Which option describes a supply-side policy aimed at increasing labour efficiency?

Which option describes a supply-side policy aimed at increasing labour efficiency?

• A. Increase labour efficiency (training incentives, reduce union power, reduce tax, reduce minimum wage)
• B. Increase competition (Deregulate)
• C. Impose import quotas
• D. Increase government spending on infrastructure

Answer: (B)

Increasing competition through deregulation is a classic supply‑side move to lift how efficiently labor is used. When markets are more competitive and barriers to entry and adjustment are lowered, firms can’t rely on protected positions or slack in the system. They must adopt better processes, invest in technology and training, and allocate labor to the most productive tasks to maintain profitability. All of this pushes output per hour worked higher, which is exactly labour efficiency. The other options are less direct. Imposing quotas disrupts market signals and tends to reduce efficiency by shielding producers from competition. Infrastructure spending, while improving long‑term productive capacity, works more through capital investment and is not a direct lever on how efficiently labor is used in everyday production. The first option describes several measures, some of which are debatable in their impact on labour efficiency and don’t cleanly target the mechanism of boosting productivity through competitive pressure.

Increasing competition through deregulation is a classic supply‑side move to lift how efficiently labor is used. When markets are more competitive and barriers to entry and adjustment are lowered, firms can’t rely on protected positions or slack in the system. They must adopt better processes, invest in technology and training, and allocate labor to the most productive tasks to maintain profitability. All of this pushes output per hour worked higher, which is exactly labour efficiency.

The other options are less direct. Imposing quotas disrupts market signals and tends to reduce efficiency by shielding producers from competition. Infrastructure spending, while improving long‑term productive capacity, works more through capital investment and is not a direct lever on how efficiently labor is used in everyday production. The first option describes several measures, some of which are debatable in their impact on labour efficiency and don’t cleanly target the mechanism of boosting productivity through competitive pressure.