Unemployment in a Just Economy
16 Pages Posted: 28 Jul 2016
Date Written: June 30, 2016
This paper is based on the ideas of political philosopher John Rawls who suggested that a just society is one which would be created behind a “veil of ignorance”, that is to say, without knowing where one would end up in the society’s distribution of talent and other attributes valued in the labor market. Today’s labor market does not meet this criterion inasmuch as risk averse people would not be willing to enter it at random, being too concerned about ending up among the excluded, i.e., those without full time jobs which today in the U.S. is still 10% of the labor force or some 15 million people (Bureau of Labor Statistics, 2014). This is substantial but it does not even include about 5 million additional people who have dropped out of the labor force altogether or the 2.3 million convicts in jail.
Thus, a just labor market would strive for full employment beyond the implications of NAIRU. The latter concept is actually misleading, because most economists and commentators in the media equate it with “full employment”. As a consequence, endemic and large scale un- and underemployment is accepted as an inevitable attribute of the labor market. This is insidious inasmuch as the concept assumes that the institutional structure of the labor market is held constant. According to Rawlsian principles the aim should be to bring unemployment down to the minimum feasible rate which in the U.S. is most likely around 1.2%, -- the rate which prevailed in 1944 and which probably represents an attainable lower bound. Instead of the prevailing system, the right to work needs to be recognized as a natural right, because the right to life depends upon it. Several ways are proposed to create an inclusive labor market that distributes the available work in a more equitable fashion than the current system and envisions a just economy on Rawlsian principles that risk-averse people would be willing to enter at random.
Keywords: labor market, justice, full employment, natural rate of unemployment, NAIRU, John Rawls
JEL Classification: B000
Suggested Citation: Suggested Citation