We believe that the role of the government in encouraging full employment should be restricted to providing a stable economic environment in which employers are willing to offer employment and employees are prepared to adjust to changing economic circumstances. This includes the use of monetary and fiscal policy to offset the effects of recessions, a stable regulatory environment, and educational policies that increase the ability of the labor force to adapt to changing conditions. We do not believe that individual legislative proposals should be evaluated on the basis of the number of jobs created.
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Voltaire said that work saves us from three great evils: boredom, vice and need. A society that organizes itself so that a large proportion of the population is unemployed is inviting trouble. In the years leading up to the Covid-19 pandemic, a variety of policies, some good some bad, led to historically low unemployment levels. The pandemic reversed this process rather severely but, partly, as a result of stimulative monetary and fiscal policy, including federal transfer payments, we appear to be at or near full employment again. Unfortunately, “full employment” (the level at which inflation begins to increase) now appears to be happening at higher levels of measured unemployment and with a smaller workforce participation rate. Why this is the case is unclear and controversial. It may just be the result of employees avoiding the work place because the pandemic has made it relatively unsafe. It may be that, as a consequence of working from home for an extended period of time, workers just don’t want to go back to work if they can avoid it. It may be that childcare (and elder care) remains complicated while the pandemic ebbs and flows. Some of these factors can be expected to fade as we approach the end of the pandemic; some we may have to live with indefinitely.
In any case it is likely that further monetary and fiscal stimulus will, under the above circumstances, contribute more to increased inflation than to lower unemployment levels.
Putting aside the current issues, we do not in general believe that it is the role of the government to guarantee jobs. The proper role of government is to create an economic environment in which full employment will emerge. The government has several responsibilities in this regard including monetary and fiscal policy, long-term taxation policy, trade policy, education, and regulation. All of these issues will be addressed throughout the various policy positions.
The government also needs to avoid making the situation worse by subsidizing long-term unemployment by continually extending unemployment compensation. It may seem heartless, but there is substantial evidence that extended unemployment compensation extends unemployment. It does so by discouraging people from relocating to find work and from taking lower paying jobs. An interesting alternative to extended unemployment compensation is a “Personal Reemployment Account.” This proposal was supported by Mitt Romney, who adopted something like it in Massachusetts. The money would be provided to unemployed individuals to be used as they chose for reeducation or retraining. They could go to a community college with the money, or to a for-profit educational institution, or even pay an employer for training with it. If they paid an employer for retraining with it, the employer would only receive the compensation after hiring the employee and retaining them for a period of time.
Most importantly, the government needs to provide a stable economic and regulatory environment in which uncertainty about government intervention does not, itself, serve as a factor inhibiting private sector employers from investing and hiring. We believe that the emergence of a viable center in American politics is essential for creating the kind of stability in fiscal, economic and regulatory policy that is necessary for long-term growth. Without such a center, the rules will swing violently as the political mood swings, from left to right and back again.