Put to the test in the past two years, the idea of a “natural” rate of unemployment has failed. There’s no need to push unemployment up to any particular rate to bring down inflation.
If we want higher wages, we must win them through deliberate wage-boosting policies.
Our work suggests we could have achieved much lower unemployment than we have in recent years, without driving up inflation.
Now that we are recovering from recession, there’s no telling how low we could push the unemployment rate. One estimate is 3.5%.