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Can Supply-Side Policies Reduce Unemployment? Lessons from North America

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  • Gary Burtless

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.
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Suggested Citation

  • Gary Burtless, 2001. "Can Supply-Side Policies Reduce Unemployment? Lessons from North America," CEPR Discussion Papers 440, Centre for Economic Policy Research, Research School of Economics, Australian National University.
    • Handle: RePEc:auu:dpaper:440
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    File URL: https://www.cbe.anu.edu.au/researchpapers/CEPR/DP440.pdf
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    References listed on IDEAS

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    Cited by:

    1. Matthew Gray & David Stanton, 2004. "Lessons of United States welfare reforms for Australian social policy," Others 0405002, University Library of Munich, Germany.
    2. Patrick J. Wilson & L.J. Perry, 2004. "Forecasting Australian Unemployment Rates using Spectral Analysis," Australian Journal of Labour Economics (AJLE), Bankwest Curtin Economics Centre (BCEC), Curtin Business School, vol. 7(4), pages 459-480, December.

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    More about this item

    JEL classification:

    • H31 - Public Economics - - Fiscal Policies and Behavior of Economic Agents - - - Household
    • J24 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Human Capital; Skills; Occupational Choice; Labor Productivity
    • J38 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Public Policy

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