Reducing Unemployment: A Case for Government Deregulation

By Garry K. Ottosen; Douglas N. Thompson | Go to book overview

CHAPTER 9
SUMMARY

This final chapter will briefly review the arguments presented in earlier chapters. The purpose is to draw in all of the loose ends and complete a picture of what the United States can do to reduce the unemployment rate that is compatible with stable inflation.


THE COSTS OF UNEMPLOYMENT

Chapter 1 outlined some of the costs associated with unemployment. It noted that, in monetary terms, an unemployment rate of 7 percent costs the United States at least $400 billion in lost output. This lost output does not begin to add up the total cost of unemployment. In terms of social and human costs, unemployment has been linked to alcoholism, child abuse, family breakdown, vandalism and criminal behavior, psychiatric hospitalizations, suicide, homicide, and other problems.

Unemployment is not an insignificant problem in the United States. Currently, the United States is unable to drop its unemployment rate much below the 6 percent for any length of time before inflation begins to accelerate. In other words, the United States' nonaccelerating inflation rate of unemployment or the rate of unemployment that is consistent with stable inflation is currently about 6 percent. At present, the U.S. economy must keep more than 7 million people unemployed just to keep inflation from accelerating.

If unemployment is so expensive, why not allow inflation to rise and do whatever is necessary to force the unemployment rate down? The reason is that continuously accelerating inflation would result. Continuously accelerating inflation would damage the economy so severely that it might eventually collapse. Even if it did not collapse, our experience with unemployment and inflation in the 1970s has taught us that, except in

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Reducing Unemployment: A Case for Government Deregulation
Table of contents

Table of contents

  • Title Page iii
  • Contents v
  • Chapter 1 - THE COSTS OF UNEMPLOYMENT 1
  • Notes 10
  • Chapter 2 - THE NAIRU 11
  • Notes 28
  • Chapter 3 - A FAULTY DIAGNOSIS OF UNEMPLOYMENT 30
  • Notes 48
  • Chapter 4 - BUSINESS COSTS, GOVERNMENT REGULATIONS, AND THE NAIRU 51
  • Notes 73
  • Chapter 5 - UNEMPLOYMENT INSURANCE, SOCIAL WELFARE, AND THE NAIRU 75
  • Notes 96
  • Chapter 6 - THE UNION WAGE PREMIUM AND THE NAIRU 98
  • Notes 114
  • Chapter 7 - UNION PRODUCTIVITY EFFECTS, LABOR LAW, AND THE NAIRU 117
  • Notes 133
  • Chapter 8 - PRODUCTIVITY AND THE NAIRU 136
  • Notes 143
  • Chapter 9 - SUMMARY 144
  • Notes 155
  • Bibliography 157
  • Index 165
  • About the Authors 173
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