Long-Lasting Youth Unemployment Analysis

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Being unemployed when young leads to a higher likelihood of long-term ‘scarring’ in later life in terms of subsequent lower pay, higher unemployment, and reduced life chances. “Wage scarring” is a term for the scarring in the form of persistently lower wages due to a person’s long unemployment experience (McQuaid, 2014). The long periods of unemployment may decrease worker’s skills and productivity which increase the likelihood of a person not being hired or having to accept a lower paid job. This has impacts on both present and future economic growth. At the present time, long-lasting youth unemployment will lower real GDP. High youth unemployment has a negative effect on spending or real GDP as well as economic growth. It affects purchasing…show more content…
Capacity utilization measures the extent to which a business is using its production potential (Tutor2u, 2015). Average production costs tend to fall as output rises, so higher capacity utilization can reduce unit costs, making a business more competitive and profitable. Every country aims to produce as close to full capacity (100% utilization) as possible. If those unemployed youngsters are employed and work optimally, there will be a high rise in the amount of outputs produced. Long-lasting youth unemployment will lower the production capacity utilization of its country. Just imagine, if an individual can produce 2 outputs each day and we have 20 million youngsters unemployed, we have already lost 40 million outputs each day. High youth unemployment in the UK indicates that the country is not producing at full…show more content…
As explained before, at the present time, it will lower both private consumption and investment which result in lower real GDP and slower economic growth. Not only that, it will also decrease government income from tax as well as increasing government spending on unemployment benefits. In the future, if youth unemployment is not being addressed properly, it would lower the production capacity utilization of its country and the production point will move further from the PPF (shift inward). Moreover, it will also degrade the quality of labour force as well as increasing the quantity which will result in a surplus of labour. Prolonged youth unemployment will move the macro-equilibrium to the left as the aggregate demand curve shifts to the left. The future real GDP will also fall and which result in slower future economic

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