The outlook for job seekers in the UK appears to be taking a turn for the worse. Weak economic growth and continued uncertainty for employers have led to forecasts that unemployment will hit 5.3% this year.
Author
- Peter Howley
Professor of Economics and Behavioural Science, University of Leeds
In politics, the debate typically follows a familiar pattern: creating jobs, tackling unemployment and making sure welfare benefits are fair. But this economic framing captures only part of what is at stake. Work is not simply a source of income. It is about much more than a paycheck.
When people lose work or cannot find a job, the damage is often psychological as much as financial. With official estimates suggesting that UK unemployment will climb higher this year than previously forecast, that leaves problems for the government beyond just the numbers.
Economists estimate that in terms of life satisfaction the non-financial costs of unemployment are several times larger than the loss of income itself. Unemployment can also leave long-term scarring effects - fears about becoming unemployed again, for example - even after people have found a new job.
One reason is that employment fulfils important psychological needs. Just as vitamins are essential for human bodies, certain aspects of work - autonomy, variety, recognition - are essential for the mind .
When work disappears, people lose not only financial security but often routine and social connection as well. Days can become less structured, social networks might shrink and confidence can erode. In most societies, work is also closely tied to self-worth, meaning unemployment can bring feelings of guilt, shame or personal failure even when job loss is beyond a person's control.
A good illustration of how powerful these social meanings can be comes from a study of people's happiness as they transitioned into retirement . People who move directly from employment into life as a pensioner typically experienced little change in their overall satisfaction.
In contrast, those who had been unemployed before retiring reported a marked improvement in wellbeing once they reached retirement age. The difference was not due to changes in financial circumstances. Rather, retirement removed the stigma attached to not working. During working life, being unemployed carries a heavy social stigma. But no one looks down on a pensioner for not working.
Psychological pain
To illustrate further these non-financial costs of not working, research my colleagues and I conducted also looked at how unhappy people feel when they are out of work depending on the overall unemployment rate in their neighbourhood . If unemployment were purely an economic issue, then living in an area with high joblessness should make things worse. It means fewer jobs and tougher competition for those roles, after all.
But what actually happens is the opposite: although the psychological pain of being unemployed is always substantial, this pain reduces as more people around you lose their jobs. Now, it is clearly not the case that people are just cruel and taking pleasure in others' misfortune. But when job loss becomes more common, the stigma eases and people no longer feel as alone or to blame for their situation.
The current challenge is not limited to outright job loss. Globalisation and technological change have expanded economic opportunities overall, with things like new industries, cheaper goods and services, and greater access to global markets. But they have also contributed to the growth of insecure and lower-quality work. For many people, stable and meaningful employment has become harder to find.
These changes are unevenly distributed: communities that have historically been reliant on manufacturing have suffered lasting declines. These include higher unemployment, lower wages and wider social problems following exposure to competition from cheaper manufacturing bases . In this sense, economic change has created a new geography of disadvantage.
The consequences extend beyond individual happiness. Rising job insecurity and dissatisfaction with work can reshape how people view government institutions and politics more broadly. They are associated with falling trust and growing frustration: conditions that have been linked to stronger support for populist and anti-establishment movements across advanced economies.
When large groups feel economically marginalised or socially undervalued, political discontent often follows . Labour market policy, therefore, is not only about employment rates or economic growth. The right decisions can help to sustain social cohesion and democratic stability during periods of economic change.
The rapid advance of AI in the workplace brings these questions into sharper focus. It promises extraordinary gains in productivity, but also raises an uncomfortable question for the future. What happens when large numbers of people are no longer needed for the work that once defined economic life?
The challenge posed by AI is not simply how to distribute income, but how to sustain human flourishing in a world where work plays a smaller role. Financial compensation alone may prevent poverty, but it cannot guarantee satisfaction with life. And if citizens do not feel that their lives have value or direction, the political consequences may prove as significant as the economic ones. The future of work is not just an economic question, but a social one.
Peter Howley does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.
