The United States has been conducting a great economic experiment. It involves keeping unemployment rates at a historical low over a long period.
The results are in: Sustained low unemployment achieves the good results its advocates have always claimed it would. Not only that: We've kept unemployment low without experiencing an upsurge of inflation.
Until the past few years, economic policy assumed that was impossible. Yet the jobless rate fell Friday to 4.2 percent, a 29-year low -- and inflation still seems at bay.
Just as important, those who argued for years that the plight of the poor owed more to what was wrong with the economy than to what was wrong with the poor have been proved right. Tight labor markets have led employers to offer jobs to people who were described as "unemployable" only a few years ago.
Among the large beneficiaries of the low unemployment rates are young black men, according to a study by Richard B. Freeman of Harvard University and William M. Rogers at the College of William and Mary. They found that in 14 metropolitan areas where unemployment has been below 4 percent since 1992, the proportion of young, less-educated black men who are working rose from 52 percent to 64 percent. Increased work has been accompanied by falling crime rates.
Low unemployment helps explain a recent spate of good journalism on the changing situation in black America, including Ellis Cose's important article in the June 7 Newsweek and a detailed report on the Freeman-Rogers study by Sylvia Nassar and Kirsten B. Mitchell last month in the New York Times.
"Poor blacks never lost faith in work, education and individual effort," Jennifer L. Hochschild of Princeton University told Nassar and Mitchell. "What's different now is that they can do something about it."
Economic thinkers of a New Deal-bent have insisted for decades that if unemployment were low enough, many social problems described as "intractable" would begin solving themselves. The irony is that it took Bill Clinton, a Democratic president described as too conservative by many liberals, and Alan Greenspan, a Federal Reserve chief whose hero was the libertarian Ayn Rand, to prove the theory true.
Greenspan is described as a wizard, but he did something more important than magic: He altered his policies in light of the evidence. Greenspan, like most economists, once held the conventional view that low unemployment would breed inflation. But over time, he saw this economy behaving differently. Instead of hitting the brakes by raising interest rates, he held them steady and unemployment continued to drop.
Greenspan is now under pressure to raise rates. But he might consider the intriguing theory of Alice Rivlin, who stepped down last week as vice chairman of the Fed. She says we may be in a time when low unemployment keeps inflation down because it forces companies confronted with a shortage of workers to become more efficient.
"Economists have had in their head the idea that tight labor markets would lead to inflation and low productivity," Rivlin told the Financial Times in April. "It may be that under the present circumstances of fierce global competition, the effect of tight labor markets is exactly the opposite."
Political progressives have been reluctant to tout the good news that they were right about low unemployment. Many in their ranks are more concerned with persistent inequalities and injustices.
But admitting there's good news doesn't entail ignoring the bad. Acknowledging that low unemployment has been good for African Americans, for example, doesn't mean racism has disappeared or that we've arrived at a utopian state of social justice. We haven't.
For example, a study released this month by the 2030 Center, which studies the economic problems of young adults, found that half of all temporary workers, those who have insecure, "nonstandard jobs," are aged 20 to 34.
While some take temporary work because they want flexibility, the study found that the vast majority of temporary workers "profess strong dissatisfaction with their benefits and second-rate status." This is a problem. But it would only get worse if unemployment climbed back up.
Politicians will always talk about their devotion to economic growth. But now that we know what low unemployment can achieve, politicians need to be pressed about their priorities and what kind of growth they're looking for. Will their policies tilt toward keeping the jobless rate down? Or will their fears of inflation always make them tilt toward risking higher unemployment?
Yes, inflation is a risk. But it is now undeniable that the risks of high unemployment are borne most heavily by the poorest among us -- those who are only now beginning to climb the economic ladder. We dare not knock that ladder down.