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1 Introductory concepts 2  Market mechanism  3 Elasticities  4 Market structures 5  Market failures  6  Macro economic activity/eco growth  7 Inflation 8  Employment & unemployment  9  External Stability  10  Income distribution 11.Factors affecting economy  12  Fiscal/Budgetary policy  13  Monetary Policy   14 Aggregate Supply Policies  15 The Policy Mix

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Benefits vs costs of achieving full employment


Every economy will seek to promote employment growth because it is the primary avenue from which income can be generated and (material) living standards can be boosted.  In simple terms, employment creates income, usually in the form of wages, that can then be used to consume goods and service that provide people with higher material living standards.  Alternatively, some income generated from employment can be saved  and invested, providing people with a form of wealth that can then be used to finance future consumption.


There are several other personal or economy wide benefits that full employment provides, including:



Compared to the benefits of achieving full employment, there a relatively few costs, as one would expect.  However, the achievement of full employment can come at the expense of other economic goals.  For example, if the government is determined to achieve 'full employment,' it may pursue expansionary policies that work to create inflationary or external pressures, resulting in excessive inflation or an unsustainable CAD (or NFD).  In addition, the inflationary pressures are likely to be compounded by the higher labour costs that typically follow a period of full employment, which then further increase inflationary pressure and damage international competitiveness.

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