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The Social Costs of Unemployment


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The Social Costs of Unemployment

The social costs of unemployment to people as individuals, to their families, and to the community as a whole, are:

Poverty, lack of spending money
Frustration, despair
Young people without full-time work experience
Social disillusionment
Ill health
Reduced life span
Mental illness
Increasing suicide rate
Drug abuse, crime

Increased family breakup
Domestic violence

Higher and rising crime rates
Brutalisation of lifestyle
Lost Income:
(1) Loss of income tax from those now unemployed.
(2) Loss of National Insurance contributions which would have been received from both employees and employers.
(3) Loss of Value Added Tax as the unemployed reduce their spending.
Increased Expenditure
(4) Increased cost of Unemployment Benefit (Among developed countries, the British rate of benefit appears to be one of the lowest).
(5) Increased cost of Social Security support payments.
(6) Increased costs for Health Service, Police and Prisons.

Note that persistent lack of care and consideration towards its members leads to a view of society as being hostile and unrewarding. We now see this taking place and see its effects.

The social cost of unemployment to the community is the total cost to the community, is the sum of all the items listed here.

Prices used to be based on 'cost plus reasonable mark-up', and unhindered competition was meant to ensure that the mark-up was reasonable. Prices are now based on what people can be persuaded to pay for what they can be persuaded to buy. The mark-up between producing in a low-wage country, and then selling in a high-wage country, can be enormous.

Manfred Davidmann pointed this out in 1996, also saying that imports were now being priced at what the market will bear, or just under. The enormous profit margins then cause production to move from high-wage to low-wage countries. The consequence is a lowering of standard of living in high-wage countries to that in low-wage countries, instead of a raising of standard of living in low-wage countries to that in high wage countries.

The large additional profits which result from transferring operations abroad then do not result from doing a better job, or from providing better, or more needed, or more effectively produced, goods or services. These additional profits result from importing unemployment into the UK, are the result of dismissing British employees.
See   Exporting and Importing of Employment and Unemployment

It is an accepted principle of economics, that the social costs of an enterprise's operations have to be paid by the enterprise, expressed by the maxim 'The polluter pays'. In other words, the social costs of unemployment have to be paid by the enterprise which caused the unemployment.
See   Community Economics: Principles

To the extent to which an enterprise fails to allow for, and pay, the social costs of its operations, to that extent are its profits derived from passing its operating costs to the community, is it making profits at the expense of the community, is it exploiting the community and its members.

The social costs of unemployment, however, are in the end paid by the unemployed (who are part of the community) and to some extent by the community as a whole. So the enterprise has passed on to the community this part of its operating costs, is making a profit at the expense of the community.

Owners and directors in this way profit from the unemployment and the lower standard of living their operations cause in the home-country. They will continue to profit from increasing unemployment and its consequences as long as they do not have to pay these social costs of their operations. In other words, as long as they are allowed to pass this part of their operating costs to the community.

Sources, with Descriptions

Title   Description
Exporting and Importing of Employment and Unemployment   Discusses exporting and importing of employment and unemployment, the underlying principles, effect of trade between low-wage and high-wage countries.

Shows what is required to halt and reverse the trend towards increasing unemployment and falling living standards in high-wage countries.

Shows what is required to make the system work, as well as the controls required to prevent misuse of the system and to protect people.

There are sections about transferring operations abroad, about importing from low-wage countries, about social costs of unemployment, about community objectives and community support for enterprises, about ownership rights and about ensuring that the way in which enterprises operate is socially responsible.

See 'Press Notices'.

Community Economics: Principles   Allows for the needs of the community and for the basic causes of real-world problems and global needs. Includes sections on owners, directors and managers, actual rewards and differentials, social responsibility, social costs and accountability, misuse of the system, irresponsible behaviour, motivation.

There are sections on problems and their causes, on profit motivation. The roles of owners, directors and managers are described and discussed, as are their social responsibilities and the consequences of irresponsible behaviour.

Manfred Davidmann

Manfred Davidmann is an internationally well-known and respected scientist and author of a number of books and reports which have had and are having considerable impact. His work usually breaks new ground and opens up new understanding and is written in meaningful and easily understood language. Outstanding is that his work is generally accepted as factual, objective and unbiased.

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