In general terms, economists who believe that the natural rate of unemployment can be reduced argue that government policies should seek to make labour markets more competitive and flexible.
All of the policies in the product market are designed to increase competition, and so efficiency. If the productivity of an industry improves, then it will be able to produce more with a given amount of resources, shifting the LRAS curve to the right. All of the following policies are, in some way or another, trying to increase the level of competition in product markets.
The following policies are all designed to improve the quality and quantity of labour. Increased numbers will obviously increase the productive potential of an economy. Increased quality will improve the productivity of labour. If a given amount of labour increases its productivity, then they will produce more with a given set of resources, and so the productive potential of the economy will again improve. As with the product market policies, successful labour market supply side policies will shift the LRAS curve to the right.
Key concepts to focus on are incentives, enterprise, technology, mobility, flexibility and efficiency.
The governments of the 1980s reduced these high marginal income tax rates to encourage more people to work hard. The final big drop was in the Budget of 1988, when the top marginal rate fell from 60% to 40% where it remains today.
In recent years, growth rates in the UK have been low and unemployment has risen. For example, in 2012 output was still below its peak of 2008 and unemployment had risen from 6.4% from 7.8%.