Answer to Question #201660 in Macroeconomics for Akhona Klanisi

Question

In response to unemployment challenges in an economy, the government put in place several macroeconomic policies. Discuss at a theoretical level how public policies such unemployment benefits and tax incentives can affect the employers, government and the level of unemployment, taking into account the age groups, skills endowments and substitution effects of the various workers in an economy

Answer 1

Unemployment benefits also known as unemployment insurance benefits refer to payments made by state to eligible workers. Tax revenue are tax reductions and redemption for a company and individuals. Employers are responsible for unemployment benefits and tax payment when an employee looses a job. Government pay the unemployment benefits to the unemployed working age whose skills are unused. Unemployment benefits increases the rate of unemployment as the age working become reluctant in searching jobs . Workers then substitute their working hours with leisure.