How Does Unemployment Effect the Economy?

Unemployed people contribute less to the economy because they are spending less. They do not participate in paying tax due to lack of jobs. Consequently, the government ends up borrowing money because of low revenues and high spending. Rise in employment rates also affects other areas, such as quality of health services and living standards. This affects the society in general. In an economy with high unemployment rates, the hours lost by the unemployed are usually unrecoverable.