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Unemployment and Its Wider Impact

Abstract and Keywords

Higher unemployment affects many more people than those currently out of work. A society with unemployment remaining high for many years is very different from one providing adequate opportunities for all who want work. The lack of jobs can be a major obstacle to preventing and reducing poverty and exclusion not simply among the unemployed but also among single parents, older people, and those with disabilities. Equal opportunity programs and rehabilitation services also encounter particular difficulties. The level of unemployment has wider implications for the distribution of resources, power, and opportunity across society. But analysis and research into this wider impact remain limited. The reasons lie in part in a general shift away from structural analyses. Yet more and better understanding of the broader impact of unemployment on society may help us to take account of and respond to the experiences of those currently out of work and to the wider repercussions.

Keywords: Wider unemployment, Poverty, Low-pay no-pay cycle, Social security, Stigma, Inequality


“Beyond the men and women actually unemployed at any moment, are the millions more in work at that moment but never knowing how long that work or any work for them may last” (Beveridge, 1944, pp. 247–248). This statement from the final chapter, “Full employment and social conscience,” of William Beveridge’s classic Full employment in a free society may appear obvious to any reader, but surprisingly little time has been given to considering its implications.

A society with unemployment remaining high for many years is very different from one that provides adequate opportunities for all who want work: any increase in unemployment affects many more people than those currently out of work. The level of unemployment has wider implications for the distribution of resources, power, and opportunity among different groups and classes in society. Yet nearly all the research and analysis conducted of the impact of unemployment have been on those out of work (see Paul et al., this volume, and McKee-Ryan & Maitoza, this volume) with scant consideration to what it, or the threat of it, means to those in work or to the effects on the wider society. As a result, this chapter has to draw from sources over a considerable period of time.

The chapter examines how changing unemployment can affect the balance of power in the labor market and how the impact of this may vary across societies. The significance of higher unemployment for public and other services and the wider costs for the economy and society are discussed. The impact for different generations is also explored—those still in school, those of working age, and even after that. The final sections of the chapter consider the ways that the impact of unemployment can be modified by, for example, the effect of automatic economic and social stabilizers and the role of social security and protection in reducing the risk of poverty and exclusion, even when unemployment is high. One particularly pervasive belief that joblessness leads to crime is explored. The conclusions summarize the unequal burden of the social and economic costs (p. 100) of high unemployment across and within societies. While stressing that different policies can help to modify the impact, it emphasizes the value of high stable levels of employment for the sounder social development of any society.

The Balance of Power in the Labor Market

With changes in demand, the shift in the balance of power between the employer and the worker, between the employing and the working classes, is significant. The higher the unemployment, the more the balance tilts in favor of the employer: “hiring requirements tend to rise—the definition of an ‘acceptable’ worker is tightened up,” as Lloyd Reynolds, a pioneer of labor market analysis, pointed out (Reynolds, 1951, p. 73). As a consequence, those with the least bargaining power in the labor market—such as those lacking skills and/or belonging to ethnic, religious, and other minorities—become even more vulnerable to exclusion and deprivation. The risk of low pay and poor working conditions is increased. By contrast, with lower unemployment employers may have to recruit more widely, invest more in training and recruitment, and make more adjustments to promote flexible working time that allows a “family-friendly” and better “work–life” balance for their employees.

How working relations can change after layoffs is illustrated by a Finnish national study that found the stress of increased insecurity among those that remain is likely to be exacerbated by extra work that rarely brings extra pay. “Downsizing may imply a one-sided renegotiation of the terms of the psychological contract between the organization and its employees, such that the latter (1) receive less from this relationship and (2) invest more in this relationship. Both processes may result in an imbalance between investments and rewards, which in turn may lead to lower well-being” (Kalimo, 2003, p. 9; Bambra, 2010, p. 215). This could be affected by the scale of the reductions and the broader labor market context. It is not clear if or how far the balance shifts the other way with an improvement in the labor market.

