Impacts of Unemployment

Unemployment refers to the situation in which an individual who is able and willing to work at an existing wage rate does not get work. High unemployment leads to the following economic and social impacts.

Types of Unemployment in India

Economic Impacts of Unemployment

Underutilisation of human capital: The presence of a large number of unemployed individuals in a country implies that a large part of the human resource is unutilized. Such wastage of manpower prevents a country from achieving its potential in terms of growth and development.

Low capital formation: Low employment implies low income and earnings in the country. Consequently, the ability to save and invest also remains low. As a result, the rate of capital formation is low.

Loss in the output: Since large-scale unemployment implies underutilization of manpower, the level of output in such a scenario is less than the optimum level.

Low productivity: Due to unemployment, poverty, and inferior quality of human capital, per capita productivity remains low.

Social Impacts of Unemployment

Deterioration of the quality of life: Unemployment leaves people with lower incomes and pushes them towards poverty. Consequently, their standard of living falls.

Rise in inequalities: The higher the degree of unemployment, the higher is the gap between the rich and the poor. Income remains concentrated in the hands of the few employed persons. This gives rise to various inequalities in society.

Social ills: Unemployment and poverty push people towards crime and other social ills. This raises the level of unrest in society.

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