Concepts
of Employment and Full Employment:
Meaning and Definition:
By employment
is meant an engagement of a person in some occupation, business, trade or
profession, etc. The nation of desiring to be employment can be explained by
taking three established facts:
(i) Working
hours per day.
(ii) Wage rate.
(iii) A man’s state of health.
If the normal
working hours per day in an established firm are, say, seven and a health man
has the capacity to work for nine hour, it cannot be said that the man is
unemployed for two hours a day.
Similarly, if the
wage rate in a particular
occupation is $25 per day and a certain man demand $40 per day, then he would
not be able to get employment. Finally, if a man is sick and is unable to work,
he cannot be included in the rank of the unemployed.
The classical economists were of the view that in a free
competitive economy, unemployment cannot exist for an indefinite period. If
anyone remains jobless for a considerable period of time, then it can be only
due to the fact that he is demanding more wages than that he is really worth
for. The believed that in order to avoid this prolonged unemployment, the worker
should accept wage cuts.
The classical economists, however, admitted that in
short period unemployment can exist due to various reasons. For example, some
unemployment may be caused by the introduction of machinery and other labor
saving devices in the factory or it may be due to industrial disputes which lead
to temporary unemployment among the factory workers. Some unemployment can also
exist in factories for a part a year where the work is carried out seasonally.
For
instance, sugar factory works only in winter and ice factory in summer. Some
unemployment can also be due to the fact that unions are maintaining high level
of wages. The employers do not find it advantageous to keep this at a higher
level of wages .They retain a few competent workers and dispense with the
services of less efficient ones.
The modern economists have, however, rejected the above
view point given by the classical economists. They believe that in actual word,
perfect competition dose not prevail. It is not necessary that by lowering the
wage rate only, the economy can operate at the level of full employment.
During
the great Depression of Thirties, the economy could not be lifted out even by
lowering the wage rates. J.M. Keynes is of the opinion that unemployment can
only take place when the current demand for goods and services is not efficient
to absorb the available labor into different occupations.
Employment depends on spending of the whole income of the
people either on consumption or on investment goods. As the level of money
income increases in a community, people tend to spend a smaller portion of their
income on immediate consumption. So there will be a deficiency of return to
entrepreneurs. They try to cut down the volume of employment they offer to the
factors. This tendency may be counteracted if investment in capital goods
expands sufficiently. But in a wealth country, there may be comparatively less
new opportunities for investment. Hence the necessary increase in the volume of
investment may be not made with the result that a portion of labor force is
unable to find employment.
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