Unemployment as a social cost

Unemployment is conventionally dealt with as a quantitative problem, as labour market policies (e.g. “workfare”) often show. This approach neglects the institutional nature of both supply and demand of labour. Labour preferences reflects social, noneconomic issues; on the other hand, labour demand requirements fall short of social efficiency. Accordingly, economic metrics cannot be used to socially assess labour market outcomes. We suggest that Sen’s notion of capability may be more appropriate: unemployment results as a social cost, as it reveals tha important aspects of wellbeing are endangered. As a policy implication, freedom to choose how to conduct one’s life is more important than occupation per se. Some social implications are also suggested.