The Problem
By conventional measures, the U.S. job market has suffered some degree of slack (i.e. insufficient demand for labor) for about 70 percent of the time since 1980. The absence of persistent, strong labor market demand has a significant negative impact on wages and incomes, as well as labor supply. Evidence suggests that these costs fall disproportionately on the least advantaged.
The Proposal
In this paper, Jared Bernstein offers a four-part proposal to increase labor demand along with earnings and employment opportunities: (1) reform the monetary policy framework to accommodate more monetary stimulus and reduce the risk of hitting the zero lower bound, (2) develop a Full Employment Fund to reduce labor market slack, (3) support direct job creation programs to boost labor demand, and (4) design international trade policies to safeguard aggregate demand and mitigate the negative effects of trade deficits.
Abstract
By conventional measures, the U.S. job market has suffered some degree of slack for about 70 percent of the time since 1980. The absence of persistent, strong labor market demand has a significant negative impact on wages and incomes, with these costs falling disproportionately on the least advantaged. In this paper, I offer a four-part proposal to increase labor demand along with earnings and employment opportunities: (1) reform our monetary policy framework to accommodate more monetary stimulus and reduce the risk of hitting the zero lower bound, (2) develop a Full Employment Fund to reduce labor market slack, (3) support direct job creation programs to boost labor demand, and (4) design international trade policies to safeguard aggregate demand and mitigate the negative effects of trade deficits.
