The word "full employment", is it only political rhetoric or a realistic aim?

Question

Many politicians say that they aim for "full employment", but at the same time, many politicians see full employment as a source of inflation.

And it is also true that many people are not capable of working. They can lack skills or health. So "full" employment in a society must be impossible.

What is your view on "full employment"?

Answer 1

Actually, an unemployment rat of 3% IS considered "full employment" This is to take into account that people do change jobs, move, graduate from or return to college, etc.



And I have NEVER heard of ANYONE claiming that full employment is a source of inflation. Give me a source-I would love to learn more about this viewpoint.

Answer 2

Full employment is the goal of communism. It is a disaster for the economy and highly inflationary. If you have to have everybody working, the government will innovate less and be less efficient. Efficiency is the best inflation fighter there is. My economics teacher told me after she visited soviet russia that she saw a man there whose job it was to scrape the ice off the sidewalk. She thought, "don't they have salt?". Then she realized that if they had salt, the same job could be done by a lot less people and the government would have to find something else for these people to do.



Capitalist regulators attempts to achiece NAIRU, Non-Accellerating Inflationary Rate of Unemployment, which is generally thought to be around 4 or 5%, but the actual number changes depending on the rate of innovation in the nation. A more innovative country can employ more people without sparking increasing inflation. This is basically the rate of unemployment you get due to people leaving their jobs because they are looking for something better, people entering the job market for the first time, and people getting fired because their employer became more efficient and doesn't need them anymore. The increased efficiencies and availability of skilled workers create new opportunities, so ideally people aren't unemployed for long.



Of course in the real world, any capitalist system goes through booms and busts, no matter how regulated. Unemployment passes below NAIRU and we get an overheating economy, inflation increases, the value of investments aren't worth what people are spending, then they pull out their money and jobs start disappearing. The economy drops above NAIRU level unemployment and people aren't earning as much money. They therefore aren't spending as much money and inflation drops. Eventually, investments outpace inflation and more people put money into the economy again and create jobs.



The real killer is stagflation where you have both high unemployment and high enflation, typically caused by higher raw materials costs, like oil prices (like we have now). The flip side is what we had in the 1990's when the tech boom created so much innovation that both unemployment and inflation were low for a long time. That's the closest you'll ever get to full employment in a healthy economy, but even that eventually overheated and crashed.

Answer 3

It is always good to define our terms, and this is a good example the need to do so before starting a discussion.



I have read that about 2% of the population are unemployable. I have also read that there is always about 1 to 2% of the population in a job transition. These are people who were working, and will be working again soon, but are not working at present for some reason. So "full employment" probably means an unemployment rate of less than 4%



I believe we are just over 5% now, so we aren't doing too bad. Someone above mentioned the Great Depression. I believe unemployment then ran about 25%.

Answer 4

Full employment hasn't happened in my lifetime and I'm 63. And I don't think employment has hit the 97-98% figure since WWII.



A more realistic figure of what full employment would be in my opinion anything over 95%.



Politicians here are really so desperate to get critical of the current administration you'd think unemployment going over 5% is equal to the Great Depression.

Answer 5

Here is an excellent article that demonstrates what you're question is leading to:



Excerpts...



Full employment, or the natural rate of unemployment, is considered to be consistent with a level of unemployment that predominantly comprises voluntarily unemployed workers. In other words, those members of the labor force who really want a job have one. Leaving the nuances of who is part of the labor force for the main text, the rate of unemployment consistent with full employment is a major issue for economic policymakers. Small differences in the perceived rate of full employment lead to significant variations in the policy response to economic growth.



The definition of full employment is critical, because as unemployment rates reach and fall below this level, inflationary pressures start to build. The further that the unemployment rate falls below the natural rate, the greater the pressure on inflation. This is a result of modern production methods. Even in a capital-favoring production country like the United States, worker wages represent over 70% of all production costs. Rising wages increase costs, which are usually passed on to consumers as price increases, leading to climbing inflation.



To understand the relationship between full employment and wage increases, let us assume that the agreed upon natural unemployment rate is 5%. If the unemployment rate is 8%, then there are workers who desire jobs but cannot obtain one (known as involuntary unemployment). With high unemployment rates, the existing labor surplus implies that employers have little trouble finding people to work at the prevailing wage. But as economic growth accelerates, the labor surplus diminishes as more workers are hired, and the unemployment rate falls. Finally, due to strong economic growth, the unemployment rate falls to a level consistent with full employment.



As the story unfolds, economic growth remains persistently bullish, but now everyone (give or take) who wants a job has one. Yet increases in the demand for labor continue to grow and employers must pay existing workers overtime and entice non-labor force participants into the labor force by offering them higher wages. As wages increase, more people are willing to work (reaching their reservation wage), but production costs rise. If strong economic growth persists, wages pressures continue to build, leading to increasing inflation (also known as cost-push inflation).

Answer 6

Full employment is generally considered to be around 97%-98%. There will always be a certain percentage of the population that either can't work or flatly refuses to.