Policy responses to labour market adjustment and distributional changes

If the economy is to benefit from technological change and trade, workers will often have to change jobs or occupations, a process which may cause dislocation for workers. The more smoothly this process takes place in the labour market, the lower the adjustment costs for displaced workers and the greater the net gains to society from technological change and trade. Governments and other institutions can make the labour market more responsive to economic change through a range of measures that are targeted primarily at, but not focused exclusively on, the labour market. Reducing the costs of adjustment for workers can also lower public resistance to technological change and prevent the rise of trade protectionism.