A Keynesian Perspective to the Economy

How Social Assistance Can Reduce Unemployment and Out-of-Workforce Rates

Abstract

In this paper, I examine the relationship between social welfare programs and unemployment. Unemployment and welfare are two of the most significant topics in macroeconomics, with many disagreeing on the relationship between the two. A commonly held belief, particularly in the United States, is that too generous of a welfare state discourages and disincentives people from looking for work, leading to continuous unemployment. However, my findings indicate that increased government spending on social welfare programs can actually improve employment rates. Looking at past studies conducted by economists in England, Germany, and the United States, I find that social assistance programs are beneficial at decreasing unemployment in the long term. Such programs allow workers to find and retain jobs for which they are prepared by allowing for increased training, increased search periods, and increased educational attainment for children. This research is heavily influenced by Keynesian theories and ideas that government should play an active role in the economy to reduce unemployment. While Keynes looked primarily at direct relief assistance for people in times of economic downturn, my findings expand on the idea and look at alternative policies that can be used to reduce unemployment continuously.