The current monetary policy framework of the Fed intends to be more 'inclusive' by running the economy hot for longer during expansions. The logic of this strategy rests on Okun's (1973) hypothesis that sustaining a 'high-pressure economy' persistently improves labor market outcomes of low-wage...

As the economy emerges from a crisis, macroeconomic policy confronts a dilemma: a protracted stimulus can foster a more inclusive labor market recovery, yet risks igniting inflation that ultimately undermines workers' welfare through real income erosion. This tension amplifies in the presence of...