“Liability to unemployment or insecurity of tenure” is “the distinguishing feature of the proletarian estate” (G. A. Briefs, 1937, quoted in Lockwood, 1958, p. 55). This central element has clearly persisted in the United Kingdom at least: analysis over 8 years of the British Household Panel Survey showed that the two higher classes of the seven classes measured were “50% less likely to have any experience of unemployment and 75% less likely to have 12 months or more accumulated unemployment [over the 8 years] compared to those in” the bottom two (ISER, 2002, p. 7). As Townsend showed in Poverty in the UK, those with unskilled jobs particularly “live in the shadow of unemployment” (Townsend, 1979, p. 601).

In societies in which this pattern persists, unemployment is not simply a “distinguishing feature” but a central element of The hidden injuries of class (Sennett & Cobb, 1973) that itself increases the insecurity of those more vulnerable to being out of work. “Anticipating that one will be dismissed during the next year has a quite substantial effect on worker well-being” (Kalimo, 2003, p. 9). Those in poorer-paid work with less skills are more prone to be out of work and have less resources to cope with it. For many of them unemployment is a characteristic of the job, expected and endured with greater frequency as a worker grows older or has poorer health. That experience of unemployment may itself damage health and accelerate the aging process (Bartley, Ferrie, & Montgomery, 2006).

Differences across Societies and over Time

High levels of unemployment bring “consequences so serious for the whole of society (and not just for the unemployed) that a strong case can be made for low rates of unemployment to be a national goal” was the conclusion of a pioneering study of well-being in Australia (Travers & Richardson, 1993, p. 223). A generation ago Goran Therborn examined Why some peoples are more unemployed than others. He called attention to the importance of a “historically deeply rooted . . . commitment to full employment” (Therborn, 1986, p. 32) leading some countries to respond to economic crises without allowing a surge in joblessness.

Differences in preventing and containing unemployment can significantly affect the ways in which unemployment impacts societies, their institutions, and their members. With the growing polarization in many labor markets across the world, the degree of commitment to full employment cross-nationally and in supranational groupings and international organizations has weakened, especially as spreading global economic and financial crises have led more governments to cut back on public spending and risk higher unemployment as growth has faltered.

The organization of the labor market in different societies is likely to affect the impact of any particular level of unemployment. Where internal labor markets have been developed with limited (p. 101) points of entry and greater reliance on promotion than external recruitment for most posts, the more established, skilled workers may be even better protected against loss of work whereas those unable to gain entry are left more vulnerable still to job insecurity. “The more secure are the ‘ins’, the greater the penalty for being an ‘out’” (Kerr, 1954, p. 105). What Kerr called the “balkanization” of labor markets can become reinforced by increased unemployment, leading to wider inequalities and so reduced social mobility as the gaps between the rungs of the social ladder are widened.

This is not to argue that the maintenance of high employment by itself is sufficient to avoid problems such as these, but experience over time and across countries strongly suggests that it is a necessary requirement. Many basic social policies depend upon unemployment being kept low for their success. A comparative review of European programs to help the “hard-to-employ” led Beatrice Reubens to stress the value of low unemployment as a prerequisite for successful rehabilitation and reemployment (Reubens, 1970). “Maintenance of a high general level of economic activity has priority over improved labor market organisation . . . because it is a structural prerequisite to the latter” (Reynolds, 1951, p. 75).

The ways that society, its institutions, and its members, particularly the more powerful, regard unemployment and respond to changes in it can be critical. The fear of unemployment and its insecurity is likely to be felt differently in different societies depending not only on past experience but also on the stress they place on individual achievement and how far they believe in the openness of opportunity. The legacy of past recessions, for example, may linger for years, reinforcing resistance to change. In the United Kingdom the fear of insecurity persisted from the interwar depression into high employment years as a folk memory dominating trade union–employer relations (Burkitt & Bowers, 1979, p. 13). In the United States the interwar “depression imposed its scarcity regime and disciplines on a society accustomed to a ‘politics of abundance’” (Elder, 1974, p. 284) and The invisible scar (Bird, 1966) was borne by many for a long time (see also Terkel, 1970; on Australia see Travers, 1986). Voting studies suggested the depression may have shaped the political views of the generations most affected for decades. Work insecurity was found to “foster a retreat from both work and the larger communal society” (Wilensky, 1961, pp. 523–524 and 539) and “can lead to a misanthropic view of society and a pessimistic view of life” (Hyman, 1979, pp. 290–293).

