Unemployment Means Lost Output and Human Deficits

UNCOMMON SENSE 2 © Revised August 1995

By Helen Ginsburg, Professor of Economics, Brooklyn College of the City of New York and Executive Committee, National Jobs for All Coalition

Unemployment adds to the federal deficit,* and to the already oversized human deficit. And, although it is hardly ever mentioned, unemployment also means a tremendous loss of potential output. In plain language, jobless workers and unused capacity do not turn out goods and services that could be used to raise living standards. Houses that are not built, urban transit systems that are not produced, and child-, health-, and eldercare workers who are fired or not hired cannot meet the housing, mass-transit, and human-service needs of our people.

The magnitude of this loss is not trivial. For example, suppose unemployment in 1994 had been 4 percent–the interim 5-year goal of the Humphrey-Hawkins Full Employment and Balanced Growth Act of 1978–instead of the 6.1 percent experienced in that year. In that case, the nation would have produced roughly $280 billion in additional goods and services–more than $1,000 for every man, woman and child. As noted economist Robert Eisner, former President of the American Economic Association, commented on the staggering loss caused by unemployment: the nation is “literally throwing away potential output.”

Eisner also brings a much-needed correction of the deficit hysteria that has dominated the political agenda by pointing out deficits that are more serious than the budgetary one. Over the long haul, he says, “our deficits are in our rundown infrastructure of roads, bridges, airports, waste disposal facilities” and inadequate environmental protection. They are also in our neglect of “a significant part of a generation growing up semi-literate in an unending cycle of poverty, in an educational system more and more clearly behind that of the World’s other developed nations, in our … gaps in child care and health care and in inadequate housing for tens of millions of Americans. These are our real deficits. They are large. They pose awesome dangers to the future of our economy and our nation.” [“Deficits: Which, How Much and So What?” American Economic Association Papers and Proceedings, May, 1992]

*See Uncommon Sense #1: “Increasing Unemployment Increases the
Deficit; Reducing Unemployment Reduces the Deficit.”


Adapted from Sheila D. Collins, Helen Lachs Ginsburg and Gertrude Schaffner Goldberg, Jobs For All:
A Plan for the Revitalization of America, New York: Apex Press. 1994, pp. 110-111.

Editor: June Zaccone, Economics (Emer.), Hofstra University