Costs of unemployment: decreasing pressure on the state's budgets

Abstract

"The macro economic opportunity-cost of total unemployment means in a broad theoretical view the loss of gross domestic product (GDP) which results when factors of production are not utilized. This article concentrates on the fiscal costs of registered unemployment which are more carefully defined and receive in general most attention from the public. They include the expenditures on unemployment and social benefits as well as the lost revenues of direct and indirect taxes and lost payments to the bodies of social insurance (unemployment, pension, health and care) which coincide with registered unemployment and loss of labour income. The fiscal costs of unemployment in the year 2011 amount to 56 billion EURO. 55 percent result from expenditures and 45 percent result from lost revenues. From the year 2005 to the year 2011 the fiscal costs of unemployment decreased by 32 billion EURO (- 36 %).<br> All of the state's budgets are affected by the cost of unemployment. The Federal Government and the Federal Employment Agency which is the legal body of unemployment insurance bear the bigger part. Over the years the Federal Employment Agency's burden decreased more than in the average because total unemployment declined and changed its composition due to labour market reforms. Despite the decreasing pressure on the budget a lower rate of unemployment insurance is not recommended. Accumulation of current surplus in the reserve fund would provide for future risks and challenges of labour market policies in an uncertain economic environment." (Author's abstract, IAB-Doku) ((en))

Cite article

Bach, H. & Spitznagel, E. (2012): Kosten der Arbeitslosigkeit: Druck auf öffentliche Budgets lässt nach. (IAB-Kurzbericht 08/2012), Nürnberg, 8 p.