Fiscal policy can decrease unemployment by helping to increase aggregate demand and the rate of economic growth. Demand side policies are critical when there is a recession and rise in cyclical unemployment.
A quick list of policies to reduce unemployment:
Monetary policy – cutting interest rates to boost Aggregate Demand (AD)
Fiscal policy – cutting taxes to boost AD.
Education and training to help reduce structural unemployment.
Geographical subsidies to encourage firms to invest in depressed areas.
Lower minimum wage to reduce real wage unemployment.
More flexible labour markets, to make it easier to hire and fire workers.
