The Path to Full Employment
Since the development of modern macroeconomics, full employment was seen as a goal to be attained through monetary policy and aggregate demand. Some countries later recognized the role of labor market flexibility as well.
However, even with supposedly cutting edge monetary and demand management policies, the labor market still fails to clear. Economists overlook the roles played by lack of information, wage inflexibility, and not being able to adjust rapidly enough to changes in economic conditions due to slow retraining. The path to full employment means making sure the price of labor is appropriate to its supply and demand conditions. It also means ensuring the demand exists in the first place, and that the information exists to connect workers to employers. This requires the following steps :• The most flexible possible labor market
o Replacing the minimum wage and income taxation through the Three Pillars System; effectively subsidizing wages
o Increasing citizens’ purchasing power; further underwriting labor costs
o Ease of relocation (downward pressure on housing costs and a preference for renting)
o Limits on labor union power
o Rapid, continuous retraining of the labor force
• Excellent transportation network that connects employees to employers
• A program to deliver market information about salaries, job availability, etc.
• Demand management through higher wages (Three Pillars System), and fiscal and monetary policy
• Correct the imbalance between peoples’ working hours
• Create an employer of last resort for those deemed impossible to employ in the private sector at the time, utilized for public works