Some have argued that unemployment should be used as a policy tool to be increased, or allowed to increase, to keep inflation low by subduing workers’ pay demands. Others have seen it as a way to control trade unions more generally. It has not only been “in the embattled right-wing camps of Thatcher and Regan” in the 1980s but “the bourgeoisie has often seen high unemployment as a means to roll back the power of the working class and the trade unions” (Therborn, 1986, p. 133). Those with considerable influence and power, and little risk of unemployment, often accept, even engineer, higher unemployment because of its presumed effect on the behavior of others, and not just those out of work. In fact, they are less concerned with jobseekers than those in work and the disciplining effect of the “reserve army of labour.” “ ‘Discipline in the factories’ and ‘political stability’ are more appreciated by the business leaders than profits. Their class instinct tells them that lasting full employment is unsound from their point of view and that unemployment is an integral part of the ‘normal’ capitalist system” (Kalecki, 1943, p. 326, although the causes of the latest financial crises might lead him to modify the first sentence). However, too much unemployment may be seen as a major problem by governments, putting their own future at risk. How the issue of full employment can slip or be pushed off the political agenda is brought out well in Alan Deacon’s analysis of the first generation of postwar politics in the United Kingdom (Deacon, 1981).

Later, in the early 1980s, the UK Conservative government under Margaret Thatcher believed that the unions were too powerful and the “short sharp shock” of unemployment would bring them to their senses, stopping what it saw as workers “pricing themselves out of jobs” and pushing up inflation. By contrast, in 2008, the causes of the sudden decline in demand with “the credit crunch” across many societies were generally recognized to be far from the ordinary worker whose job was at risk, and employers then were more willing to keep staff using short-time working to spread work and avoid laying them off than in the 1980s. Even then different countries acted to restore and maintain demand to very different degrees: in those that gave priority to reducing budget deficits the consequences of the recession were felt more widely with cuts to public services affecting very many more than the increased numbers out of work.

(p. 102) The Impact on Public and Other Services and the Wider Costs

Success in many health and personal social services requires restoring people to a “normal” life in the “community” after a particular crisis, whether it is due to some physical injury, an illness, a breakdown, or a period in prison. What this usually means is getting people back into a job since it provides the main source of regular income, status in society, a daily routine, and a range of social contacts. With unemployment rising and remaining at a high level, such rehabilitative measures are severely threatened. Higher unemployment need not have contributed to the initial problem, but it is likely to inhibit its solution and can worsen it. Equal opportunity programs to reduce discrimination against minorities also run into difficulties when job openings become limited.

The impact is further intensified by the fact that the increased unemployment itself, with more people affected by the stresses and pressures of being out of work, and for longer, places greater demands on many public services (Popay, 1983). Someone with a disability or mental illness may be able to cope while working, but the loss of their job, its resources, and its supporting structure can make their condition worse, or at least more visible, and increase their difficulties in many ways including getting back to work.

There is a double pressure imposed on government and the services. With extra spending on out-of-work benefits and the heavy loss of direct and other taxes that those now unemployed would have provided while working, public resources diminish at the same time as needs increase. The total budgetary loss to the government per person unemployed is not just the cost of the direct spending on benefits to those out of work, but income tax and social security contributions are also lost, and so too are indirect taxes as people’s spending drops with their reduced income. In the United Kingdom the revenue loss has been greater than the additional spending (e.g., Unemployment Unit, 2000/2001, pp. 20–21). This lost revenue is rarely taken into account publicly in government reports or discussed in policy debates, but it adds considerably to any fiscal crisis—a point well recognized in a Swedish saying: “this country is not rich enough to afford unemployment” (quoted in the Kreisky Commission, 1989).

