Abstract

Policymakers are focused on the labor market because of unemployment, which has shown a strong upward trend since the mid-1970s, rising from a rate of about 2 percent to about 8 percent by the end of 1997. This increase has largely been due to structural factors. The relatively slow pace of growth in labor inputs identified in the analysis of the production function in Chapter 2 has not kept pace with the growing labor force. Hence, estimates suggest that the steady-state unemployment rate has increased to around 7½–8½ percent at present.