IDEAS home Printed from https://ideas.repec.org/p/iie/pbrief/pb14-10.html
   My bibliography  Save this paper

Wages and Labor Market Slack: Making the Dual Mandate Operational (DRAFT)

Author

Listed:
  • David G. Blanchflower

    (Peterson Institute for International Economics)

  • Adam S. Posen

    (Peterson Institute for International Economics)

Abstract

The new chair of the Federal Reserve, Janet Yellen, contends that there is considerable slack in the labor market, and that the Fed is monitoring several measures of labor market conditions to assess that problem. This Policy Brief provides new analysis on one of these measures, the US labor force participation rate. It questions the view that much of the decline is structural in nature, attributable to demographic factors. Underemployment—the phenomenon of workers wanting to work more hours but who are unable to do so—has also kept wages down. The implication for Federal Reserve policy is that low labor participation provides an additional measure of labor market slack, and that a substantial portion of US workers inactive in the labor market should not be treated as gone forever, but should be expected to spring back into the labor market if demand rises to create jobs. The Fed should be trying to address this issue along with trying to stabilize prices.

Suggested Citation

  • David G. Blanchflower & Adam S. Posen, 2014. "Wages and Labor Market Slack: Making the Dual Mandate Operational (DRAFT)," Policy Briefs PB14-10, Peterson Institute for International Economics.
    • Handle: RePEc:iie:pbrief:pb14-10
    as

    Download full text from publisher

    File URL: https://www.piie.com/publications/policy-briefs/wages-and-labor-market-slack-making-dual-mandate-operational-draft
    Download Restriction: no
    ---><---

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Niesr, 2021. "Appendix," National Institute UK Economic Outlook, National Institute of Economic and Social Research, issue 3, pages 51-59.
    2. Xie, Taojun & Liu, Jingting & Alba, Joseph D. & Chia, Wai-Mun, 2017. "Does wage-inflation targeting complement foreign exchange intervention? An evaluation of a multi-target, two-instrument monetary policy framework," Economic Modelling, Elsevier, vol. 62(C), pages 68-81.
    3. David N. F. Bell & David G. Blanchflower, 2014. "Labor Market Slack in the United Kingdom," Working Paper Series WP14-2, Peterson Institute for International Economics.
    4. Chadha, Jagjit S., 2021. "Foreward," National Institute UK Economic Outlook, National Institute of Economic and Social Research, issue 3, pages 3-4.
    5. Nickel, Christiane & Bobeica, Elena & Koester, Gerrit & Lis, Eliza & Porqueddu, Mario, 2019. "Understanding low wage growth in the euro area and European countries," Occasional Paper Series 232, European Central Bank.
    6. Bhattacharjee, Arnab & Lisauskaite, Elena & Pabst, Adrian & Tzendrei, Tibor, 2021. "UK Regional Outlook," National Institute UK Economic Outlook, National Institute of Economic and Social Research, issue 3, pages 37-50.
    7. Niesr, 2021. "Overview," National Institute UK Economic Outlook, National Institute of Economic and Social Research, issue 3, pages 5-36.
    8. Donayre, Luiggi & Panovska, Irina, 2018. "U.S. wage growth and nonlinearities: The roles of inflation and unemployment," Economic Modelling, Elsevier, vol. 68(C), pages 273-292.
    9. Levin, Andrew T., 2014. "The design and communication of systematic monetary policy strategies," Journal of Economic Dynamics and Control, Elsevier, vol. 49(C), pages 52-69.
    10. Josh Bivens, 2014. "Tightening Monetary Policy Now Is a Bad Mistake," Challenge, Taylor & Francis Journals, vol. 57(6), pages 5-22.
    11. Donayre, Luiggi & Panovska, Irina, 2016. "Nonlinearities in the U.S. wage Phillips curve," Journal of Macroeconomics, Elsevier, vol. 48(C), pages 19-43.
    12. Mr. Gee Hee Hong & Zsoka Koczan & Weicheng Lian & Mr. Malhar S Nabar, 2018. "More Slack than Meets the Eye? Recent Wage Dynamics in Advanced Economies," IMF Working Papers 2018/050, International Monetary Fund.

    More about this item

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:iie:pbrief:pb14-10. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Peterson Institute webmaster (email available below). General contact details of provider: https://edirc.repec.org/data/iieeeus.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.