turn to crime to meet their economic needs. On the other hand, the volunteerism decline does not have such an obvious explanation but could perhaps be tied to the negative psychological impacts of being jobless.

The economic costs of unemployment are probably the most obvious when viewed through the lens of the national checkbook. Unemployment leads to higher payments from state and federal governments for unemployment benefits. For example, in July 2020, the US payments from state and federal governments for unemployment benefits reached $18.26 billion. At the same time, state and federal governments no longer collect the same income tax levels as before — forcing these governments to borrow money.

It is also worth noting that high unemployment affects companies as well. Unemployment benefits are financed largely by taxes assessed on businesses. When unemployment is high, states will often look to replenish their coffers by increasing their taxation on businesses — counter-intuitively discouraging companies from hiring more workers. Not only do companies face less demand for their products, but it is also more expensive for them to retain or hire workers.

The goal of WorkQuest is to be instrumental in solving unemployment problems. The WorkQuest platform will simplify the search for reliable and honest employers as well as spreading the use of blockchain technology in solving the current problems in the global labor market.

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