This article uses unemployment as its main metric.
This article refers to a concept of a macro-economic level of full employment after which inflation is incurred. This idea traces its origin to one of the founders of the Chicago School of Economics, in the mid-twentieth century, the renowned Milton Friedman. One of the boundaries Mr. Friedman's theory called for was a "natural rate of unemployment" (see here: https://en.wikipedia.org/wiki/Milton_Friedman ) which contemporary economists put at around 5%. As unemployment reaches this number, labor shortages emerge and the cost of labor rises. This is not bad in itself. Generally, proponents of this theory would agree that if wages remain equal to or less than productivity, inflation will be kept under control. National monetary policy takes as its early warning sign of coming inflation, the "canary in the coal mine" of inflation, rising wages. That is the point at which the Fed will start to slow growth by raising interest rates.
There is no likewise measurement and policy prescription when assets or investment income increase. As we've recently, the practice of Quantitative Easing (QE) had the effect of raising asset prices, allowing firms and individuals to increase margin borrowing, that is, borrowing on the increased value of the asset without having to invest cash in building the total unit underlying assets. When the stock market is rising and hedge funds are growing, raising interest rates and collateral requirements would slow this down lowering the growth in asset prices, reducing the amount of money/credit is available. However, it doesn't appear that even Janet Yellen is willing to confront the institutional bias toward financial institutions as creditors. Legislators should also realize that the return to capitol is taxed at a lower rate than returns to labor; the type of income that is reported on a W-2; whether the individual also has other forms of income to report. The typical college educated knowledge worker probably claims 90% of their income as wage labor on a W-2.
The author also looks at the per cent of workers in the labor force as a proportion to the numbers of workers available. That number is at a low point. This would imply that there is a supply of acceptable workers not yet in the labor force. One issue is that much of the long term unemployed are older manual laborers in the construction industry and unionized factory workers from the "rust" belt industries; auto workers, steel workers, coal and other miners in the extraction industries, there may even be some aerospace and civilian/military contractors such as Boeing, industries which have been modernized, automated, and occupy many fewer jobs than the post-WWII period, say 1948 – 1974, from Truman's first election through the first Arab oil embargo and the end of US participation in the Viet Nam war.
We should not accept the specious free market argument that the growing economy creates more jobs that it destroys. While on the macro level, this may be true, there remains the problem with the value of the new jobs and the actual people who will occupy them. The economy has not created enough of the right sorts of jobs to absorb the workers shed by the old economy. We have with us a large unemployed group/class of people; white, black and Hispanic and other Pacific Island nationalities (that was PC), who are skilled in manual labor for which the largest market is government investment, e.g., infrastructure repair.
Another metric the author uses is productive capacity. How much is America producing compared to how much it can produce. If America, or any finite economy, is producing by using up all its assets, productive capacity would be at 100%. However, most economists of this school would suggest the after productive capacity gets over about 80%, the economy becomes unable to replace the assets it uses up in producing revenue. So, the economy slows. Current productive capacity has not yet reached this level. These three factors, the unemployment rate, the employment rate and the rate of current productivity creates that topological map for economic growth.
I suggest there is a large group of under-employed workers. This is not only people who want to work more hours, but, more importantly, people who are qualified to work at more rewarding knowledge work. This type of work has been increasingly off-shored to India and China where is has supported a growing middle class at a much lower value that the American middle-class. There has been a huge transfer of wealth from the American middle/working class to the middle/working class in Asia, but also to the upper class in America. There are also under employed manual workers. Government is a good investment in both our country and will put people to work using their skills. This will increase productivity on the macro level. The migration of both under employed manual workers and college educated knowledge workers to more productive occupations/work will increase the overall wealth of our economy.
My conclusion would be that the most likely place to accommodate growth would be in creating productive jobs that currently under-employed knowledge works can fulfill. As the pool of under-employed move into more appropriate employment, they will become more productive. Modern occupations are granular. That is, in the final analysis, there's a person carrying out the functions of the job. So as each under-employed person engages in more productive labor the more assets society creates. More assets equate to more revenue and in this conception more per capita revenue, which is another way of saying increased productivity on a macro-economic level.
Unfortunately for Republicans, tax reductions don't lead to productive investment. The current accumulation of wealth in fewer and fewer hands, once again the idea of granularity, leads to economic inefficiencies. Extreme concentration of wealth, or the accumulation of wealth among fewer people encourages speculation and arbitrage, that, is, income generated from non-productive economic and financial manipulation. These are two methods of investing capital which are highly destabilizing to the market. They lead to bubbles and, of course, the eventual burst which affects many more people than just the speculators and arbitrageurs as we saw in the last recession; the privatization of wealth and the socialization of risk/loss.
A metaphor I've devised for understanding the inefficiencies in the distribution of wealth is the structure of the universe. There are various structures in the physical universe, as we see it in modern scientific instruments like the Hubble Spacecraft. These structures are the result of gravity working on mass. If there is one big gravitational object, all other masses become attracted to it and the result is one large gravitational body, say a monopoly. When gravitational masses are equal and equally spaced out, the gravitational bodies will end up spread out in a grid that is gravitationally stable or a ridged grid with no motion. It's only when there is a discriminatory but balanced distribution of gravity that forms the various structures we see in the Universe. Similarly, in the economy we need some concentration of wealth. The current ratio is, in my opinion, weighted to heavily in favor of concentration. Too much money, in too few hands. To paraphrase Churchill: "Never have so many, owed so much, to so few." (I have to say, I just made that up. I like it.)
In the end, the problem is not the productivity or productive capacity of the American economy. It is not a problem that can be solved by giving more funds to the small group of people in which it accumulating. Tax reductions on the wealthy, eliminating the estate tax (one of the oldest taxes on the books going back to eighteenth century England, tax discrimination favoring rental income over labor income benefits the already wealthy. Concentration of capital contradicts essential market principles of mass based social institutions. In the economy, it is the problem of demand, mass demand. This is the underlying principle of modern, administrative, bureaucratic, industrial and financial state, ethnically mixed states. It's the principle of the concentrated mass that imparts power to social institutions. What this implies is that economic growth will be driven by mass demand.
Increasing mass demands leads to a policy of progressive taxation and equalizing the taxes between capital and labor. The estate tax should be raised as well as the limit at which the estate tax is activated. The more you leave to your heirs, the more we tax the inheritance. This transfer of wealth can be distributed in one of two ways: with government planning, or, as direct tax refunds to individuals, if you like the free market theory. As a person, I can think of social investments that ought to be made. That is a different theory of government action, the state should provide social benefits to its citizens. Both have their strengths and weaknesses. That's a topic for a different time.
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