The social costs of unemployment must be added in order to obtain a comprehensive measure of the costs of unemployment. The social problems which generate psychological costs as well as costs related to health care, protection against crime, social tensions, human resources losses to name a few must be recognized. Economic Costs Associated with Unemployment Canada's economy suffers losses in production because of unemployment and, as a result, does not reach its potential level of production. If full employment could be reached, it is estimated that production could be significantly increased. Unemployment and Government Budget Costs Governments, like other economic agents, share a portion of the economic costs created by unemployment.
Governments raise revenues from production in the form of taxes.
Those taxes are then redistributed, via various economic agents, in the form of transfers and subsidies. Governments suffer revenue losses and increased expenditures because of unemployment. The ARB analysis reviews several studies with different approaches to better understand the impact that unemployment may have on people's physical and mental health and to determine the social costs it entails for individuals and society. Some of the studies seek to assess the psychological impact of unemployment. Others attempt to determine the effects of unemployment-related stress or shock on the incidence of various illnesses or on mortality.