Lester Thurow argues in "Unemployment Rate Stays High Because Public Is Willing to Tolerate It" (Viewpoints, July 21) that the currently high unemployment rate of over 7% is the product of a new public toleration of a social ill.
He suggests that a more expansionary monetary policy could be followed without inflationary consequences. But since there are no assurances that he is correct, the Federal Reserve is unlikely to make unemployment reduction a major goal.
It is important to explore micro-level solutions, as well as the macro-oriented monetary approach, to the unemployment dilemma. The most promising of these is the encouragement of gain-sharing compensation plans, such as profit sharing. Sharing arrangements encourage firms to expand hiring, since employers obtain a proportion of whatever extra returns their new workers generate. It is for this reason, for example, that door-to-door sales companies--which offer shares of sales revenue generated as worker compensation--are always on the lookout for additional personnel.
In addition, an economy with a significant share element would offer more assurance to the Fed that inflation could be halted if the need arose. Monetary restrictions would quickly translate into reduced share bonuses--and, hence, labor costs--in a share economy, thus reducing inflationary pressure.
Japan, with its end-of-year share bonuses for employees, has consistently exhibited a lower unemployment rate than the United States and a greater ability to subdue inflation.
It's time we learned a lesson from abroad and began exploring tax incentives and other devices to promote a gain-sharing compensation system for our own work force.
DANIEL J. B. MITCHELL