Unemployment is a macroeconomic phenomenon that directly affects people. When a member of a family is unemployed, the family feels it in lost income and a reduced standard of living. There is little in the realm of macroeconomics more feared by the average consumer than unemployment. Understanding what unemployment really is and how it works is important both for the economist and for the consumer, as it is often discussed.
The Costs of Unemployment
Because most people rely on their income to maintain their standard of living, the loss of a job will often directly threaten to reduce that standard of living. This creates a number of emotional problems for the worker and the family. In terms of society, unemployment is harmful as well. Unemployed workers represent wasted production capability. This means that the economy is putting out less goods and services than it could be producing. It also means that there is less money being spent by consumers, which has the potential to lead to more unemployment, beginning a cycle. However, in general, while unemployment is harmful for individuals, there are some circumstances in which unemployment is both natural and beneficial for the economy as a whole.
