Public Policies Affecting Unemployment

In order to reduce unemployment, the government will seek policies which will effectively target their goal.They may create programs which help job seekers match their skills to employers, search for vacancies in different areas, and provide workshops to help train people more in-depth in a particular skill.  Some policies affect unemployment in the opposite way that is desired. 

One such policy is Unemployment Insurance.  This entails workers who have lost their jobs to receive a portion of what they had been earning.  This increases the rate of unemployment for a short time because people who receive this benefit have less of an incentive to look for a new job. 

Another important policy to consider is the Minimum-Wage Law.  Governments will set a minimum wage which must be met by employers.  Since the minimum wage raises unskilled worker's wages above their equilibrium rate, the quantity of labor demanded decreases.  So, in order to help some get out of poverty by setting a minimum wage, others are forced into unemployment. 

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