As the US economy begins to recover from COVID-19, we are poised for a period of faster economic growth than we have seen in decades. As policymakers consider how to respond to this boom, the way they define the potential labor force and maximum sustainable employment will have a direct impact on who benefits from economic recovery and growth.
In “Reimagining Full Employment: 28 Million More Jobs and a More Equal Economy,” J.W. Mason, Mike Konczal, and Lauren Melodia find that 28 million more workers could be drawn into the labor market than conventional measures suggest, and that the racial, education, and gender employment gaps could be significantly reduced. The authors arrive at this number by using the systematic relationship between overall labor market conditions and employment rates across race, gender, education, and age to construct a new measure of potential employment—one in which all people benefit from the labor market privileges that white men experience. This measure suggests the US can achieve an employment-population ratio of 68 percent over the next decade—nearly 10 points higher than the Congressional Budget Office’s (CBO’s) estimate of maximum employment.
Based on their findings, Mason, Konczal, and Melodia argue that there is no reason to accept the pre-pandemic employment rate of 2019 as the maximum possible level of employment in the US. Instead, the extraordinary stimulus measures of the past year and the prospective wave of federal investment currently being debated can combine to deliver a historic boom—and draw in more workers to the labor market than ever before. If policymakers choose to manage this economic boom rather than fight it, the US could see true full employment and the reduced racial and gender inequalities that come with it.