long-term unemployment:
out of work for more than 6 months
- loss of self-respect, confidence, sense of identity
- increased suicide rates
- increased homicide rates
- increased depression rates
- increased fatal heart attacks and strokes
- increased cancer risk
The Effects of Unemployment on Society
What is Unemployment?
Colleen Gardner and Rachel Backner
How Unemployment Spreads:
- the state a person is in if he/she cannot get a job despite being willing to work and actively seeking work.
- types of unemployment:
Frictional Unemployment
Structural Unemployment
Cyclical Unemployment
7.9%
http://www.tn4me.org/images/upload/File/FlowChart.pdf
12.3 million
40.6%
5 million
Effects on Health
Unequal Burdens of Unemployment
How do we measure unemployment?
Criticisms
a nationwide survey by the U.S. Bureau of Labor Statistics
- lower-skilled jobs
- teenagers
- workers aged 50 and older
- minorities
- gender
- less educated workers
- the BLS lists all part-time workers as fully employed
Effects on the Still Employed
but 9 million of the 38 million part-time workers are underemployed
unemployment rate = percentage of labor force that is unemployed
- the BLS fails to include discouraged workers in the labor force
- changes in workforce constitution
- increased employer demands
- increased stress and similar health risks
Who's in the labor force?
- people under 16
- institutionalized persons
- adults not actively seeking work
- adults willing and able to work
- unemployed adults actively seeking work
The U-6 Measure:
RI: 18.3%
National: 14.9%
so, lower labor force participation boosts national employment numbers
the BLS understates actual unemployment
the economy produces at a point within the production possibilities curve
Non-economic Costs to Society
- loss of skills
- socio-political unrest
- increased poverty rates
- interracial and ethnic tensions
- downward mobility/declining optimism
- specific industries weakened
- family disintegration
- increased crime rates
Economic Costs of Unemployment
GDP gap: actual GDP - potential GDP
lost output
- decreased consumer spending
- poor credit quality
- lower productivity
- fewer goods and services offered to society
Okun's Law: For every 1 percentage point by which the actual unemployment rate exceeds the natural unemployment rate, there is a negative GDP gap of about 2%
Effect on Government Spending
- unemployment benefits 2008-2011: $434 billion
- cost to taxpayers: $184.7 billion
- opportunity costs
2009: unemployment rate 4.3 percentage points above natural rate
4.3 (2) = 8.6% drop in GDP = $1.2 billion loss in GDP
photo credit Nasa / Goddard Space Flight Center / Reto Stöckli