In an ideal world, the unemployment rate would be 0%. Professor of economics, L. Randall Wray says it’s not a complete impossibility.
While some say that “full employment would ruin us, destroying the value of our currency through inflation and depreciation,” Wray insists that would not be the case at all. Instead the benefits of an unemployment rate of 0% include more production of goods and services, education, community building and eventually alleviation of poverty. How could alleviating the nation’s poverty be a bad thing? It would not be as counterproductive to the economy as the government would like to think.
In 1978, the Humphrey-Hawkins Act amended the Employment Act of 1946 by targeting a 3% unemployment rate. A great goal, but during 1978, unemployment fluctuated between 5.8 and 6.4%. Then as the recession of the early 1980′s hit, the rate soared to 10.8% in some months of 1982.
Wray thinks the way to eventually reach that 0% mark, or at the very least 3%, is through a government-provided “employer of last resort” program. It would offer a job to anyone ready and willing to work. Granted, they would only be getting the federal minimum wage – which is currently $7.25 an hour – plus benefits, but it would still have people who are not working out there and contributing to society. Such a program would also restore the government’s preconceived notion that full employment would be bad for the economy as the “total impact would exceed the sum of the benefits.”
However, in having a program like this, there would be strict rules to prevent people from taking advantage of it. Any employee who’s been dismissed three times in a year would be stripped of the ability to participate in the program going forward.
The relief that would come with the program would extend far enough to ease the costs that are spent on unemployment compensation – Wray’s point being that it would pay for people to work, as opposed to paying them to not work. With the increased national productivity and a country a peace with 0% unemployment, it would put to bed any concerns about the deficit rising.
Wray is adamant that this really is all a possibility, but it’s going to take baby steps to get there. Companies that are not even considering applicants who are currently unemployed, must be stopped and government programs should be created specifically to hone in on where job creation is possible. We may never live in an ideal world, but if parts of it could be ideal, that would a step in the right direction.