[6] In the United States, estimates of the NAIRU ranged between 5 and 6% in the late 20th and early 21st centuries,[2] but have fallen to below 4% since the recovery from the 2008 financial crisis.
[7][8] Monetary policy conducted under the assumption of a NAIRU typically involves allowing just enough unemployment in the economy to prevent inflation rising above a given target figure.
An early form of NAIRU is found in the work of Abba P. Lerner (Lerner 1951, Chapter 14), who referred to it as "low full employment" attained via the expansion of aggregate demand, in contrast with the "high full employment" which adds incomes policies (wage and price controls) to demand stimulation.
This correlation (previously seen for the U.S. by Irving Fisher) persuaded some analysts that it was impossible for governments simultaneously to target both arbitrarily low unemployment and price stability, and that, therefore, it was government's role to seek a point on the trade-off between unemployment and inflation which matched a domestic social consensus.
Exogenous supply shock inflation is also possible, as with the "energy crises" of the 1970s or the credit crunch of the early 21st century.
The NAIRU theory was mainly intended as an argument against active Keynesian demand management and in favor of free markets (at least on the macroeconomic level).
[2] Vox reporter Matthew Yglesias wrote of the late 1990s, "Everyone — from college students to stay-at-home moms to sixty-somethings to low-level drug dealers — becomes somewhat more inclined to seek formal employment.
That lets veteran workers get higher pay, even as companies are able to maintain some lower-pay work thanks to the growing labor force.
[13] As the NAIRU is inferred from levels of inflation and unemployment and the relationship between those variables is acknowledged to vary over time, some economists have questioned whether there is any real empirical evidence for it at all.
Some economists who favour the provision of a state job guarantee, such as Bill Mitchell, have argued that a certain level of state-provided "buffer" employment for people unable to find private sector jobs, which they refer to as a NAIBER (non-accelerating inflation buffer employment ratio),[19] is also consistent with price stability.