Government of any nation put a lot of measures in place while trying to abate the level of unemployment. This is a bid to get as many unemployed youths as possible to work. This was a recent persistence occurrence as many societies have witnessed what is referred to as full employment for longer period. Some witnessed this during the post World War II economic expansion. Australia witnessed full employment between 1945 to some time in 1970s. There was a time between 1950 and 1960s when United Kingdom’s unemployment rate was at an average of 1.6%.
From the situation on ground around the globe, any nation can tackle unemployment if the government can look at it from these two critical angles:
1. Unemployment Solution from the Demand Side
A direct demand-side resolution of unemployment was implemented in Britain from 17th century until 1948, with the institution of the workhouse, which provided jobs for the unemployed with inconsiderate conditions and poor wages deter their use. It is a government-funded employment for able-bodied poor. A recent substitute is a job guarantee, where the government assures work at a living wage. A short-term solution can be the public works programs such as Works Progress Administration.
Government-funded employment is seen as a remedy to unemployment only in times of crises. This is due to public sector jobs’ existence depending directly on the tax receipts from private sector employment.
In the classical economic theory, when demand equals supply, the market reaches equilibrium. At this point, those who want to sell at the market price can while those who do not want to sell at the market price do not sell. This classical theory can also be applied to the labor market. The higher the demand for goods and services, the higher the labor being demanded. Also, the higher the demand for labor, the higher the wages and employment being demanded. It moves the economy along the demand curve. Consequently, monetary and fiscal policy can both be used to increase temporary growth in the economy, increasing the demand for labor and decreasing unemployment.
2. Unemployment solution from the Supply Side
The supply side policies can solve the problem of unemployment by making the labor market a bit flexible. Labor union activities keep wages from falling, indicating that many people want to sell their labor. Minimum wage should be removed and the power of the labor unions curtailed. Workers should also be educated so they can have competitive edge and be more eye-catching to the prospective employers.
Reforms should be put in place to increase permanent growth. Increase in the supply of goods and services require more labor, increasing employment rate. It is believed that policies such as tax reduction on business and regulation create more jobs and definitely, reduce unemployment.
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