Monetary Policies and Full Employment

By William Fellner | Go to book overview
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CHAPTER I
Underemployment and Equilibrium

THE CONCEPT OF FULL EMPLOYMENT

THE TASK of defining full employment is an ungrateful one. When economists speak of reasonably full employment--or more briefly of full employment--they usually mean a condition in which job-seeking persons are not unemployed on any significant scale. Such a statement contains but a vague definition of the concept of full employment, but it frequently is true that more importance attaches to a deliberately vague statement of this character than to a pedantic technical definition which hides, rather than makes explicit, the ambiguities inherent in a problem. In this case, as in many others, the attempt at conceptual precision proves to be cumber- some and does not lead to a completely satisfactory result.

Full employment, of course, means the absence of involuntary unemployment: only the honestly job seeking have to be employed in "full" employment. The crux of the conceptual difficulty is that the stock of unemployed persons usually includes individuals who might obtain employment if supply conditions were different on the labor market, that is, if they sought a job on different terms. Whether an individual should be regarded as voluntarily or involuntarily unemployed has obviously something to do with the question whether he would remain unemployed even if he were willing to accept a lower reward for his services, that is, even if he changed his attitude as a potential supplier of labor services. The voluntarily unemployed may frequently be interpreted as demanding for their services a price at which these services are not bought. A wealthy rentier is voluntarily unemployed even if he were willing to work for high multiples of the current salary rates. In spite of this, it is not fruitful to maintain that all persons are voluntarily unemployed who fail to reduce the supply price of their

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