What can the government do to reduce the level of unemployment Essay

What can the government do to reduce the level of unemployment permanently - Essay Example This percentage was equivalent to 197 million individuals (International Labor Office, 2012). Economists propose various theories and approaches towards reduction of the level of unemployment in various countries. The Philips curve, non-accelerating inflation rate of unemployment (NAIRU), natural rate of unemployment and general supply-side economics will be discussed in relation to a reduction of the unemployment rate. The concepts of supply-side economics developed and spread in the 1970s. These were a response to the Keynesian economic policy, particularly the failure of demand management in the stabilisation of the western economies during periods of stagflation at the time. The distinguishing factor of supply-side economics as a modern phenomenon is the argument on a favour of low tax rates for the working class (Wessels, 2006). Classical liberals at the time opposed taxes and government. Their claim was that every individual had a right to their own self and their property, and thus taxation was immoral (Wessels, 2006). Supply-side economists, on the other hand, argued that the collective benefit of jobs provided individuals an impetus for cuts in tax. In supply-side economics, macro-economists argue that economic growth can be achieved in a country by the government reducing the barriers of production and enabling people to produce and supply goods and services, and also invest in capital (W essels, 2006). According to supply-side economics concepts, consumers benefit from a high supply of goods and services at low prices (Atkinson, 2008). Furthermore, through investment and expansion of businesses, a country experiences an increase in the demand of employees (labour). Some of the typical policy recommendations for the concept are; less regulation, and low marginal tax rates to stimulate the production of goods and services (Atkinson, 2008). In supply-side economics, tax is viewed as a