Unemployment - Solutions

Demand Side Solutions

The main goal of these programs is to alleviate short-term hardships and, more importantly, to allow workers more time to search for a job. Many countries aid the unemployed through social welfare programs. These unemployment benefits include unemployment insurance, unemployment compensation, welfare and subsidies to aid in retraining.

This was notably implemented in Britain from the 17th century until 1948 in the institution of the workhouse, which provided jobs for the unemployed with harsh conditions and poor wages to dissuade their use. A direct demand-side solution to unemployment is government-funded employment of the able-bodied poor.

The demand for labour in an economy is derived from the demand for goods and services. Those who do not want to sell at this price do not; in the labour market this is classical unemployment. According to classical economic theory, markets reach equilibrium where supply equals demand; everyone who wants to sell at the market price can. Increases in the demand for labour will move the economy along the demand curve, increasing wages and employment. Monetary policy and fiscal policy can both be used to increase short-term growth in the economy, increasing the demand for labour and decreasing unemployment. As such, if the demand for goods and services in the economy increases, the demand for labour will increase, increasing employment and wages.