Edmund Phelps wrote an op ed piece in the New York Times on August 6 arguing that much of the recent rise in US unemployment (and, by implication, global unemployment) has been structural in nature, and therefore will not be amenable to correction simply by boosting aggregate demand. I predict that we are going to hear a lot more about structural unemployment in the near future, and the work of Phelps (who won the Nobel Prize in 2006 for his lifelong dedication to employment and innovation theory) is a good place to start. Basically, he says that we will only get unemployment back down to pre-recession levels if we think much more radically about supply-side labour market solutions than we have done to date. Read more
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