Essay on the Concept of Full Employment in a Country !

The concept of full employment is not very easy to define. In fact, the term has become very ambiguous in nature because different economists have expressed different views on its meaning. Full employment, in a very simple, logical sense, may mean that the total available supply of labour is completely absorbed in gainful employment. But this not a very feasible statement, because there is bound to be at least some voluntary unemployment.

Keynes, thus, suggested that full employment may mean absence of involuntary unemployment. In his General Theory, he declares that full employment level is reached by the economy when the real wage is equal to the marginal utility of employment.


At a lower wage, no worker would be willing to take up the job. Thus, if anybody is not willing to work at the prevailing equilibrium wage rate, it implies that he is not interested in employment, and, therefore, is voluntarily unemployed. In every society there are some rich landlords or some lazy people who do not want to work.

They are voluntarily unemployed. Such voluntary unemployment is not a social problem. The main problem of unemployment is involuntary, or forced, unemployment. Thus, the existence of involuntary unemployment (which is not frictional or temporary) implies less than full employment condition in the economy. According to Lerner, thus, full employment means that those, who want to work at the prevailing wage rate are able to find work.

Lerner, however, clarifies that full employment does not mean that everybody must work equally. It is quite likely that some people may prefer leisure to work, and yet, there is full employment. According to Keynes and Lerner, thus, full employment is consistent with “voluntary’’ and “frictional” unemployment.

Frictional unemployment refers to unemployment caused by wrong placement of workers, or by workers having wrong skills, or by lack of quick mobility of labour in relation to the change in demand. Lerner opines that measures devised to reduce frictional unemployment do not move the economy towards full employment, but raises the full employment level itself.


Beveridge, on the other hand, defines full employment in a way which means “having always more vacant jobs than unemployed men. It means that jobs are at fair wages, of such kind and are so located that the unemployed men can reasonably be expected to take them.” This definition suggests that frictional unemployment is not very conducive to full employment.

Mrs. Joan Robinson categorically says that frictional unemployment cannot be considered as being consistent with full employment. In her opinion, since it is difficult to give a precise meaning of “frictional” employment — when one cannot sharply demarcate unemployment which is due to frictions and unemployment which is due to deficiency of effective demand — we cannot treat frictional unemployment to be consistent with full employment.

In the technical language of macro-economic analysis, full employment is viewed as an equilibrium situation in which the sum of the demands in all labour markets tends to be equal to the sum of the supplies, though, of course, in many of these markets, there is the likelihood of an excess of demand over supply, or of full employment in that it is “a situation in which aggregate employment is inelastic in response to an increase in the effective demand for its output.” He, therefore, suggested that an economic policy, aiming at achieving full employment, should be designed to uplift the effective demand appropriately.

Incidentally, classical economists, believed in the normalcy of full employment level equilibrium of the economy. Keynes, however, pointed out that full employment equilibrium is far from frequent. Normally, there is under­employment equilibrium.