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That low income causes poor health is one of the most robust findings in health science. Income improves health by providing social status, and purchasing power for salutary products like medications, nutritious food, and safe housing. Unfortunately, health research too often focuses on documenting the effects of low income, rather than ways to improve income distribution. The goal of this perspective is to call attention to an underdiscussed means of improving income distribution and promoting health: full employment. Perhaps most associated with economist John Maynard Keynes, full employment was a bipartisan policy goal from the 1930s to the 1970s—the “era of shared prosperity.”1 This goal then fell by the wayside—during a time when income inequality increased, population health worsened, and life expectancy declined.1 Now, the tide may be turning. Full employment conditions in 2021 and 2022 resulting from pandemic-related economic stimulus have brought reconsiderations of its benefits.2 Understanding how those benefits relate to health gives rise to the idea of “Health Keynesianism”: pursuing full employment to improve population health.
Full employment is an unusual topic for a doctor to write about. But so much of the poor health we see in clinical practice stems from low income. And despite increasing attention to issues of income and health, too much of our current health equity work aims for clinical management of the problems created by income maldistribution, rather than seeking to change that distribution. This can produce modest benefits for individuals, but likely does little to affect overall social circumstances. Instead, taking health equity seriously means using a toolset that can effect real change. Full employment is a tool in that set.
WHAT IS FULL EMPLOYMENT?
Economists describe three types of unemployment: frictional unemployment, structural unemployment, and demand-deficient unemployment. Frictional unemployment stems from the job search that matches employers and employees. When searching, people are temporarily “between jobs.” Structural unemployment relates to a mismatch between the skills workers have and employers need. Demand-deficient unemployment means that people are unemployed because there is not enough demand for workers. Full employment means no demand-deficient unemployment—all qualified workers can get jobs. There may still be frictional and structural unemployment, but when there is full employment, all the labor resources of the economy that can be put to use are being put to use.
HEALTH BENEFITS OF FULL EMPLOYMENT
The principal health benefits of full employment policy arise from improved worker bargaining power.3 When labor markets are tight, workers have more power to strike a fair bargain with employers. This impacts health in several ways. First, it compresses the wage distribution—raising wages at the lower end—and increases the share of business revenue that goes to workers. It thus contributes to decreased income inequality. Full employment does this very effectively—some estimates suggest that the recent full employment conditions undid, in a period of 18 months, 40% of the wage inequality that developed over the prior 40 years.2 Second, full employment tends to work against discrimination that keeps qualified workers out of the labor force. For example, recent full employment conditions improved unemployment and labor force participation for individuals racialized as Black and individuals with disabilities.4,5 Third, improved bargaining power helps workers negotiate safe working conditions and health-promoting benefits, such as sick leave. Fourth, improved wages, benefits, and working conditions can “spill over” to improve health for those workers support, such as children or older parents, through increased household resources.
WHAT CREATES FULL EMPLOYMENT?
Full employment is pursued through monetary policy and fiscal policy. Together, monetary and fiscal policy increase demand for workers, which in turn increases worker bargaining power. Monetary policy involves central banks setting interest rates. Full employment monetary policy emphasizes low interest rates, meant to keep financial resources from sitting idle when they could be used for investments that result in improved health. Fiscal policy relates to managing macroeconomic demand. Full employment fiscal policy uses public spending to keep the economy running at full steam. Public spending supports infrastructure building, and publicly financed education and healthcare, all of which can improve health. It also includes “automatic stabilizer” income programs, like unemployment insurance and SNAP (the Supplemental Nutrition Assistance Program). These supports kick in when income drops, promoting health in two ways. First, they enable people to purchase health-promoting products they might have forgone. Second, they increase aggregate demand. Finally, “active labor market policies,” like job training, subsidized employment, and job placement assistance, are also important. Such policies reduce not only demand-deficient unemployment, but also frictional and structural unemployment.
CONCERNS ABOUT FULL EMPLOYMENT
One concern is that full employment could increase inflation (a rise in the general price level). If available resources for production cannot keep up with demand, supply falls behind and prices may rise, at least as an economy transitions towards meeting the new level of demand. However, we should think through the harms of inflation relative to alternatives. Taming inflation by increasing unemployment hurts not only those who lose jobs, but also the whole workforce through reduced bargaining power—especially those most tenuously connected to it3—along with children and others supported by workers.
Second, full employment is not a panacea. Even with full employment, those who are able to work need anti-discrimination efforts to fight unjust exclusion, collective bargaining policy, and health and safety regulation. And those who are unable to work, such as children, older adults, caregivers, and those with disabilities that preclude work, need income support policies.6 These could take the form of social insurance (e.g., older age pensions and disability income), or a universal minimum income. And of course, we need universal healthcare access, and tax policy that both finances public programs and works against income inequality. But even though it is not a panacea, full employment’s range of important benefits still makes it something important to pursue.
THREE PRINCIPLES OF HEALTH KEYNESIANISM
The first principle of Health Keynesianism is to use monetary and fiscal policy to pursue full employment. This improves population health in the ways described above. The second principle is to avoid unemployment crises through financial sector regulation. The most recent unemployment crisis resulted from a pandemic, but unemployment crises more commonly result from financial shocks. Appropriate regulations help prevent these. The third principle is to use fiscal policy to get out of unemployment crises as quickly as possible. Automatic stabilizers help, as does temporary deficit spending, since other ways of financing demand stimulus (e.g., taxes) risk blunting its effect.3 The effectiveness of fiscal policy is demonstrated by contrasting the successful COVID-19 economic response and the inadequate response to the “Great Recession” of 2008. During the Great Recession, unemployment, poverty, and food insecurity all rose, taking almost 10 years to return to pre-recession levels, with clear harm to health.7 Though the COVID-19 pandemic saw a larger increase in unemployment than the Great Recession, the use of Keynesian principles averted many of these harmful impacts, and employment quickly recovered.
CONCLUSIONS
Full employment gets little attention in health equity discussions, often not even recognized as something to aim for. But it is a feasible way to improve the conditions needed for health. Since we know income distribution matters for health, our health equity work should take seriously ways to improve it.
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SAB reports research grants from NIH, North Carolina Department of Health and Human Services, Blue Cross Blue Shield of North Carolina, the American Heart Association, the American Diabetes Association, and Feeding America, and personal fees from the Aspen Institute, Rockefeller Foundation, Gretchen Swanson Center for Nutrition, and Kaiser Permanente, outside of the submitted work.
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Berkowitz, S.A. Health Keynesianism: Why Full Employment Policy Matters for Population Health. J GEN INTERN MED (2024). https://doi.org/10.1007/s11606-024-08756-0
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DOI: https://doi.org/10.1007/s11606-024-08756-0