Compare and contrast policies that a government might use to reduce level of structural and cyclical unemployment.

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pohnpei397 | College Teacher | (Level 3) Distinguished Educator

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Policies meant to reduce these two kinds of unemployment will typically differ because the causes of these kinds of unemployment are so different.  It is possible that policies meant to combat structural unemployment will also reduce cyclical unemployment, but policies meant to reduce cyclical unemployment will not generally reduce structural unemployment.

The most common government policy to combat structural unemployment would be worker retraining.  Workers whose skills are no longer needed in our economy become structurally unemployed.  If the government can help them to gain the sorts of skills that are needed (for example, a factory worker getting retrained to work in the medical profession), it can help to reduce structural unemployment. 

When the economy is in a recession, it experiences cyclical unemployment.  In such cases, the government will generally try to stimulate aggregate demand.  It might also try to stimulate aggregate supply by making it easier for firms to borrow money to expand.  These are policies that are not aimed at retraining workers.  Instead, they are aimed at trying to get more workers back to work doing things they already know how to do.

Both types of policies are meant to get people back to work.  But policies meant to combat structural unemployment must retrain workers to give them different skills while policies meant to combat cyclical unemployment do not need to do so.

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