The costs of higher unemployment become added to the other factors making greater demands on welfare state provisions. In many countries the needs of the increased number of unemployed add to those of an already rising number of retired groups and other groups in need, and do so at a time when escalating health costs and rising expectations of public provision have been making heavier demands upon state services that are also restricted by budget deficits. Furthermore, the higher unemployment can increase the need for spending among these other groups, including those in work and others outside the labor force (see below).

Under these increased pressures of rising need and falling revenue, supply and standards in many public services are likely to decline. Those who can afford it turn to alternative forms of provision outside the state. They may purchase these services privately or support demands for increased provision by their employers. Resource problems become intensified when, as in many countries, this alternative provision through the market is supported and subsidized by tax breaks for employers and employees (e.g., tax relief for private health insurance, housing costs, and pensions). These less visible subsidies reduce public revenues even more and further squeeze public expenditure to the benefit of the better-off. This becomes one more factor leading to the widening of inequalities in resources, power, and security under the pressure of increased unemployment.

The Varying Impact across the Generations

The Impact on Those Still at School

The prevailing trends in unemployment nationally and at a local level can have an effect on education. Many teachers have spoken of the ways in which schoolchildren are affected by high unemployment with the consequential reining-in of career aspirations (Sinfield, 1981, see also McKee-Ryan and Maitoza, this volume). Young students from deprived areas or minority groups have recounted how some teachers and career advisers dismissed their hopes of entering particular careers when unemployment is high.

Those entering the labor market when demand is high can find training and work opportunities, but, as demand falls, employers cut training programs as well as recruitment. Some university graduates are forced to take jobs previously expected to be taken by sixth-formers, who in turn are pushed down the labor market with knock-on effects all the way down. During a prolonged downturn the result becomes “a lost generation,” that finds new school-leavers preferred to them when demand picks up and realizes (p. 103) that their whole working lives may be affected by long-term political and social repercussions.

By contrast, “stable employment contributes to building up skills, work experience, and social networks, although some forms of work will also have a psychological cost. . . . The process of identity formation is, therefore, far more at risk, with accompanying rises of relationship breakdown, poor mental health, addiction, and accidental and self-inflicted harm” (Bartley et al., 2006, p. 90).

Qualitative longitudinal study on the United Kingdom has shown that “young people enter a period of economic recession with prior resources and particular trajectories already in play in their lives” (Edwards & Weller, 2010, p. 125). For those with some prior handicap the problems may be particularly acute. One institution for young people with learning disabilities developed a successful program that enabled them to develop sufficient skills to take some basic jobs at a nearby airport. The visible success of the scheme encouraged new entrants and the teachers. It also helped to enable some to make the move out into the community and generally helped to reduce the social distance from the rest of the world. With increased unemployment “able-bodied” competitors were preferred for the jobs that remained: the young people became locked into repeating training with no successful exit, and the walls of “the total institution” became higher again, reinforced by the fact that the teachers also became demoralized and sought other opportunities.

The Impact on Those of Working Age

It is not only the workers who cannot get jobs who lose when unemployment rises, but voluntary job-changing also falls as those remaining in work are more likely to cling to their jobs, however unsatisfactory, even though they resent being trapped and the stagnation of their careers. This creates a fertile ground for cynical and dismissive stories about the unemployed as scroungers that can serve to weaken public concern about the level of unemployment.

When employers set their requirements higher in looser labor markets, the chance of moving up are further limited. This can be compounded as larger organizations reduce external entry to many jobs, relying on internal promotions to reduce staff numbers. The effect on career development can be felt over many years, especially when younger generations with better training are likely to be recruited to better paid and more secure work.

The way that “aggregate unemployment adversely affects all principal wage earners in the community, not just those personally unemployed,” is also brought out in a study based on telephone interviews in Los Angeles county from 1976 to 1982 (Dooley, Catalano, & Rook, 1988, pp. 117–118). It found that those already vulnerable were likely to be most affected (although it provided little on the actual effects). Similarly, in Denmark “the health consequences of unemployment and, more generally, of economic instability,” according to one study of a shipyard closure over 3 years, “apply not just to unemployed people, but also to large groups of employed people whose conditions of employment are uncertain or whose jobs are temporary” (Iversen & Sabroe, 1988, pp. 149–150). The value of better, more open, and more accountable procedures on dismissals helping to reduce the stress among the workforce was noted.

