Impacts
Let us first learn about a few commonly observed impacts of unemployment. Then we'll see how some of them and more can be applied to the Philippines.
Common Impacts of Unemployment
Common Impacts of Unemployment
Loss of Income
Unemployment usually leads to a loss of income. This is pretty obvious since if one does not work, he would natually not be able to get any income. On the individual level, this is not so serious, but on a larger scale, this can be very problematic. People would be less willing and able to purchase goods and services and they would tend to purchase what they originally consider inferior goods and hence may experience the negative effects of loss in income such as debt, and collectively bigger problems such as increased povety rates and lower standards of living due to lower purchasing power
Unemployment usually leads to a loss of income. This is pretty obvious since if one does not work, he would natually not be able to get any income. On the individual level, this is not so serious, but on a larger scale, this can be very problematic. People would be less willing and able to purchase goods and services and they would tend to purchase what they originally consider inferior goods and hence may experience the negative effects of loss in income such as debt, and collectively bigger problems such as increased povety rates and lower standards of living due to lower purchasing power
Negative Multiplier Effects
Unemployment occurs when certain factories or companies close down, and this is especially serious when there is a financial crisis where recession and unemployment is rampant. When a company closes down, many jobs are lost. Since what one spends is what another earns and one is unemployed, he has lower purchasing power and would also prefer to save more as one is likely to be uncertain of the future. When a large number of people are unemployed, collectively, their expenditure would be much lower. This would inevitably also lead to a decrease in demand. On the supplier side, if there’s lower demand and lower income, they too will lower production, and a decrease in demand and decrease in expenditure on materials by the suppliers would affect the next level of suppliers in the same way. This may result negative effects such as a drop in GDP.
Unemployment occurs when certain factories or companies close down, and this is especially serious when there is a financial crisis where recession and unemployment is rampant. When a company closes down, many jobs are lost. Since what one spends is what another earns and one is unemployed, he has lower purchasing power and would also prefer to save more as one is likely to be uncertain of the future. When a large number of people are unemployed, collectively, their expenditure would be much lower. This would inevitably also lead to a decrease in demand. On the supplier side, if there’s lower demand and lower income, they too will lower production, and a decrease in demand and decrease in expenditure on materials by the suppliers would affect the next level of suppliers in the same way. This may result negative effects such as a drop in GDP.
Loss of National Output
Unemployment causes the scarce resource labour to be underemployed since part of the workforce is not being used. Hence production is not at its maximum and thus underemployment of resources would lead to a loss in potential national output. If the situation does not improve in the long run, aggregate supply would drop and hence results in a continuous loss of potential national output and hinders the potential of the country’s growth.
Unemployment causes the scarce resource labour to be underemployed since part of the workforce is not being used. Hence production is not at its maximum and thus underemployment of resources would lead to a loss in potential national output. If the situation does not improve in the long run, aggregate supply would drop and hence results in a continuous loss of potential national output and hinders the potential of the country’s growth.
Fiscal Costs
One way government gets revenue is through tax revenue. This simply involves taxing the income of people, based on their income. When there is unemployment, the government would collect less tax revenue as a result since the incomes of people are lower. This loss would increase as unemployment increases. Unemployment can result in debt and poverty, and the government has to take care of these people, hence welfare spending would also increase at the same time. In cases where unemployment is very high, there would be a budget deficit, due to a combination of the two, loss of tax revenue and increased welfare spending. This would result in the government having a limited budget to spend on the many areas as well as decreased spending on public and merit goods. It might also burden the employed since the government might increase tax rates to boost tax revenue.
One way government gets revenue is through tax revenue. This simply involves taxing the income of people, based on their income. When there is unemployment, the government would collect less tax revenue as a result since the incomes of people are lower. This loss would increase as unemployment increases. Unemployment can result in debt and poverty, and the government has to take care of these people, hence welfare spending would also increase at the same time. In cases where unemployment is very high, there would be a budget deficit, due to a combination of the two, loss of tax revenue and increased welfare spending. This would result in the government having a limited budget to spend on the many areas as well as decreased spending on public and merit goods. It might also burden the employed since the government might increase tax rates to boost tax revenue.
Social Costs
An increase in unemployment leads to social deprivation. Social issues such as increased crime rates and lower life expectancy are all related to unemployment. For instance, people who have lower income and are in debt might resort to crime to earn themselves a living, and high employment would lead to more of such people, leading to increased crime rates. Furthermore, some places with constantly high unemployment rates might observe high inequality in income, and this is even more prominent in countries with high growth but high unemployment.
An increase in unemployment leads to social deprivation. Social issues such as increased crime rates and lower life expectancy are all related to unemployment. For instance, people who have lower income and are in debt might resort to crime to earn themselves a living, and high employment would lead to more of such people, leading to increased crime rates. Furthermore, some places with constantly high unemployment rates might observe high inequality in income, and this is even more prominent in countries with high growth but high unemployment.
Impacts of Unemployment in the Philippines
Having looked at some common impacts of unemployment, let us see what's applicable to the Philippines.
Social Costs
Social Costs, specifically high income inequality, is a result of unemployment in the Philippines. Philippines has a Gini coefficient of 43.0 in 2009, which shows that its income inequality is rather high since the closer the Gini coefficient is to 1, the greater the income inequality. It has also been shown that crime rates in the Philippines is related to unemployment. Moreover, high poverty rates and hunger rates may be caused by unemployment too.
Social Costs, specifically high income inequality, is a result of unemployment in the Philippines. Philippines has a Gini coefficient of 43.0 in 2009, which shows that its income inequality is rather high since the closer the Gini coefficient is to 1, the greater the income inequality. It has also been shown that crime rates in the Philippines is related to unemployment. Moreover, high poverty rates and hunger rates may be caused by unemployment too.
Philippines is generally more socially affected by unemployment and less economically affected. Philippines' economy is doing well and with high GDP, it is presumed to be one of the top economies in the world in by 2030. Hence, social impacts are generally more applicable to the Philippines, but not so much on the economic costs of unemployment.