Unemployment costs and economic policy in Denmark

Explain the cost associated with unemployment. Include a PPC diagram in your explanation.

Governments will always aim towards reducing the level of unemployment to as low as possible. There cannot be 0% unemployment as there always will be a natural level of unemployment as there always will be people between jobs and employers who fire employees to optimize their company. The cost of unemployment can be grouped into 3 groups:

The Costs to the unemployed person:

The first cost of this unemployment of an individual will be a decrease of their living standard as they cannot afford it anymore and therefore need to spend less. This will also affect their families’ living standards. This will worsen the longer the person is unemployed as they at first maybe had savings to spend from, but later they will run out. If unemployed for longer periods of time it can lead to a decrease in skill as they do not use these when unemployed. At last it has a negative effect on the unemployed person’s mental health. Unemployment can lead to stress, and problems associated with stress such as anxiety and depression.

Costs to Society:

Areas with higher unemployment often has higher levels of poverty, homelessness, crime and more gang activity. This is as without a job they do not have an income which results in poverty and some cases homelessness as they cannot afford a home. Some then choose to turn to crime to support their families. Unemployment is not entirely to blame for these problems, but they are connected to it.