Policies to reduce unemployment Flashcards
What can we do to solve cyclical unemployment/
We can use expansionary fiscal policy by increasing GS or reducing taxation.
We can use expansionary monetary policy to reduce interest rates.
As a result of this, AD will shift to the right.
What are evaluation points for policies to solve cyclical unemployment?
1) Conflict of objectives. Increasing AD may result in demand pull inflation.
2) Can harm government finances as these policies are costly.
3) Reliant on business/consumer confidence. In a recession there will be little confidence.
4) Time lags.
What are some policies to reduce real wage unemployment?
We can reduce minimum wages to reduce the excess supply. This will reduce the number of people unemployed.
We can reduce the strength of trade unions so they can bargain for the right wages and for more jobs.
What are some evaluation points for the policies to solve real wage unemployment?
1) Impact on workers will be high. They may have less income.
2) Income inequality may get worse.
What are some policies that can solve Structural NRU?
Interventionist SSPs
1) GS on education and training. More skills and more knowledge.
2) Subsidies for in work training.
(1+2) occ (3+4) geo
3) GS on infrastructure. Easier to get to work
4) Grants or low cost housing. Workers can move closer.
Market Based SSPs
1) Reduce benefits. Nudges workers to gain skills so they can work. Workers wont be picky and reject jobs.
Occ and geo
2) Deregulate hiring/firing law.
Occ
What are some policies that can solve Frictional NRU?
Interventionist SSPs
1) More/better resources for job centres so people can find jobs.
2) Subsidies to private job agencies to help unemployed.
3) GS on infrastructure. Increases search area
Market based SSPs
1) Reduce benefits. Forcing unemployed to be quicker.
What are some evaluation points for NRU?
1) No guarantee to work and costly
2) Time lags
3) Negative stakeholder impacts on workers themselves
