Government policies are available that can and should be used to ensure low unemployment

1. Introduction

At the present time, ideal for the most people is to live and work within an economic structure which may provide to them the prospect of steady employment, fairly steady prices and a high quality standard of living. According to data from the year 2008 during the worldwide economic recession, the International Labor Office declared that global unemployment extended more than 200 million people, 7 percent of the global workforce was looking for the job, which reached the highest level on record. It is usually recognized that to achieve low levels of unemployment most governments concerning about using the policy instruments to restructure. However, the types of policies are depending on what type of unemployment they address.

2. Body

As according to Downs (1957) “economics and politics must be merged into a unified theory of social action.” (P. 280). There are two main political for reducing the unemployment, which is demand side policies and supply side policies. Demand side policies aim to reduce the cyclical unemployment, which is caused by the recession. On the other side, the supply side policies are used to reduce frictional and structural unemployment, which are due to imperfections in the labor market.

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• Demand side policies

Related to the demand side policies which mainly deal with cyclical unemployment. The term cyclical unemployment sometimes also known as Keynesian unemployment, generally occurs during the business depression phase when investment and consumption begin to drop off and the economy is incapable to create the equivalent number of jobs as occurred at the preceding cyclical peak. As the results of businesses not having sufficient needs for worker to employ entirely those who are searching for work. The deficiency of worker demand comes from an absence of outlay and consumption around the whole economy. When business cycles are at their peak, total economic output is being maximized, therefore cyclical unemployment will be low. When economic output decreases, the business cycle will drop down and cyclical unemployment will rise.

• Fiscal policy

Increasing the aggregate demand and economic growth rate is the efficient way to lead unemployment decrease. The government will need to pursue an expansionary fiscal policy, which may include decreasing the taxes and increasing government expenditures. The Government can increase its own expenditure level. This “fiscal pump-priming” straightly increases aggregate demand and can make a significant influence on national income equilibrium. The government might increase current expenditure (for example aggrandizing the payment in the part of education and the health care service) or multiply expenses on capital schemes which improve the stock of capital (such as expenditure on new infrastructures, new infirmaries or other major public service projects). Continued economic growing offers a stage for more jobs to be found in the economy. Besides, a declining in taxation may result of increases buyers’ disposable income and should enhance household spending. The effect may be better if taxes are decreased for individuals on lesser than average incomes. These tax-payers are probable to spend a larger percentage of their disposable income. In short, lesser taxes increase disposal income and therefore assistance to increase consumption, giving rise to higher aggregate demand. As aggregate demand increased, Real GDP will also increase. If the company needs to produce more, there will be an escalation in demand for employees and therefore lower the unemployment.