Long-term unemployment can really affect how the economy grows. Here are some ways it does that:
Lower Productivity: When people are unemployed for a long time, their skills can get weaker. For example, the Organisation for Economic Co-operation and Development (OECD) says that if unemployment goes up by just 1%, it could lead to a 2% drop in what the economy can produce over time.
Less Spending by Consumers: When someone is out of work, they usually buy less. In the UK, regular spending from people makes up about 60% of the economy. If people spend less, it means there's less demand for goods and services, which can stop economic growth in its tracks.
Higher Costs for the Government: More people out of work means the government has to spend more on help for these individuals. In 2020, the UK spent around £27 billion on unemployment benefits. This puts a strain on government finances and means less money for building and development projects.
Social Problems: High unemployment can lead to more crime, health issues, and other social problems, which can make things even worse for the economy.
In short, long-term unemployment affects how productive people are, how much they spend, government budgets, and social harmony. All of these factors make it harder for the economy to grow in the long run.
Long-term unemployment can really affect how the economy grows. Here are some ways it does that:
Lower Productivity: When people are unemployed for a long time, their skills can get weaker. For example, the Organisation for Economic Co-operation and Development (OECD) says that if unemployment goes up by just 1%, it could lead to a 2% drop in what the economy can produce over time.
Less Spending by Consumers: When someone is out of work, they usually buy less. In the UK, regular spending from people makes up about 60% of the economy. If people spend less, it means there's less demand for goods and services, which can stop economic growth in its tracks.
Higher Costs for the Government: More people out of work means the government has to spend more on help for these individuals. In 2020, the UK spent around £27 billion on unemployment benefits. This puts a strain on government finances and means less money for building and development projects.
Social Problems: High unemployment can lead to more crime, health issues, and other social problems, which can make things even worse for the economy.
In short, long-term unemployment affects how productive people are, how much they spend, government budgets, and social harmony. All of these factors make it harder for the economy to grow in the long run.