This is from a CNN report from last December, so today’s total is at least $100 billion more, or a minimum of $534 billion. But this large number greatly understates the cost of unemployment.
Consider that the official number of unemployed people is roughly 14 million. The average household income is $49455, according to a recent USA Today article. From a back of the envelope calculation that means the nation is losing, annually, $700 billion in income in order of magnitude. While it’s losing this national income caused by unemployment taxpayers are also paying out and additional $100 billion for unemployment benefits. The total loss of income, and demand, is therefore a staggering $800 billion! Annually.
This doesn’t include additional billions of lost income from another 4-6 million in people who are underemployed and working fewer than a full workweek.
The cost to the nation’s annual economy is staggering. Most of it’s a total waste and total loss that cannot be recovered.
Meanwhile Congress does nothing to hire directly on much needed infrastructure projects, projects that would greatly reduce unemployment and thus dramatically increase the nation’s income–not to mention decades of productivity improvements such projects would produce. A similar positive effect would result from direct transfers to states and municipalities preserving existing public employment. Official figures are that almost 700,000 employees have been laid off at the local government level, increasing the unemployment rate by a full percent, while decreasing annual production by nearly 1% as well.
From one point of view, what we’re doing now is to pay people to consume more than they produce–a pretty good definition of what unemployment represents. What we should do instead is to pay people to produce more than they consume, which is precisely what we need to be doing to have our economy recover. And the best, most effective way to do that is for the government to hire directly. Although the private economy has produced 4.5 million jobs for the past couple years, it is not enough.
Too many households are still constrained from spending because their major asset, their home, is worth less than what they paid for. Millions of others are simply unemployed and have no productive work to restore their incomes for much of anything other than what unemployment and food benefits might offer. The private economy isn’t going to produce robust job growth until demand levels are restored to previous levels.
With demand destruction at $700 billion plus per year private firms simply cannot hire profitably. Funding that raises employment pays for itself many times over.