If there is cyclical/demand deficient unemployment it means that the government on working to boost AD and the demand for work.  Demand-Side Policies will be used for this.

Supply-Side Policies would be used to boost the availability of workers and for the other forms of unemployment.

 

REMEMBER: In the case of Labour questions/Unemployment.  The firms are the ones that DEMAND and as well as and consumers and we, the workers are the one that SUPPLY.

 

DEMAND-SIDE POLICIES:

Policies could be used to increase AD so that there is an increase in national income as well as employment. The government could use Fiscal Policy to do this which, would help to reflate the economy.   For example; During a recession, the government could increase its own expenditure or decrease the rate of income tax. 

Whilst not being able to control the Monetary Policy, they could urge the ‘loosening’ of the policy to make credit more readily available. 

The government could also use regional policy to help stimulate economic activity in the ‘regions’ and areas where unemployment is higher than the national average.

For example; This could be done through employment subsidies or tax reductions to firms that relocate to that area, or set up a shop there.

 

SUPPLY-SIDE POLICIES:

These are policies that aim to increase the quantity and quality of labour.  Labour is a factor of production so doing so would stimulate economic growth in the long run as well as increase the productive capacity in the long run, despite costing the government in the short run.        

         

On a Diagram:  LRAS/PPF/PPB moves outwards

 

Policies that aim to reduce the Occupational Immobility of Labour and Structural Unemployment would help increase the productive potential of labour through improving their skills.  They would also focus on improving incentive to work for the unemployed, in particular- Frictionally Unemployed.

Improved Education and training courses would help to increase the productive potential of labour and provide them with the necessary skills needed to work. 

Improving the availability of information via databases would help to reduce geographical immobility. Ensuring that there is accommodation available for workers that are willing to move to where jobs are available is also essential.

 

KNOWLEDGE: If arguing the benefits of Supply-Side Policies, you could bring in that…

Supply-Side economists believe that reducing the level of welfare payments to the unemployed increases incentive for people to work.  This is because they will receiving more through would rather than benefits, even if it is minimum wage. Lower marginal tax rates could also be offered to the people who decide to enrol on to appropriate training courses, for example, an ICT course that specialises in programming for an IT job.