![]() In theory, such risks are heightened when the Fed allows the jobless rate to remain below estimates of the natural rate. Other work shows that groups with higher than average jobless rates, such as African Americans, benefit disproportionately from lower overall unemployment, and evidence presented in this paper shows these gains to be economically significant when looking at the impact of high-pressure labor markets not just on real earnings, but on labor supply as well.įrom the perspective of the Federal Reserve, however, these outsized gains can come at the cost of inflationary pressures. Much literature, briefly reviewed below, shows persistent, low unemployment associated with nominal and real wage gains, most notably to lower- and middle-wage workers. ![]() ![]() Since at least the days of Arthur Okun’s work on the “upgrading of workers into more productive jobs in a higher-pressure economy,” economists have recognized the benefits of tight labor markets, both to the macroeconomy and to disadvantaged groups. Views expressed within the report do not necessarily reflect the views of the Center. ![]() This report was commissioned by the Center on Budget and Policy Priorities’ Full Employment Project. ![]()
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