Anxiety about job security as demand falls affects workers before redundancies are announced, and the impact on health may be across the labor force of a company, affecting those who retain their jobs as well (Bambra, 2010, p. 214; Beale & Nethercott, 1992). This may be all the more likely when further layoffs are expected. Those who already have health or other problems can be particularly affected by declining demand. “In times of low unemployment, the great majority of men with long-term illness are in fact employed, and thus deriving most of their income from paid work” (Bartley et al., 2006, p. 89) and are less subject to social exclusion through poverty. When demand falls, those with poor health or some disability are more likely to be edged or forced out: they may even be given incentives to take redundancy (MacKay & Davies, 2008). Higher unemployment can have particular significance for mental illness: “unemployment is a severe risk for public mental health that must be fought with all possible means” concluded a meta-analysis of studies from “26 predominantly western” countries (Paul & Moser, 2009, p. 271). Once out of work, these people experience more difficulty than others in obtaining new jobs and so have a greater risk of prolonged unemployment, poverty, and premature withdrawal from the labor market.

Unemployment and Life after Work

Unemployment impacts the lives of retired people in two ways. First, the quality of retirement is affected by how those retiring have been able to plan for that event. “Working life matters” is the subtitle of a study that examines the experience of older people (Bardasi & Jenkins, 2002). The security and rewards of their past employment (p. 104) have a major impact on the pension they have been able to build up, particularly private ones in which no allowance is made for contributions lost while out of work. A couple who can both plan their retirement from secure jobs are able to save for their retirement, building up their resources in their last years of work and replacing major household items, as well as retiring with adequate, if not better, pensions.

This is a very different experience from those whose last full-time jobs were 10 or even 20 years before the standard retirement age when a sudden redundancy removed the chance of building up savings, especially among those in less secure work with the least chance of generous payoffs. In the intervening years they will have exhausted any savings and may already be in debt to maintain even the limited level of living that a pension reduced by the lack of contributions from the time out of work may do little to ease. Where unemployment has been high or has increased during the last years in work, more older people will be closer in experience to the second couple: opportunities for part-time work to supplement inadequate pensions into retirement are also likely to decrease with increased unemployment.

Longitudinal studies have revealed that it is not just the quality of life that is affected by unemployment, but lives are also liable to be shortened by the experience (Bartley et al., 2006). However, a society’s institutional arrangements for retirement can shape the experience: in countries in which state benefits are low, for example, the risks and effects of poverty and deprivation in old age are greater.

Second, the level of unemployment during people’s retirement may also affect their resources. When and where unemployment is high, older people are more likely to be sharing the family’s poverty resulting from unemployment by helping younger members instead of benefiting from the higher standard of living achieved by members in full-time employment.

Modifying the Broader Impact of Unemployment

Social and Economic Stabilizers

The ways that unemployment has an impact not only on individuals directly affected but also on other groups and on the wider society can be significantly modified. The effects vary across societies and over time: they are by no means uniform or inevitable. In particular, unemployment benefits and other financial support during unemployment can act as an automatic economic built-in stabilizer that benefits the whole society. The partial replacement of earnings helps to limit unemployed households’ drop in income: it thus maintains purchasing power in the wider economy so that demand for workers does not fall even further. Debrun and Kapoor’s analysis of data from 49 industrial and developing economies led them to their subtitle: “automatic stabilizers work, always and everywhere,” “strongly contributing to output stability regardless of the type of economy” (Debrun & Kapoor, 2010, p. 5).

