GDP Gap §

The economic Cost of Unemployment can be represented by the “GDP gap”. The GDP gap is where actual levels of production and income lie inside, it is those that could be achieved according to the Production Possibility Frontier.

The Direct Monetary Cost of Unemployment arises due to lower levels of Aggregate Consumption, investment, and business confidence. as well as additional welfare payments made to the unemployed from tax.

• the below dotpoints are guesses
  • Aggregate Consumption is lower due to more conservative spending as people only spend on essentials.
  • Investment lowers due to reduced Aggregate Consumption
  • Business Confidence lowers since the are reliant on consumption which has lowered The Opportunity cost of Unemployment arises from lost taxtion spent on welfare that could have been spent on long-term beneficial projects for all, like infrastructure, health, or education.

#econs-example

With a few assumptions, it is possible to estimate the extent of lost production and income. In june 2022, the AWOTE (average weekly ordinary time earnings) for adults employed full time was approximately 875 million per week, or about 860 Jobseeker bill (assuming all eligible people applied) of approximately $25 billion p.a.