4.5.4—Consequences of unemployment

Unemployment reduces the output that could have been produced and can lower the income and security of affected households.

At economy level, unemployment can reduce tax receipts and increase benefit spending, weaken demand and erode skills. The social cost may include poorer health, stress and regional inequality; the size depends on duration and who is affected.

If a recession leaves trained workers idle, GDP and tax revenue fall while benefit payments rise. A long spell can also make later job matching harder, so the cost persists after demand recovers.

The unemployment rate alone does not show duration, hardship or lost output per person; two economies with the same rate can face very different consequences.