Question

What are three policies that the government could do to decrease the natural rate of employment? Explain how each policy would affect job findings or job separations.

Answer 1

these are the three policies that government can do do reduce the natural level of unemployment-

1. government should reduce the unemployment benefits.

this policy will affect the job separation rate. this is because those people who are now employed will not be very eger to quiy their job because unemployment benefits are low now. This will reduce job separation rate.

2. these should be reduction in the barganing power of the trade unions.

if there is reduction in the bargaining power of the fiirm then the will be reduction in the gap that exist between the market clearing wage and wage that prevails in the market. This will cause an increase in the job finding rate.

3. barriers and restriction on the movement of the labors should be reduced.

this will cause movement of workers from one job to another job very easy. this will increse the job finding rate. As those people who are suitabale for the a particular job may get it more easily hence job finding rate increases.