Economic Problems Associated with High Levels of Unemployment
a) Cost to the Inland Revenue (or exchequer)
Each unemployed person is said to increase the price of the Inland Revenue in terms of allowance for the following: -
i. The unemployment benefit.
ii. Loss of the tax revenue from the unemployed.
iii. Cost of the special schemes for the unemployed people.
iv. The Administration.
b) Waste of Scarce Resources
Labour, unlike some raw materials, cannot be stored for future use. Unemployed/unused labour resources are lost for all times.
c) Inequality of Income Distribution
The gap in the level of standards of living between those not in of work and those in work widens during time period of severe unemployment.
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A significant step in computation and analysis of cost is the categorization of costs into various types. Classification assists in better control of the costs and also assists significantly in decision making.
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