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.
Regional policy
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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