Saturday, August 22, 2009
The classical economists believed that there was always full employment. According to them full employment is a situation when there is no involuntarily unemployment, through there may be voluntarily, casual, seasonal, structural, technological and frictional unemployment. In their opinion in a free competitive economy serious unemployment was passing phase. All job seekers are able to find jobs sooner or later at the prevailing wage rate. This view however is not accepted by economists these days. Actually there is always some unemployment. Employment will be full literally when every able bodied adult worked the number of hours considered normal for a fully employed person at the current wage level. This level of employment, however normally appears to be unattainable in private enterprise economists. For, under such economics, quite a few have enough unearned incomes to be able to afford a life of well-paid idleness. Pigou accordingly defied full employment as one when “every body who at the ruling rate of wages wishes to be employed is infact employed”.
But even Pigovian full employment appears to be unattainable for, at any given time, there is bound to be some seasonal and frictional unemployment. This led Keynes and after him to define full employment as a level of employment which falls short of Pigovian full employment. The Economic and Social Council of the UN has accepted the same definition for it required countries to fix full employment standard in this sense.
Keynesian full employment is by definition the maximum level of employment that private enterprise countries can attain without experiencing strong inflationary pressure. According to Keynes “full employment is a situation in which aggregate employment is inelastic in response to an increase in effective demand for its output”. But for purpose of practical policy it is necessary to reduce the concept to quantitative terms. It should be possible to say precisely when employment is less than full so that remedial measures can be adopted to achieve the full employment level.
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