WHY DON’T WE SEEM TO CONSIDER THE FULL COSTS AND SIGNIFICANCE OF UNEMPLOYMENT—IT DOESN’T EXIST IN ISOLATION. IT’S IMPACT IS FUNDAMENTAL, MASSIVE—AND ENTIRELY NEGATIVE.
I have long been seriously disturbed at the U.S.’s general indifference to the plight of the unemployed, together with the economic impact of having so many people out of work. The powers that be seem to miss the point that unemployment represents waste on a truly prodigious scale, and represents a direct cost to the economy in a whole series of ways.
- Unemployment creates misery on a massive scale which, in turn, undermines consumer confidence.
- It leads to endless social problems—all of which have to be dealt with in some way or another at a cost.
- It adds particularly to health costs.
- It depresses demand.
- It depresses growth.
- It depresses the tax base.
My ball park figure for each person unemployed—in terms of the cost to the taxpayer—is at least $50,000. The real figure is probably a great deal higher because of the multiplier effect. Multiply that by the millions unemployed or underemployed at any one time and the total is stupefying—and all negative to the prosperity of this country.
Yet many regard a relatively high level of unemployment as desirable because it gives management the power to keep wages down. This is madness coupled with ignorance on a truly epic scale.
If people don’t earn—because they are unemployed or underpaid (a growing problem in itself) they don’t buy, or they don’t buy enough—which means the very thing that keeps business going—a market for goods and services—is undermined. Economists call this demand. Without demand, you don’t have much of an economy. With it, we can grow out way out of debt.
The above chart makes the point with singular clarity. The green line (the top one) represents the unemployment rate and the blue line (the bottom one) represents the budget. The period covered is 65 years.
Note how the two lines are virtually in lock-step. The significance is clear. If you want to reduce the deficit, you reduce unemployment.
Does the Republican Party understand this? Clearly not. Does the administration grasp its full significance? That seems unlikely.
Does the average American taxpayer understand? Frankly, I doubt it because the media is doing a lousy job at expressing the issues in this fundamental way—and most Americans think their job keeps them working hard enough so to have to think in the evening represents an unacceptable extra burden.
People really need to start understanding this stuff, or our future is bleak. Obsessing about the deficit while ignoring unemployment is national suicide.
Yes, I know this should really be in my economic column, but every now and then, I get carried away.
By men in white coats on minimum wage.