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Updated Oct 20, 2023

The Real Effects of Unemployment

Financial concerns are a common concern during unemployment, but there are some other issues unemployed individuals often experience.

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Shayna Waltower, Business Operations Insider and Senior Writer
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This guide was reviewed by a Business News Daily editor to ensure it provides comprehensive and accurate information to aid your buying decision.

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While losing your job may be a devastating blow to your career aspirations and financial stability, it may be an even bigger blow to other areas of your personal life. Researchers have looked at how unemployment can affect job seekers in both the short and long term. Here’s what you should know.

Effects of unemployment

Studies show that the millions of workers who are unemployed can experience a range of personal impacts and challenges during an already difficult time. Below are some of the effects unemployment can have on workers.

1. Difficulty finding a new job

A survey by Indeed found that telling employers you’re unemployed might not help your odds of getting hired. The survey gathered responses from more than 500 job seekers and 559 hiring executives. Among this group, 77% of people who are looking for work said that it’s easier to find a job when you already have one. 

About 83% of employers in the survey agreed, and for a number of reasons. For example, someone who’s been out of work is more likely to be eager for work than a person who’s currently employed. Employers often favor applicants who take time applying for jobs over those trying to expedite the hiring process so they can start working.

To stand out from the crowd when applying for a job, try submitting a creative job application to catch the hiring manager's attention.

2. Limited negotiating power

Someone looking for a job to advance their career or increase their salary may have more grounds for negotiating than someone who needs a job. A job seeker who currently has a job can approach an employer with salary and benefit expectations. The job seeker might even counter the employer’s offer and explain the experience they’d bring to the company.

Someone who’s been out of work for a while, however, likely doesn’t have as much leverage to sweeten their side of the deal. They might feel the need to accept the employer’s original offer, even if it doesn’t quite meet their expectations.

3. Employment gaps

One common thing employers look at when reviewing applicant resumes for the best employee to hire is employment gaps. A noticeable gap on a resume can sometimes send the wrong signal to employers. A gap of one year, for example, might raise hiring manager questions about an applicant’s ambition and work abilities. The job seeker would then have to try and explain the gap to the employer in a favorable light.

4. Physical health issues

Researchers at Penn State have found that unemployment can also bring about physical health issues. They analyzed data from more than 6,400 people between the ages of 27 and 49 about their employment status and mental and physical health. Those who experienced long or frequent periods of unemployment had poorer health by the age of 50 than those who’d been steadily employed.

One reason unemployment can negatively affect one’s health may be an inability to afford doctor’s visits. A University of Nevada study reported that people with jobs are four times more likely to have access to healthcare than people who are unemployed.

Did You Know?Did you know
Unemployed individuals have a higher chance of experiencing physical health issues because they may struggle to access healthcare.

5. Mental health issues

Both the research from Penn State and from the University of Nevada reported mental health effects that relate to unemployment. The University of Nevada’s findings are particularly illuminating. The researchers found that people unemployed for more than one year are at a much greater risk of depression, stress and anxiety. Admissions to mental health hospitals were more common for people who were unemployed for long periods of time as well.

6. Less overall satisfaction

To further understand unemployment, researchers in Germany collected and analyzed data from men and women over a 20-year period, starting in the subjects’ early 20s. Researchers found that participants who were consistently unemployed were more dissatisfied with their lives than those who were employed. The research also linked unemployment to higher risks of mortality and mental health issues.

Unemployment in the U.S.

Through August 2022, the average U.S. unemployment rate was about 3.7% for the year, which equals about six million unemployed people. This percentage is similar to the unemployment rate just before the COVID-19 pandemic began in March 2020. By April 2020, the nation’s unemployment rate reached 14.7%, but has gradually declined to more typical levels.

Among racial demographics, Latino workers have been the most affected by unemployment during the pandemic. The unemployment rate among this demographic reached 18.8% in April 2020. Black workers have been the second most affected demographic, with a pandemic high of 16.8% in May 2020. As of August 2022, these groups’ respective unemployment rates are 4.5% and 6.4%, both of which are higher than the national rate.

Closing the gap

Being unemployed, especially for prolonged periods of time, can be challenging. However, unemployment is often not a long-term situation. Indeed’s study found that 15% of respondents found a job in less than a month, while 26% were employed in one to three months. Another 20% found work in four to six months. 

If you’re unemployed, keeping your morale high can be one of your greatest strengths. Fill your time with mindful activities, such as learning new skills, building out your resume and taking up new hobbies. This way, whenever you get an offer that suits you, you’ll be more than mentally and physically ready to reenter the workforce.

author image
Shayna Waltower, Business Operations Insider and Senior Writer
Shayna Waltower is a business journalist with a multimedia background. She spent years doing on-the-ground reporting in local communities from coast to coast before narrowing her focus to helping small businesses nationwide streamline operations, attract customers and improve profitability. Waltower, with her previous experience in storytelling across mediums (broadcast, social media, etc.), enjoys not only producing digestible guides for business owners that break down complex topics but also helping entrepreneurs competently convey their brand stories to consumers. Over the years, Waltower has developed expertise in a number of wide-ranging but critical business areas and topics, including POS systems, workplace management and cybersecurity.
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