Supply side policies shift LRAS to the right. They are subset of fiscal policies.

Policies

Education and training

• Improves Labour - more skilled workforce
• Improves Enterprise - more education means more ideas
• Unemployment decreases
• Economic growth
• Occupational mobility

Drawbacks

• Takes a very long time to cause a shift in LRAS
• Very costly
• Can widen the gap between the rich and the poor. Those who are not educated are disadvantaged in the job market, and if they get a job, they are likely to be paid less.

Privatisation

• Improves Capital - More investment
• Improves Enterprise - Innovation
• Economic Growth
• Decreases inflation

Drawbacks

• If it is a natural monopoly, such as tap water, it will not be very competitive and the costs are mostly fixed (e.g pipes). A monopoly would likely end up having cheaper prices.
• The goal of some industries shouldn't be profit - For example healthcare, the objective is to make people better, not earn as much money as possible.
• Regulation may be needed to control the monopoly power if it was not owned by the government - it may be easier / cheaper to just keep a government-owned monopoly.
• Fragmentation - For example trains, train tickets would have to be negotiated with each train company you travelled with.

Reduce unemployment benefits and income tax

• Labour - encouraged to work
• Unemployment decreases
• Economic growth
• Current Account worsens
• Inflation increases

Drawbacks

• Gap between poor and rich becomes larger
• Those unemployed and unable to get a job because of their skills will not be incentivised to get a job and will only be hurt by the policy.

Deregulation

• Land - natural resources allowed to be exploited
• Unemployment decreases
• Inflation decreases

Drawbacks

• Regulations could be in place for the safety of workers. Removing these regulations could cause increased injury and hence increased cost for the healthcare system.
• Regulations could be put in place to force the firm to pay for its negative externalities. Removing this regulation would cause the cost to be paid by the government elsewhere.

Infrastructure Investment

• Improves Land
• Improves Labour - occupational mobility
• Inflation decreases
• Economic Growth increases
• Current Account improves

Drawbacks

• Usually very expensive
• Normally takes a long time to be completed and hence shift LRAS to the right

Immigration

• Improves Labour - more workers
• Inflation decreases

Drawbacks

• May take away jobs from native workers, who then need to be paid unemployment benefits.
• May cause wages to decrease as there is more competition and firms have a greater choice.
• May reduce incentives to develop technologies to improve the productivity of each worker, since it is cheaper to hire more labour. This could lead to a lower living standard than if net migration was not increased.

Restriction of trade union activity

• Improves Labour
• Inflation decreases

Drawbacks

• Less safe working conditions - Trade unions lobby for safe working conditions and restricting them could reduce this.
• Cannot overcome unfair wages - cannot bargain for higher wages
• Less job security, and hence lower consumer confidence. If workers are in a trade union, they will feel more secure and hence be likely to save less and spend more