The US Labor Day holiday is a reminder that just as an economy can have an “output gap” so it can often have a significant social “WELFARE GAP”. The US is the poster child for this phenomenon among advanced countries, defined as underperformance on key dimensions of household living standards relative to the frontier of leading outcomes and enabling policy practices of peer countries.
Remedying deficiencies in such areas as decent work, child and dependent care, skilling, real economy investment, and social and environmental protection relative to countries having similar GDP per capita can often also strengthen growth itself by improving labor force participation and productivity, disposable income and consumption, productive investment and innovation, and thus aggregate demand. Going after such win-win opportunities on a systematic basis is the key to a post-neoliberal, post-trickle-down rebalancing and renewal of economics.
See my book Human Centred Economics: The Living Standards of Nations, especially Chapters 5 and 6 for elaboration of the social “welfare gap” concept and empirical evidence.
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