ECONOMIC

women's labor force participation; and an increase in other public transferprograms for the low-income unemployed. These factors have tended toweaken the tie between current consumption and current earnings, and theymay have increased the extent of unemployment that is consistent with afull-employment economy.Other changes may have had the opposite effect. These include the risinglevel of education, the relative increase in white-collar occupations, and moreefficient job search because of improvements in transportation and communication.Because the reasons for differences in unemployment rates byeducation level are not well understood, it is not clear whether the rise ineducation by itself has been accompanied by a stable or a changing education-specificfull-employment unemployment rate for given age and sexgroups. The effects of improved labor market efficiency are also ambiguoussince it is not clear whether greater efficiency in the search for jobs lessensthe rate of unemployment at full employment.There is no unique procedure for adjusting the full-employment unemploymentrate for the changing demographic composition of the labor forceand for the changing relationships in the unemployment rates of variousdemographic groups. Moreover any estimating procedure is subject to samplingvariability. Using available data on labor force composition and unemploymentrates, and adjusting for the increased proportion of young personsin the labor force and for the increase in their unemployment rate relativeto adults, the Council of Economic Advisers has estimated that the fullemploymentunemployment rate equivalent to 4.0 percent in 1955 is now 4.9percent. This estimate corresponds with the widening in the differencebetween the overall unemployment rate and the unemployment rate foradults observed in Table 5.The effects of many of the other factors which are believed to influencethe full-employment unemployment rate are much more difficult to quantify.Partly because of this difficulty there is considerable dispute about theirrelative importance, but it is likely that they have raised the full-employmentunemployment rate even higher than the current estimate, perhaps closerto 5J/2 percent. The current benchmark estimates, however, incorporateonly the effects for which the evidence is substantial. As further evidence becomesavailable—perhaps through more data on unemployed persons classifiedby reason for unemployment, or perhaps through observed changes inwages and prices as actual unemployment rates decline—the current estimateof the full-employment unemployment rate might be further refined.It is important to bear in mind, however, that the full-employment unemploymentrate will not remain constant. For example, as the population agesand youths represent a smaller percentage of the labor force, the full-employmentunemployment rate will also tend to decline. The overall unemploymentrate that represents full employment can be expected to change withtime as demographic, social, and economic factors affect the rates at whichworkers move in and out of jobs, and in and out of the work force.51