can reduce the disincentives to work that many of our social programs contain; and it can vigorously pursue cost containment in its regulatory functions. These and other policies that are discussed in this book can reduce the amount of unemployment needed to control inflation.
The benefits of a low-unemployment economy will flow not just to previously unemployed workers but to all workers. Current thinking on unemployment focuses on the benefits that may flow to unemployed workers who are removed from the unemployment rolls through retraining or other programs. This approach implicitly accepts a natural unemployment rate of 6-7 percent. Achieving a low-unemployment economy, a tight labor market, will benefit, first and foremost, the marginal workers who will get and hold on to decent jobs. But the benefits do not stop there. All workers will benefit as a low-unemployment economy increases competitive pressures on employers to hire and hold on to good employees.