[Excerpt] There is a growing consensus among economists that reliance on aggregate demand policies alone will not be sufficient to move the economy to full employment with a nonaccelerating inflation rate, and that policies which alter the structure of labor markets will be required. While obvious structural policies such as public sector employment programs and training programs are the focus of current debate, many other public policies affect labor markets in subtle ways which may well adversely affect the level and distribution of employment and unemployment. To help improve the inflation-unemployment tradeoff, policymakers should seek to marginally modify these policies, preserving their benefits while reducing their adverse labor market effects.
To illustrate these points, this paper discusses the influence of public and private retirement policies on the level and distribution of employment and unemployment. I focus on the Social Security system (OASDHl), the Employee Retirement Income Security Act (ERISA), the amendment to the Age Discrimination in Employment Act that raised the permissible mandatory retirement age to 70, the Supreme Court decision in the Manhart case prohibiting sex differentials in employee pension contributions, and early retirement provisions negotiated in private collective bargaining agreements. Certainly, it would be difficult to criticize the intent of these policies. However, each of the public policies adversely affects the level or distribution of employment and unemployment. I conclude by noting several reforms of the method of financing the Social Security system which would reduce the system's adverse labor market effects.