The Impact of Unemployment (Edexcel IGCSE Economics)
Exam board Pearson Edexcel · IGCSEUpdated 2024-06-13
Consequences of Unemployment
Spec point —
2.1.1c
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Unemployment can have implications for different stakeholders (workers, firms, government, society and consumers)
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E.g During 2009-2013 recession, Greece's unemployment reached 27%, with youth unemployment peaking at 60%
- This led to increased spending on social welfare, high poverty rates, homelessness, social problems and some households not being able to afford basic necessities
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The Impacts of Unemployment
| Impact | Explanation |
|---|---|
| National output | - High levels of unemployment reduces consumer incomes. As a result, demand for goods and services falls - In response, firms reduce the level of output produced |
| Scarce resources | - As the economy contracts, there is a more inefficient use of available resources |
| Poverty | - Levels of poverty rise as unemployment rises and incomes fall - Some workers may struggle to afford afford the basic necessities, such as food, shelter and clothing |
| Government | - Government's receive less tax revenue and have higher expenditures in the form of welfare payments |
| Consumer and business confidence | - The level of optimism that consumers and businesses have regarding their expected financial situation falls - Consumers have less job security, so save more - Businesses expect to receive less sales revenue so they delay any investment plans |
| Society | - Inequalities rise as some individuals in society struggle to access healthcare and education - There may be increased societal problems, such as an increase in crime rates |
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