Fight Inflation with Supply-Side Labor Reform
Given that a shortage of workers is a major source of today's surging inflation in the United States, policymakers should be devising a strategy to increase the active labor force. The right approach would both draw in older and younger non-workers and attack the epidemic of occupational licensing and credentialism.
SAN DIEGO – In the past few years, a million retired Americans have picked up a pickleball racket. We would have less inflation if they had picked up a hammer, wrench, or pencil instead. “Help Wanted” signs are everywhere, from coffee shops to pharmaceutical plants. Advanced economies could ease one major source of inflation by inducing more people to join the workforce, especially those at the two ends of the labor barbell: older people and young people.
Owing to the whirling printing press of central banks, excessive government spending, shipping disruptions, and now Vladimir Putin, inflation has spiked to levels not seen since Rocky II (1979). But with a supply-side labor policy, we can help fill the record 11.3 million job vacancies in the United States, while the Federal Reserve and its counterparts elsewhere figure out how to drain their bloated balance sheet.
In the popular press, the US economy appears to be blessed with Energizer bunnies. Tom Brady breaks touchdown records at age 44, Clint Eastwood directs movies at 89, and William Shatner boldly goes into space at 90. Despite these stunning achievements, the proportion of retired people in the economy has jumped by one-third over the past 15 years.