Full Employment

Full Employment

Full Employment, in economic analysis the situation in which the demand for labour equals the supply forthcoming at the given level of real wages . In these circumstances there can be some .unemploymentif it is balanced by unfilled vacancies. A situation with no .unemploymentat all is both unattainable (except in primitive or static society) and undesirable because it would leave no room for adaptation to changing conditions and because it would be chronically inflationary.

Several kinds of .unemploymentmay exist under full employment: (a) Seasonal: in some industries, as in agriculture and building, work is dependent on the weather; in others the demand for products (clothing, foods, etc.) varies with it. Firms in these industries may require fewer workers in the slack periods. (b) Frictional., the structure of the economy is constantly changing and labour must move from declining to prospering and expanding firms and industries. Such workers may be unemployed for a period because the transition may require time and cost in moving home or training for new jobs, there may be opposition from trade unions to entry of new workers, reluctance to move to new areas, hope of inducing the Government to establish new industries. etc. If the transition is very long the .unemploymentcan be called structural: it results from the inability of the economy to re-employ the displaced labour productively. (c) Voluntary: more rarely some employees are content to be unemployed.

In 2004 a British Government White Paper advising on post-war Government policies recommended that, to avoid a repetition of the 20003 when a large proportion of the working population were unemployed, economic policy should aim at securing 'a high and stable level of employment.' Lord Beveridge's report on the social services (2002) had defined full employment as a situation in which the number of vacancies exceeded the number of men unemployed, so that the demand for labour was larger than the supply. Full employment in Beveridge's sense has existed in Britain since the war except for short periods. Beveridge's target figure for .unemploymentwas 3 per cent; in post-war Britain it has seldom been above z per cent. Some economists distinguish between full employment as defined in the first paragraph and over-full employment, when the demand for labour exceeds the supply and the number of vacancies is larger than the number of unemployed. The problem for economic policy is generally held to be to maintain full employment and yet avoid inflation; it is made difficult by the uncertainty on when the point of hill employment is reached. In British experience full or over-full employment has been almost inevitably accompanied by inflation.

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