1. The loss of output in an economy

When unemployment occurs, there are idle resources in the economy in terms of labour. this means the economy is operating inside the PPF (Production Possibility Curve) and the economy's output is not maximised resulting in a loss of economic welfare. If these unemployed persons were productively employed, then it would be possible to produce more goods and services. Thus, unemployment results in a loss of output in the economy.

2. Loss of Tax Revenue

This is the costs the government bears since the unemployed persons do not pay income tax and since total expenditure falls, due to tax revenue from indirect taxes such as VAT also falls.

3. Social Costs eg - Poverty and Crime

When unemployment occurs, there may be an increase in poverty and crimes in the country as well as overcrowding and congestion in cities, where the unemployed persons move to, in order to find jobs. Thus, some areas on the country become depressed.

4. A decline in economic growth

When unemployment is high, people become pessimistic about the future causing expectations to be dismal. Pessimism can cause people to save instead of spending and this worsens the unemployment further as investment falls resulting in a fall in real GDP and consequently a fall in economic growth.

5. Unemployed persons become unemployable

Unemployed persons become unemployable because firms and businesses would believe that those persons would have lost their skills and choose not to re-hire them resulting in further unemployment.

6. Additional Financial Burden on the State

Unemployment results in the government increasing its expenditure on unemployment benefits. Thus, a burden is placed on governments as it requires the allocation of governments limited revenue to provide Unemployment Relief Programs and other benefits aimed at alleviating unemployment.