The effect, of course, depends on the level and duration of benefits and the ease of access to them. “The more highly developed the social protection in a system and the more generous the social benefits provided, the greater the effects of automatic stabilizers on the economy are likely to be” (Euzéby, 2010, p. 74; Dolls, Fuest, & Peichl, 2012). The current trends across many countries to reduce insurance coverage, limit benefits, and tighten entitlement conditions are weakening this protection. This is all the more counterproductive when many economies are failing to maintain the growth necessary to maintain employment.

A good benefit system can be a social as well as an economic stabilizer. “It is the response to the aspirations for security in its widest sense. . . . Its fundamental purpose is to give individuals and families the confidence that their level of living and quality of life will not, in so far as is possible, be greatly eroded by any economic and social eventuality. It is the guarantee of security that matters most of all, rather than the particular mechanisms” (ILO, 1984, para. 39).

This “guarantee of security” affects those in work, increasing their willingness to risk changing jobs and reducing the immobility in the labor market that can inhibit the expansion of new industries. Both trade union and employer responses to changes in companies and in the labor market more generally are likely to be influenced by the degree of protection that is seen to be available to workers. The extension of unemployment insurance to “nearly 1 million domestic workers” in South Africa is likely to have reduced the fear of job loss for a group, predominantly women, that has long been highly vulnerable to great insecurity in the informal market (Lund, 2009, p. 302). “Additional social buffers” such as strengthening the employment and training services can also support the automatic ones (Euzéby, 2010, p. 76).

The value and importance of social security in reducing the impact of increased unemployment and (p. 105) preventing further effects both on the individual and the wider society have not been extensively discussed (Sinfield, 2012). This neglect is itself a reflection of “the individualisation of the social” (Ferge, 1997) that has become a dominant trend in many societies with the shift toward the market and cuts to public spending. As a consequence, there has been little comparative research into the differences in the extent of security and stability in the labor market that countries provide. One rare comparative study with data on over 15,000 employees in 24 countries concluded that the existence of a “social safety net” as well as broader societal support provided a greater sense of security (Debus, Probst, König, & Kleinmann, 2012). However, studies of the different benefit systems reveal that some, for example, offer better support to higher-paying occupations and little support to groups more marginal to the labor market, thus helping to reinforce core and peripheral polarization and the social exclusion of certain minorities; others provide stronger support for older redundant workers (Clasen, Gould, & Vincent, 1998).

The Wider Impact of the Political and Social Construction of Unemployment

In societies in which there is greater concern for work incentives, the extent to which benefits of any type help to replace lost wages and so bring greater economic and social stability is more limited. One detailed comparative analysis of 18 “rich democracies” led the U.S. author to conclude that in his own country there is “an unbalanced infatuation with trying to detect welfare disincentives and dependency” (Brady, 2009, p. 142). This is also true of the United Kingdom: 40 years ago contributory-based benefits were received by 75% of those drawing any benefits while unemployed, but the proportion has now fallen below 20%. Maximum benefit duration has been cut from 12 to 6 months and the value relative to wages has fallen by 50% in the past 30 years to some 10% of the average. Penalties and sanctions have been increased despite the lack of any evidence supporting the policy swing to “conditionality” (Sinfield, 2013).

A poor benefits system with low benefits and increased conditionality and sanctions can add to the unsettling and destabilizing effect of increased unemployment not only on individuals but also on their families and others, on communities, and on the wider institutions of society, leading to and reinforcing a second-class citizenship for certain groups and areas. The dominant public and political discourse in countries with poor benefits seems more likely to “blame the victim” out of work (Ryan, 1971) than in others with more generous, or at least more adequate, benefits. Curiously, it seems to be in places in which benefits are relatively low that there is more concern that people out of work are “resting” or “languishing” on benefits and so should be more vigorously policed and controlled to “regulate the poor” (Piven & Cloward, 1972). For example, in countries such as the United States and the United Kingdom the fear and shame of being out of work among those worried about losing their jobs are likely to be much greater than in, for example, the Scandinavian countries, although there appears to be no systematic research on this.

