Controlling or reducing unemployment Unemployment

supply-side economics proposes lower taxes lead employment growth. historical state data united states shows heterogeneous result.

in u.s., unemployment insurance allowance 1 receives based solely on previous income (not time worked, family size, etc.) , compensates one-third of 1 s previous income. qualify, 1 must reside in respective state @ least year and, of course, work. system established social security act of 1935. although 90% of citizens covered unemployment insurance, less 40% apply , receive benefits. however, number applying , receiving benefits increases during recessions. in cases of highly seasonal industries system provides income workers during off seasons, encouraging them stay attached industry.

tax decreases on high income earners (top 10%) not correlated employment growth, however, tax decreases on lower income earners (bottom 90%) correlated employment growth.

according classical economic theory, markets reach equilibrium supply equals demand; wants sell @ market price can. not want sell @ price not; in labour market classical unemployment. monetary policy , fiscal policy can both used increase short-term growth in economy, increasing demand labour , decreasing unemployment.

supply-side solutions

however, labor market not 100% efficient, although may more efficient bureaucracy. argue minimum wages , union activity keep wages falling, means many people want sell labour @ going price cannot. assumes perfect competition exists in labour market, no single entity large enough affect wage levels , employees similar in ability.

advocates of supply-side policies believe policies can solve making labour market more flexible. these include removing minimum wage , reducing power of unions. supply-siders argue reforms increase long-term growth reducing labour costs. increased supply of goods , services requires more workers, increasing employment. argued supply-side policies, include cutting taxes on businesses , reducing regulation, create jobs, reduce unemployment , decrease labour s share of national income. other supply-side policies include education make workers more attractive employers.