Can Supply-Side policies Reduce unemployment? Lessons from North America

Gary Burtless

Australian Journal of Labour Economics (AJLE), 2002, vol. 5, issue 2, 115-142

Abstract: Recent US experience offers lessons about supply-side policies to sustain low unemployment. These include programs to change the skills of the workforce and improve the microeconomic incentives facing workers and employers. Two supply-side policies were greatly expanded after the mid-1980s. Congress established generous earnings supplements, payable to low-income parents, to encourage unskilled workers to find and keep jobs. Social assistance was reformed to limit the duration of benefits and to link payments to recipients’ participation in work preparation and paid employment. Experimental and nonexperimental studies suggest these measures boosted employment among the economically disadvantaged. Compared with other OECD countries, the US maintained strong incentives for employers to create jobs for the hard-to-employ. Payroll tax and regulatory burdens on employers were kept low, and the legal minimum wage fell significantly after 1979. The US experience shows supply-side policies can boost the employment rates of the hard-to-employ and hold down structural unemployment.

Keywords: Fiscal Policies and Behavior of Economic Agents: Household Human Capital; Skills; Occupational Choice; Labor Productivity Formal Training Programs; On-the-Job Training) Wages, Compensation, and Labor Costs: Public Policy (search for similar items in EconPapers)
JEL-codes: H31 J24 J38 (search for similar items in EconPapers)
Date: 2002
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Journal Article: Can Supply‐Side Policies Reduce Unemployment? Lessons from North America (2002)
Working Paper: Can Supply-Side Policies Reduce Unemployment? Lessons from North America (2001)
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