100% employment

The nature and impact of financial issues

100% employment

Postby Elliott » 05 Aug 2011, 02:41

I am no expert on economics. In fact I understand very little of it.

Could someone please tell me whether this statement is true:

Economically we do not want full employment, anyway. 100% employment would cause massive wage inflation and would actually reduce productivity. People in work would have less incentive to apply themselves to their job if there was no threat of unemployment. Free market capitalism only works if some people are unemployed.


I heard it from a liberal.
Elliott
 
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Re: 100% employment

Postby Elliott » 05 Aug 2011, 15:09

David wrote:Out of interest, did the liberal state that as a condemnation of capitalism or as a suggestion that unemployment was desirable?

The latter. He (or she) was saying, in short, that we actually need the underclass.
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Re: 100% employment

Postby Jeff » 05 Aug 2011, 15:20

It is true, but it is a trivial truth. If there is an excess of labor, employers have a large pool of applicants from which to choose; there being a large number of potential replacements, employers will readily fire under performers. If there is a deficit of labor, employers have a small pool of applicants; there being few potential replacements, employers will be more hesitant to fire under performers. In the first scenario, as in a recession, unemployment tends to be high. In the latter scenario, as in an economic expansion, unemployment tends to be much lower.

No doubt, your liberal friend thinks full employment is a good thing. I doubt anyone would claim it is undesirable in itself, but the economic consequences of such a government mandate, which is the only way to achieve such a thing, would be devastating. Profits would be pilfered to pay for large numbers of unproductive employees.
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Re: 100% employment

Postby Michael » 06 Aug 2011, 14:56

No doubt, your liberal friend thinks full employment is a good thing. I doubt anyone would claim it is undesirable in itself, but the economic consequences of such a government mandate, which is the only way to achieve such a thing, would be devastating. Profits would be pilfered to pay for large numbers of unproductive employees.


I totally agree. One of the most wonderful things about our modern world, despite its many ills, is that we are not only to survive but thrive while employing less than our full population. Even two and a half centuries ago almost everyone had to work so that there would be enough food.
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