Governments across the world have been scratching their head on how to increase employment, or decrease unemployment, and the question appears to become more urgent these days. History shows that they have been extremely creative, but with little impact. The main problem is that they have tried to force some people to work less in order to spread the total number of work hours among more people, as if this were a zero sum game. Particular fiascos are the French 35 hour week and countless early retirement programs.
Economists generally do not think it is appropriate to add constraints to a market that is not in equilibrium. One should rather work through prices by imposing taxes or subsidies in order to encourage people to take some actions while losing little efficiency. The question is then what to tax and what to subsidize. Victoria Osuna takes here an interesting perspective with a model economy incorporating commuting, team work and overtime. There are three policy tools: tax overtime, subsidize wages and subsidize employment. All make work cheaper, but the substitution of hours in the workweek becomes critical. This is embedded in a real business cycle model, thus general equilibrium effects influence capital accumulation and factor prices.
The experiments are quite interesting. First, tax overtime to bring hours from 40 to 35: you need a 12% tax, steady-state employment increases 7%, but GDP decreases 10.2%. The issue is that a lot of capital now lies idle. To get the same increase in employemnt, a wage subsidy is desastrous, as it reduces GDP by 12.7%. The problem is that the subsidy needs to be substantial, 16.5%, which leads to large misallocations of capital. An employment subsidy of 4.5% does better, dropping GDP by "only" 4.7%.
So, if you want to increase employment, be aware that there will be substantial costs in terms of output and lost productivity. I am not sure it is worth it.