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: Unemployment leads to higher payments from state and federal governments for unemployment benefits, food assistance, and Medicaid. In July 2020 payments from state and federal governments for unemployment benefits totaled $18.26 billion. 11 ﻿ At the same time, state and federal governments are no longer collecting the same levels of income tax as before—forcing these governments to borrow money, which defers the costs and impacts of unemployment into the future, or cut back on other spending. Unemployment is also a dangerous state for the U.S. economy. Almost 70% of what the U.S. economy produces goes to personal consumption and unemployed workers. 12 ﻿ Even those receiving government support cannot spend at prior levels. The production of those workers leaves the economy, which reduces the gross domestic product (GDP) and moves the country away from the efficient allocation of its resources. For those who subscribe to Jean-Baptiste Say’s theory that the production of goods creates its own demand, that is a serious issue. 13 ﻿
It is also worth noting that companies pay a price for high unemployment as well. Unemployment benefits are financed largely by taxes assessed on businesses.