Why Unemployment Matters

Our recent report on the Employment status of Québec’s English speakers showed that, as per the most recent census data, English speakers had a higher overall unemployment rate than their French counterparts.

This brief provides an overview of some of the key impacts of unemployment for individuals and communities and outlines the consequences for communities facing disproportionately high unemployment rates.

Poverty and social exclusion

Historical data has shown that in Canada, low-income individuals tend to be over-represented in the unemployment rate (Martinez et al., 2001). Out of the 17 administrative regions in Québec, English speakers had a median after-tax income that is lower than that of French speakers in 14 regions. In the regions of Estrie, Abitibi-Témiscamingue, Nord-du-Québec, and Centre-du-Québec, English speakers earned at least $4,000 less than French speakers.

Unemployment is a loss of income and work-related benefits that has been shown to be strongly associated with an increased risk of poverty (Gallie et al., 2003). While many individuals who live in poverty may remain in poverty despite being employed, the impacts of poverty are further exacerbated when individuals are unemployed. For Québec’s English-speaking population, high unemployment and low income suggest an increased risk of poverty within these communities. 

Unemployed individuals experiencing poverty also take significantly longer to re-enter the labour force, and there is no evidence to show that the experience of living in poverty is a motivating factor in accelerating re-entry into the labour market (Gallie et al., 2003). As a result of prolonged unemployment, individuals experiencing poverty can be constrained by their lack of income when it comes to gathering information and resources needed for the job application process. Their skills diminish over time, resulting in lower re-employment wages (Apergis & Apergis, 2020). This situation can create a cycle of social exclusion, where unemployed individuals living in poverty are eventually marginalized from the labour force. 

Intergenerational income loss 

One evident consequence of unemployment for individuals is the loss of income. Individuals who are unemployed spend less than usual and have to dip into their savings to afford rent and food. Reduced savings can have detrimental long-term effects for families and communities not only in terms of their ability to afford necessities, but in the reduction of future standards of living (OECD, 2021).

Sustained unemployment and the subsequent long-term reduction in income also impacts educational opportunities for children in families. Families with low-income levels are often forced to make the difficult decision between living costs and paying for educational opportunities for their children. The children of families facing low income and long-term unemployment are less likely to benefit from enriching educational opportunities and skills investment, depriving communities and economies of valuable future skills. The interaction between unemployment-related income loss and low investments in education poses intergenerational consequences for families and communities facing higher unemployment (Jerrim & Macmillan, 2015). The intergenerational transmission of these disadvantages only deepens income inequality in Québec.

Quality of life 

Unemployment is correlated with negative psychological and health effects, in addition to being associated with increased hospitalizations and visits to physicians. Mental health, which has become a national priority, is also impacted. Individuals experiencing unemployment can suffer from increased anxiety, depression, isolation, self-harming behaviour, low self-esteem, diminished decision-making ability and a low satisfaction of life (Canadian Public Health Association [CPHA], 1996; Chen & Hou, 2018).

These experiences arise for a number of reasons, such as the stigmatization of unemployment and reliance on unemployment benefits, as well as experiences of despair from unsuccessful job applications (CPHA, 1996). These experiences do not necessarily disappear upon re-employment. Those who re-enter employment tend to continue experiencing the mental and physical health consequences arising from job and economic insecurity.

References

Apergis, E., & Apergis, N. (2020). Long-term unemployment: A question of skill obsolescence (updating existing skills) or technological shift (acquiring new skills)? Journal of Economic Studies, 47(4), 713-727. https://doi.org/10.1108/jes-12-2018-0424

Canadian Public Health Association. (1996). 1996 discussion paper on the health impact of unemployment. https://www.cpha.ca/sites/default/files/assets/resolutions/1996-dp1_e.pdf

Chen, W., & Hou, F. (2018). The effect of unemployment on life satisfaction: A cross-national comparison between Canada, Germany, the United Kingdom and the United States. Applied Research in Quality of Life, 14(4), 1035-1058. https://doi.org/10.1007/s11482-018-9638-8

Gallie, D., Paugam, S., & Jacobs, S. (2003). Unemployment, poverty and social isolation: Is there a vicious circle of social exclusion? European Societies, 5(1), 1-32. https://doi.org/10.1080/1461669032000057668

Jerrim, J., & Macmillan, L. (2015). Income inequality, intergenerational mobility, and The Great Gatsby curve: Is education the key? Social Forces, 94(2), 505-533. https://doi.org/10.1093/sf/sov075

Martinez, R., Ayala, L., & Ruiz-Huerta, J. (2001). The impact of unemployment on inequality and poverty in OECD countries. The Economics of Transition, 9(2), 417-447. https://doi.org/10.1111/1468-0351.00082

OECD. (2021). Inequalities in household wealth and financial insecurity of households. https://www.oecd.org/wise/Inequalities-in-Household-Wealth-and-Financial-Insecurity-of-Households-Policy-Brief-July-2021.pdf