The Reason Why Unemployment Destroys Our Economic Potential

During the 1930s, the Great Depression plagued Americans with a 25% jobless society. At that time, nearly one-third of the U.S production capacity was sitting idle. Since then, Americans have faced a number of smaller hits to the economy; the most recent in 2001 (not including 2008!). In that year alone, unemployment increased by about 2 million workers.

Why is unemployment so devastating to an economy?

Certainly the U.S. isn’t the only country that faces these hardships. Since 1995 there have been several larger nations that have faced difficult times of increased unemployment, including Japan, Argentina, South Korea, Mexico, and Germany. Unemployment for economies is a global issue! We should all be concerned.

Have you even wondered as you’ve listened to political debates or new reports why a huge loss in jobs is such a big deal to a nation?

The quick answer might be that you people suffer in financial hardship, or that the economy just plain won’t be as strong. But why?

It all goes back to the production possibilities model that is often spoken about by economists. Typically, it will graphically create a curve that displays the different combinations of goods and services that our society can produce in a fully employed economy. In other words, if everybody has a job, how much can we potentially do, as a whole, to improve the quality of life in a nation by providing more goods and services.

And, again, from an economic standpoint- the more goods and services produced, the lower the cost to us!

Unemployment kills an economy because of the missed opportunity of more output! And that output will make more goods and services available to the average American, which as a whole will bring down the cost of those goods and services!

Does unemployment effect the employed?

Absolutely! Be concerned and be aware of who you put in office for this reason; we want individuals who know and understand economics because that will directly impact our lives.