High unemployment rate is one of the biggest problems for any economy. No overall economy can grow properly, if a substantial number of people are unemployed. A higher unemployment rate brings the largest damage for any developing economy, because of the reason why that the economy always functions below its Production Possibility Frontier (PPF).
These will be the levels of lost goods and services that should never be recovered. In light of all these costs, disadvantages and damages, it becomes vital to reduce unemployment. Although it is a tough ask for any economy, and it needs a complete great deal of patience and efforts, but reducing unemployment is always one of the primary priorities for any country. There are many policies to lessen unemployment, however they all revolve around the efforts for increasing aggregate demand throughout the market.
The government can boost the level of its spending. By shelling out for capital projects, which add to the stock of capital, or by increasing aggregate demand, a system for more careers is created throughout the market. Increasing the aggregate demand in an overall economy is the most dependable and productive method of tackling the high unemployment rate.
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Another policy to lessen unemployment is to lower the taxation rates in the economy. A reduction in taxation boosts consumer’s removal income designed for consumption. As intake increases, the entire demand of different commodities is also increased. And to be able to match that increased demand, more labor is required. Like lower taxes rates, lowering rates of interest is another effective policy to reduce unemployment in a national country.
When interest rates are decreased, savings also decrease. This, in exchange, increases a consumer’s income available for consumption, which eventually boosts up consumption and demand in the economy. Eventually, more labors are hired to fulfil that increased demand. Moreover, another aspect of reducing unemployment by lowering interest rates is that this technique also motivates other firms, businesses and organizations to invest in the overall economy.
As the rates of interest are fairly lower, the marginal cost of investment falls. This becomes a sufficient incentive for companies and businesses to purchase the national country. So that as always, investment significantly reduces the unemployment rate in a country. This system is related with the supply side factors basically. In this technique, the national government gives grants and subsidies to companies to locate in areas of high unemployment. Often regional policy requires extra retaining schemes to give workers the relevant skills to allow them to take up new jobs.
This assists with solving the issue of occupational immobility. The government could provide grants or low-cost housing schemes to encourage workers to move to other locations, where there are careers available. This reduces the nagging problem of structural unemployment. Better information on job vacancies among the work force can curtail the level of unemployment in an economy significantly. When there is proper awareness about job vacancies, unemployment rate is supposed to be decreased.
Therefore, improving awareness regarding job information is an effective policy to reduce unemployment always. Improving flexibility in the labor market is another technique which can be used to reduce unemployment. However, its execution involves a little of a risk, too. Providing more versatility in terms of firing and hiring workers, and increased shifts or maximum working hours can help reducing unemployment. However, on the other hand, this technique creates more uncertainty and insecurity in the economy also, so it must sensibly be employed carefully and.