Journal Article The Harried Leisure Class: A Demurrer Get access Edmund S. Phelps Edmund S. Phelps Columbia University Search for other works by this author on: Oxford Academic Google Scholar The Quarterly Journal of Economics, Volume 87, Issue 4, November 1973, Pages 641–645, https://doi.org/10.2307/1882033 Published: 01 November 1973
The basis of investment pessimism, 549. — The new view, 551. — A simple model of growth, 553. — Investment and productivity in the long run, 555. — Investment and productivity in the short run, 560. — The rate of return on current investment, 563.— Summary, 567.
This paper is a brief for the introduction of a subsidy to any qualified firm for its use of low-wage employees as a means to reduce the unemployment and raise the pay of disadvantaged workers. There would be a case for such a wage subsidy in all the advanced market economies, and certainly the American one, regardless of recent trends. The case has grown stronger, however, with the worsening of the relative wages and especially the unemployment rates of low-age workers. The globalization of investment and the bias of technical progress are the causes most often suggested. I would add the growth of the system-the public entitlements to hospitalization, to retirement and disability insurance, and to the benefits labeled welfare in the narrow sense. Since this factor tends to be overlooked, I devote Section I to it. Section II proceeds to the case for a low-wage employment subsidy. It will be clear that the beneficial effects of the subsidy on disadvantaged workers are the mirror opposite of the harmful side effects of the system, side effects that the subsidy would counteract. I. Side Effects of the Welfare System
We are in the midst of a structural boom the force of which has not been seen in this country since the 1920’s. After the U.S. unemployment rate hit 6 percent in late 1994, following its two-year recovery, many experts assumed that unemployment had regained its naturalrate path. The natural unemployment rate in the second half of the 1980’s had been put at around 6.5 percent in several estimates, and if the trend reduction in the natural rate brought about by the continuing relative decline of high-school dropouts in the labor force and those whose education stopped at the diploma is placed at 0.07 per annum, it would have declined on that account to around 6 percent by 1995 (Phelps and Gylfi Zoega, 1997). Furthermore, we saw in 1995 the end of