Acceptance of that political and social climate amid high unemployment effectively lets governments, employers, and others off the hook, reducing the pressures to bring about increased demand in the labor market, not only in reducing the numbers out of work but also in tackling problems of discrimination and equal opportunity. Higher unemployment becomes a double blow for less popular and powerful groups, weakening their position in the labor market and public support for more positive action to help them. Those out of work become blamed for high and prolonged unemployment, thus increasing the divisions and tensions in society.

These views that lay the blame for continuing unemployment on those out of work have persisted despite sound research to the contrary. For example, analyses over half a century in the United Kingdom demonstrate that changes in long-term unemployment are closely related to the changing overall level of unemployment and not to altered behavior by individuals out of work (Webster, 2005). Claims of “welfare dependency” and a “culture of entitlement” with two or more generations that have never worked are not borne out by detailed research (see especially Shildrick, Furlong, MacDonald, Roden, & Crow, 2012; on EU Eichhorn, 2013). Yet these myths continue to be supported and even fostered by politicians and media while studies reveal the myth-making and the harm it does in areas in which many are trapped in “low-pay no-pay” labor markets (Shildrick, Furlong, MacDonald, Roden, & Crow, 2012; Shildrick, MacDonald, Webster, & Garthwaite, 2012). This scapegoating not only increases pressure on many who are already vulnerable but affects their families and can reduce social cohesion in local communities leading to (p. 106) greater social exclusion and rejection. The persistence of stigmatizing “demonization” may be fostered by some in the belief that benefits can be cut more easily and with less political fallout when their recipients are presented as “undeserving” (Taylor-Gooby, 2012).

Poverty and Unemployment

Higher unemployment leads to an increase in poverty, as Brady’s (2009) comparative analysis has shown. It affects many more than those recognized as unemployed, including, for example, single parents or older and/or disabled people who might have sought part-time work to supplement low benefits or pensions. Given the class and geographic concentration of unemployment, there is a greater risk that many in the same family may be affected with children leaving school unable to find work while their parents and their grandparents may have lost their jobs. Where previously those in work may have helped the others to bear the losses, the whole family, whether living together or not, becomes deprived. This can have a knock-on effect on a whole community with shops losing customers and closing, and the general quality of life declining in a downward spiral. Jobseekers find employers resistant to taking on workers from that area because of its reputation for high unemployment, and this only adds to the community’s problems and the difficulties in overcoming them.

However, this downward trend into more and deeper poverty as unemployment increases is not inevitable and can be moderated by the strength of the economic and social stabilizers already established in countries. “Welfare generosity always has a larger effect on poverty than unemployment” is the conclusion of an 18-country study with 30 years of data (Brady, 2009, p. 143; see also Martínez, Ayala, & Ruiz-Huerta, 2001, p. 446). The benefits are not confined to the individual but extend to the broader society. Similarly, in her comparative study of European member countries Bea Cantillon concluded that “the higher the level of expenditure, the lower the level of poverty among those out of work, irrespective of the overall level of unemployment in a country. . . Rich, high employment countries where social spending is low end up with high poverty. This leads to the conclusion that, if it is possible to attain a low risk of poverty without substantial spending, it has not yet been demonstrated” (Cantillon, 2009, pp. 232 and 240).

Lower unemployment by itself does not ensure lower poverty, as particularly revealed in the United States. This emphasizes the importance of the automatic stabilizing effects of good social protection and of the need for decent work and wages to prevent subemployment with its low-pay no-pay cycle. In fact, good stabilizers and decent jobs can help to promote equality, thus reducing the impact of joblessness: the 26-country review cited earlier gives particular emphasis to the “important result that unemployment has comparatively weak malignant effects in economically highly developed countries and in countries with an egalitarian income structure (where the level of unemployment protection usually is high)” (Paul & Moser, 2009, p. 280).

Crime and Unemployment

One of the few broader issues linked with higher unemployment in the public mind is an increase in criminality. However, this may well be more of an assumption than the outcome of rigorous research. Increased crime in the past has been linked to increasing affluence and many other factors. The UK Home Office Research Unit reviewed the available literature a generation ago and briefed the press that the links between crime and unemployment were “very unclear . . . with no discernible pattern” and “no evidence of a significant relationship between the two factors.” Rising crime was also “highly correlated with the consumption of ice-cream, the number of cars on the road and the gross national product” (The Guardian, October 2, 1982).

