However, if the government increases unemployment benefits, that in effect means higher taxes for the citizens.

in 在这里是介词，表示"在...方面"或"处于某种状态"。 effect 是名词，意思是"效果、影响、结果"。 in effect 是一个固定短语，意思是"实际上、实质上"，用来强调表面现象背后的真实情况。