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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

Economic Costs

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

Economic Costs of Unemployment

GDP gap: actual GDP - potential GDP

lost output

Economic Costs

  • 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%

Economic Costs

Effect on Government Spending

  • unemployment benefits 2008-2011: $434 billion
  • cost to taxpayers: $184.7 billion
  • opportunity costs

Economic 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

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