Meanwhile American and European economies have multiple obstacles, legal and social, to reducing wages, and pressures, legal and social, to raise wages: minimum wage laws, labor unions, a climate of opinion where low wages are considered a sign of inferiority and paying them a sign of unscrupulousness. No wonder we had 5 percent unemployment even in the good old days!

Unemployment would disappear if all wages fell to the level at which the supply of labor is equal to the demand for it. There is no need to go below this point like the Soviets did. But wages in general will have to be somewhat lower than they are now.

Reduced wages would be resented by workers. But since one person’s wage is another’s cost of getting something done, as average wages fall so will the cost of living. And the security each worker feels, knowing that if a current job disappears another will not be hard to find, will be invaluable. Today even people with jobs hesitate to spend money, let alone borrow, since they don’t know whether they will be employed tomorrow. This would not be a problem in a full-employment economy.

Best of all, with market-clearing wages unemployment will go away without any need for expensive “stimulus” programs or for “growth.”