By John Hood

What’s the hottest political issue right now? According to recent poll results, it’s inflation. Welcome to the 1970s, folks.

A CNN survey, for example, asked respondents to choose the two issues they deemed “most important for the U.S. government to address.” Inflation was the top or second choice of 42% of respondents, followed by border security at 29%, voting rights at 28%, and crime at 21%.

These and other polls have clear political implications for the 2022 election cycle. But today let’s consider the policy implications of that top-ranked concern, inflation.

When inflation ramps up, it often outranks other issues in political salience for two interrelated reasons. First, it’s highly visible and affects most of us directly. Second, because the best definition of inflation is too much money chasing too few goods, it has a broad range of plausible causes and remedies — which means we can all grab our favorite hobbyhorse from the corner and ride it for a good long while.

Too much money? Well, that means the Federal Reserve has pumped up the economy with too much credit, or that the federal government has run massive deficits to fund excessive “stimulus” schemes. Too few goods (and services)? That means COVID and the resulting restrictions have screwed up our supply chains, or that workers need more child care or other government help so they can fill jobs, or that COVID-era subsidies and regulations have kept too many workers on the sidelines of the labor market, crimping supply even as they spend stimulus dollars to boost demand.

Let’s run with that last causal narrative for a moment. Here in North Carolina, the headline U-3 unemployment rate in December was 3.7%, down from 6.1% a year ago and 13.5% at the height of the brief but painful COVID recession. That represents lots of shuttered businesses reopening, new businesses starting, and sidelined workers coming back to work.

Not nearly enough of the latter, however. If you look only at the U-3 rate, you miss that. The share of working-age North Carolinians who are either employed or actively looking for work, a measure called labor-force participation, was 59.4% in December. That’s also a significant improvement from the April 2020 rate (56.2%). But in February 2020, it was 61.3%.

Consider another statistic: the employment-population ratio. Some 57.2% of working-age North Carolinians were employed in December. Two years earlier, the rate was 59.4%. If that were the case today, about 187,000 more North Carolinians would be working. If you’re wondering whether they’d really have jobs to fill, just ask businesses, nonprofits, and government agencies in your community. Their managers will say yes — and hand you an application, masking their desperation with a hopeful smile.

I don’t think there’s a magic wand we can wave to make the labor shortage go away. I remain convinced that politicians offered too many subsidies for too long, through expanded unemployment insurance and other means, inducing workers on the margin to stay home. Still, those effects have largely run their course. Most jurisdictions and establishments are also lifting COVID restrictions, including whatever vaccine, social distancing, and mask mandates they may have imposed. That will help, though not instantaneously.

Looking beyond short-term remedies, there’s plenty of evidence that many potential workers face a range of structural obstacles to becoming gainfully employed. Some were poorly served by schools and lack basic skills. Some have untreated mental illnesses and addictions. Some would like to enter new, higher-paid occupations or start their own small businesses but are stymied by unwise occupational-licensing laws and other regulations. A recent study by Utah State University professor Alicia Plemmons found that states with more-burdensome licensing laws tend to fare worse in business starts and employment than do states with freer labor markets.

In the 1970s, high marginal tax rates were a big factor on the supply side of inflation. Today, it’s more likely to be regulation. The right response is still the right response, however: unshackle supply.

John Hood is a John Locke Foundation board member and author of the novel “Mountain Folk,” a historical fantasy set during the American Revolution (MountainFolkBook.com).