There appears to be a stronger link between increased unemployment and the greater likelihood that those convicted are sent to prison. This may be partly due to the fact that more of those arrested are without jobs and fines may be seen as less suitable for them; in addition, those passing sentence may believe that imprisonment may be more harmful to someone in work who will lose their job and/or that those out of work are in some way more deserving of a period in prison. If people are out of work, they may be more likely to be refused bail. And unless prisoners have a job to go to, they are also less likely to be given parole. However, higher unemployment was not found to be significantly related to increased imprisonment in one study across 18 OECD countries: there was a stronger negative relation to the level of welfare spending (Downes & Hansen, 2006, pp. 146–147), one more indication of the importance of countries’ social policies in mediating the repercussions of economic change.


“In a society where unemployment is accepted, great material and social gaps develop, resulting in the mutual isolation and alienation of different (p. 107) groups. Any social order not based on full employment must imply a restriction of living conditions and a squandering of human resources” (Swedish Ministry of Labour, 1974).

Yet, as this chapter indicates, analysis and research into the wider impact of unemployment remain limited. The reasons lie at least in part in a general shift away from structural analyses. “Today social and employment policy is characterized by its avoidance of questions about the wider system, in favor of a focus on the ‘margins’, and its downplaying of the involuntary dimension of unemployment while opting for a very subjective and personalized approach to the problem” (Walters, 2000, p. 9; see also O’Connor, 2001, final chapter). Yet more and better understanding of the broader impact of unemployment on society, and not just those currently out of work, could be valuable to readers of a handbook of psychology as it could help to set the context within which they are able to take account of the evidence of other chapters on the experience of unemployment.

Higher unemployment can be a major obstacle to attempts to prevent or reduce poverty and other forms of disadvantage not only among the unemployed but also among single parents, older people, and those with disabilities. Equal opportunity programs and rehabilitation services face particular difficulties, especially when recovery from some crisis means return to employment, the main source for income, status, a daily routine, and social contacts. Unemployment may not have caused the initial problem, but can make its solution harder and even exacerbate it.

However, the impact of unemployment is by no means inevitable, as experience across many countries demonstrates. The welfare state and in particular the benefit systems working as social as well as economic stabilizers can help to reduce and modify its impact. More research is needed, examining unemployment as a characteristic of society and not just of those who happen to be out of work at any time, and taking account of change. “Research has not fully kept up with more recent labor market change,” but it is becoming increasingly clear that “unemployment and work insecurity are part of a process through which health disadvantage is accumulated over the life-course” (Bartley et al., 2006, pp. 91 and 88; Bambra, 2011).

In 1984 I concluded an attempt to examine the wider impact of unemployment (Sinfield, 1984) by referring to a European Commission report that showed how unemployment was affecting political and public views in ways that weakened the drive toward reestablishing full employment as a high priority objective. It still appears particularly appropriate. “Rising unemployment and pressure on living standards have hardened resistance to change, at a time when change is essential for the restoration of economic health and a return to better employment” (CEC, April 1981). Three decades later I endorse that conclusion even more strongly, adding that a return to higher and better employment results in benefits not just for economic health but also for securer democratic and social development across societies.

Research Questions

  • What are the main ways in which the level of unemployment has an impact on the lives of all people across society, and to what extent does it differ among countries?

  • How does the political economy of unemployment vary across societies, and why?

  • What impact do the attitudes and practices of employers, employees, their associations, and unions have on unemployment and full employment over time, across industries, and across countries?

  • To what extent and in what ways do institutions such as the welfare state moderate the impact of unemployment not only on those out of work but also on other groups?

  • To what extent do attacks on those out of work “dependent on benefits” undermine public support for better structural measures to tackle unemployment and distract attention from the problems of the labor market with increasing evidence of the low-pay no-pay cycle? And how does this vary over time and across societies?


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