Full Employment

Published Oct 25, 2023

Definition of Full Employment

Full employment refers to a situation in which all available labor resources in an economy are being utilized to their maximum potential. In other words, when an economy achieves full employment, there is no involuntary unemployment. It means that everyone who is willing and able to work at the prevailing wage rates is able to find employment.

Example

To understand full employment, let’s consider an economy with a population of 10 million people. Out of these, 8 million are currently employed, while the remaining 2 million people are actively seeking employment but unable to find jobs. In this scenario, the economy is not at full employment, as there is involuntary unemployment.

However, as the economy starts to recover from a recession and experiences job growth, the number of unemployed individuals decreases. As a result, more people find jobs, and the unemployment rate declines. Eventually, if all 10 million people in the population are employed, the economy would be considered at full employment.

Why Full Employment Matters

Full employment is a desirable state for an economy as it signifies optimal resource utilization. When more people are employed, there is an increase in overall economic output, as workers contribute to the production of goods and services. It also leads to higher incomes for individuals, which further drives consumer spending and economic growth.

Achieving full employment is one of the primary goals of economic policy. Governments and policymakers employ various measures to stimulate job creation, such as investing in infrastructure, providing training programs, and creating a conducive business environment. By striving for full employment, societies can enhance the well-being and prosperity of their citizens.