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30% of the unemployed bear 90% of the social cost of unemployment, or the welfare loss resulting from the loss of employment for the general population

The unemployment rate is the most popular metric used to estimate the incidence of unemployment in a country. However, not all unemployed people are affected at the same level by unemployment, in terms of loss of income and diminished self-esteem. The majority of those affected are over 45 years of age, mostly women, individuals who have been unemployed for more than two years, people who do not receive any benefits, and have a medium-low level of educational. Specifically, this group accounts for 30% of the unemployed, but bears 90% of the social cost, which is measured by dividing the total amount of welfare loss by the total number of unemployed people.

The book El coste social del desempleo en España  (The Social Cost of Unemployment in Spain) evaluates the social cost of unemployment by interpreting unemployment as a loss of social welfare. To achieve this, it starts with the combination of three different dimensions: incidence (unemployment rate), severity (difference between wages and unemployment compensation, if any) which is an increasing function of the average duration of unemployment and of the income lost by remaining unemployed, and hysteresis (probability of remaining unemployed). These are interdependent factors that capture some of the key components of the unemployment issue from an economic point of view.

In order to determine the social cost of unemployment, the income that each worker has lost as a result of unemployment (the difference between the salary they would have received and the amount of the unemployment benefit or subsidy) is assessed. The welfare loss of each unemployed person is computed using the income lost during the entire unemployment period. The social cost of unemployment is calculated as the total sum of income lost by all unemployed persons.