The following are the Fiscal Policy measures to reduce unemployment
A reduction in the taxes may cause an increase in the consumer spending/investment. This will in turn increase demand for labour. An increase in the government spending will increase total (aggregate) demand which will also increase demand for labour. Government spending may create jobs directly in the public sector.
After identifying certain areas of unemployment, governments provide special aid as assisted areas. There are two types of assisted areas, and they are (a) development areas and (b) intermediate areas.
Government offers several forms of assistance to these areas.
i) Capital grants: - these are intended to reduce the cost of production of firms [purchase of land, buildings, machinery or equipment etc.]
ii) Trainings grants: - Government offer grants for training local labour to the firms.
iii) New factories: - Government built new factories and made them available to firms on reasonable terms [rent or lease]
iv) Preferential treatment:- Government give certain preference to firms in assisted area in government contracts. Local government also offers various incentives to these firms.
a) Enterprise zone: - Government setup certain zones for firms with tax allowances and other relaxation on certain government controls.
b) New towns: - To reduce the conurbations government built new township to promote industrial growth.
There are many reasons for the Government’s influence on industrial location. The following are the reason.
1) Regional differences in unemployment rates:- Due to technological improvement or changes in pattern of production in international trade [in UK immediately after first world war] some industries flourished and some others declined. This caused serious unemployment.
2) Industrial concentration makes a region too dependent on one industry:- When there is heavy dependency on an industry in one region, the prosperity of that region depends on the success of that industry. [A kind of snow ball effect] In the event of failure of the industry, the entire region will suffer due to unemployment [with in the industry and related trading area also]
3) Urban sprawl:- Heavy concentration of industry leads to [conurbations] heavy social costs in the form of congestion and pollution
The regional policy of government is aimed to;
1) Reduce the differences in regional unemployment rates,
2) Reduce an area’s dependence on the prosperity of one major industry, and
3) Restrict the growth of the great conurbations
The government deal regional unemployment in two ways;
1) Taking workers to work:- Government offer financial assistance for housing shortage and to reduce the barriers of movement [reluctance to leave their relatives and friends]
2) Taking work to workers: - Under this scheme government attempt to persuade the firms to set up their plants at an area of relatively high unemployment.
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