Matt Yglesias explains why full employment was such a magical thing in the 90′s:
It was a crazy time. The way it worked was that if you weren’t happy with your job, you could just quit and find a new one. Which meant that if your boss was earning fat profit margins, you could credibly threaten to quit and get a raise. That was great for people who got raises, but it also had awesome knock-on effects all across American society. Some people, for example, were in industries that were genuinely low margin and couldn’t afford to hand out raises. So experienced workers would quit those jobs, and low wage employers had to invest time and energy in pulling whole new people into the labor market. It was raises for the previously employed, and new labor market opportunities for folks (high school dropouts, ex cons) who’d be considered “unemployable” today.
And it got even better!
In the face of persistent labor shortages and needy demanding workers suddenly it was clear that productivity improvements rather than hard-ass bargaining was the only viable path to higher profitability. And so productivity rose! Rather than endless rounds of givebacks and lockouts, managers were accepting the need to pay people or lose staff and focusing on finding ways to get more output. It was awesome.
This is what you should be thinking about when you hear manufacturing firm CEOs whining about having to pay for employee training, or Charles Plosser worrying about an overheating labor market with less than 2% inflation and 8% unemployment. We want the labor market on full boil, about to spill out of the pot. It’s not good enough for our candidates to tout this or that mealy-mouthed jobs bill. We need to hear that candidates are willing to do whatever it takes, and keep doing whatever it takes, to get us back to a tight tight labor market. That’s when employees have real leverage to demand raises, quit their jobs, get more employer-paid training and all that other good stuff.