Reducing unemployment

Government policies to reduce unemployment

Reducing occupational immobility of labour

This is often the cause of structural unemployment so the government can aim to reduce this by providing the unemployed with skills through apprentice schemes and other workplace training.

Benefit and tax reforms

Incentivising people to work by reducing benefits, reducing taxes or linking benefits schemes to programmes that promote work, such as work experience programmes.

Boosting aggregate demand

Often used during a depression, this Keynesian solution involves creating new jobs, even if not necessarily needed, so that consumers have more disposable income to inject into the circular flow.

Employment subsidies

A demand-side policy. Governments provide subsidies for firms that take on long-term unemployed people, which prevents these people from becoming discouraged workers.

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PPF

Production Possibility Frontier Production Possibility Frontier (PPF): the curve showing the maximum combinations of goods or services that can be produced in a given time with available resources. Assumptions: - Production over a specific time period like one year - Inputs are fixed during this time period - Technology doesn’t change during this time period · Meaning of points on and around the PPF—efficiency When you are on the PPF, you are working at maximum efficiency or full capacity. If you are within the PPF then you are under-utilising existing resources or resources are being used inefficiently. There is underemployment. The economy cannot produce past the frontier. Points outside the PPF are unattainable given the current inputs. · Causes and me...

3.1.3 Demergers

Demergers A demerger is the breaking up of a firm into separate firms. e.g Sports Direct selling off Dunlop in 2016. PepsiCo splitting off foods businesses (KFC, Taco Bell, etc.) into a separate corporation, Yum Brands. Later Yum Brands demerged into Yum China and Yum Brands. Reasons for demergers Diseconomies of scale - the opposite of economies of scale, where average costs begin to rise as output increases. May occur due to it being difficult to retain control on the expanding business - principal-agent problem may arise. Also less co-operation by employees who feel more alienated and as a result less productive - they feel less of a connection to the business. May also be hard to co-ordinate and communicate between locations and employees when a firm is large. Miscommunication can again lead to costs rising. To focus on core businesses to streamline costs and improve profits. The firm may have expanded into different markets and expe...

The Philips curve

The Philips curve The Philips curve suggests a tradeoff between unemployment and inflation - to decrease unemployment, inflation has to rise. This creates a conflict between two macroeconomic objectives - targeting inflation at 2% (in the UK) and decreasing unemployment.

Edexcel AS/A Level Economics revision

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