Title: The Cost of Unemployment to the Economy
Headings: The Cost of Unemployment to the Economy
The Cost of Unemployment to the Economy
It’s not just the price of paying out benefits
Key Takeaways
Costs to the Individual
Costs to Society
Costs to the Country
The Bottom Line

Content: When a person loses their job, there is often an immediate impact on that person’s standard of living. Prior to the Great Recession, the average savings rate in the U.S. had been drifting down toward zero (and sometimes below), and there are anecdotal reports that the average person is only a few weeks away from serious financial trouble without a paying job. 4 ﻿
Even for those eligible for unemployment benefits and other forms of government assistance, it is often the case that these benefits replace 50% or less of their regular income. 5 ﻿ That means these people are consuming far less than usual. However, the economic consequences can go beyond just less consumption. Many people will turn to retirement savings in a pinch, and draining these savings has long-term ramifications. Prolonged unemployment can lead to an erosion of skills, basically robbing the economy of otherwise useful talents. At the same time the experience of unemployment (either direct or indirect) can alter how workers plan for their futures—prolonged unemployment can lead to greater skepticism and pessimism about the value of education and training and lead to workers being less willing to invest in the long years of training some jobs require. On a similar note, the absence of income created by unemployment can force families to deny educational opportunities to their children and deprive the economy of those future skills. Last but not least, there are other costs to the individual.