Policies for Reducing Unemployment

Different types of unemployment are tackled by different policy measures.

a) Cyclical Unemployment

Since cyclical unemployment is a result of deficiency in aggregate demand, it can be reduced by increasing the level of aggregate demand through expansionary Monetary and Fiscal Policies.

b) Structural Unemployment

As this type of unemployment exists when an economy’s labour is immobile, it can be reduced by: -

i. A higher level of initial education so that workers are more flexible and able to adjust when conditions change.

ii. Providing facilities for the retraining of workers whose skills are no longer in demand.

c) Frictional Unemployment

To ensure that frictional unemployment is brief the government can provide an efficient system of job notification and replacement, in addition to any necessary retraining to update knowledge and skills.

d) Technological Unemployment

Retraining programmes should be provided for these unskilled workers and workers whose present skills and knowledge do not match with the availability of jobs.

e) Seasonal Unemployment

Little can be done by government policy as it is in the very nature of certain jobs.

However, government can encourage them to take up part-time job.

f) Residual Unemployment

i. Government can organise the centres for those disabled workers to do some art or handcraft work.

ii. Government can also provide tax incentives to the company for restructuring their organisation to accommodate the disabled people.