Full Employment Has Many Benefits as Well as Many Consequences
- Pages: 9
- Word count: 2086
- Category: Social Inequality
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Full employment is often one of the most debatable topics amongst economists. Given its complex nature, there are many arguments on both sides on whether or not full employment is an indication of the labor market. While full employment might give some hope to those who are wanting to obtain quality employment, businesses and organizations are constantly having to adapt to external factors to remain competitive in the market. Although, inflation is a constant challenge for businesses as market trends continue to fluctuate. Given the information, we will analyze various factors that contribute to the overall complexity of full employment such as opportunity and market repercussion, minority employment, prosperity and adjustments in aggregate demand, and consumer demand and economic pressures.
Opportunity and Market Repercussion
If full employment is defined as the condition of the economy when everyone who is willing and able to work is employed, it is impossible to deny the benefits this would have on the working class. When looking at overall unemployment rates it is easy to overlook minorities and the working class. They tend to be hit the hardest when unemployment rates rise. However, when looking at full employment these groups tend to receive a larger bump in employment. The benefits of full employment are twofold. Full employment by definition means those seeking and eligible to work have found work. Employers are forced to raise compensation for work in order to attract workers in a tighter labor market.
This benefits households as a whole but particularly minority and working class households often see much higher rates of unemployment. The policies that most help achieve these goals typically require large scale government involvement as seen during World War II when America saw some of its lowest levels of unemployment, which contributes to full employment. Many policies that target full employment goals will often recommend large government job placement programs. These programs help those who otherwise would not find a job in the private sector to easily find work in the private sector.
Now that the benefits of full employment have been analyzed, it is important to examine what some of the repercussions are from it. When an economy reaches full employment employers are forced to pay more to attract workers in the tight job market. Initially this is seen as a major benefit to households, but for the employer this is an added expense that can only be afforded by either raising prices, which has already been discussed as a risk of inflation. Additionally, an employer can increase productivity, which would benefit the economy, but this is not always sustainable and can lead to an economic boom as seen in the early 2000’s followed by an economic downfall such as a recession or depression. While aiming for full employment seems like a noble goal, it should not be pursued lightly. Although achieving full employment has many benefits, it is important that the repercussions are analyzed due to the economic consequences that may be trickled down from full employment.
When working with minorities and people with completely different backgrounds organizations have the opportunity to get much more out of one employee. For many individuals, English in not there first language, given them the chance to open new communication with future clients, increase productivity, and reducing cost for any organization that needs to hire or outsource translators. Having additional full-timers gives them a higher chance to use their skills for the organization and relate with other people. Minorities have become the new norm in many organizations because of the need to communicate with people all over the world. In today’s economy, many organization job postings make it a requirement for applicants to be bilingual before applying.
Although, the labor market has proven to become increasingly diverse in all demographics. To correlate with the information, according to Burns, Barton, & Kerby (2012), “The U.S. workforce is undoubtedly becoming more diverse. As of June 2012 people of color made up 36 percent of the labor force. Breaking it down by race and ethnicity, approximately 99,945,000 (64 percent) in the labor force are non-Hispanic white; 24,679,000 (16 percent) are Hispanic; 18,758,000 (12 percent) are African American; and 8,202,000 (5 percent) are Asian. Approximately 4,801,000 people (3 percent) /in the labor force do not identify in any of these racial or ethnic categories (p.2). Social equality is very important and needed to have full employment. By providing minorities with the opportunity to be gainfully employed this could set the foundation for other organizations to hire minorities. Having a strong labor force in any country is the greatest resource.
The fastest way to create wealth and a highly sustainable economy is by receiving the labor of as many individuals as possible. Full employment means that all persons capable of contributing to a nation’s wealth is being utilized. If the country is not trying to achieve full employment, then it means that it is not fully mobilizing the resources available to the society.
While having full employment is great for a society as a whole, it can actually have a negative effect on minorities overall. For individuals in a society to have an equal chance at success in life there must be an equal opportunity for everyone to find employment and receive the chance to advance through work. One of the biggest cause of social inequality is the failure to achieve full employment, as this can create a segment of the population which does not have access to the normal methods of economic advancements. Even when minorities have the ability to work and somehow get close to full employment a shortage may occur.
Organizations will have a problem with an upward pressure in wages, which could pass the cost to the costumer. This can be determined by the availability of substitute and the price elasticity of demand. Imported goods may become relatively cheaper, leading to increase demand for foreign currencies. The effect may be seen in sterling depreciation and a deficit in the balance of payment. Full employment can have negative effects for not only minorities but all Americans when not having proper checks and balances. Full employment can increase the dangers of inflation, which might put trade unions in a strong bargaining position. Shortage of labor will cause employers to offer higher wages to attract workers into their organization. Since in these conditions labor can only be drawn from other occupations, wage increases will be offered elsewhere in an attempt to retain labor.
Prosperity and Adjustments in Aggregate Demand
In macroeconomics, aggregate demand is the nation’s demand for final goods and services in an economy at a given time. It specifies the amounts of goods and services that will be purchased at all possible price levels. This is the demand for the gross domestic product of a country. This being said the relationship between inflation rates and unemployment is an inverse correlation, if there is an increase in aggregate demand, such as what is experienced during inflation, price level increase, which lowers the unemployment rate and increases inflation. Full employment is a commitment to take any and all of the measures necessary for a healthy economy, one that provides opportunities for those able, willing, and seeking to work, promoting full employment increases real income, growth in productivity, an improved balance of trade, price stability, and purchasing power in a free competitive economy.
The Federal Reserve considers a base unemployment rate of 5.0% to 5.2% as full employment in the economy, and as of April of 2018 the unemployment rate is 3.9%. weThe problem with full employment is that historically it increases the danger of inflation and creates pressure within the economy and disrupts government policy. One of the repercussions is the shortage of labor, which will cause employers to offer higher wages to attract workers. However, there is a possibility that the competitiveness of wage increases to retain the labor within the market would trickle down to other aspects within the operations of a business.
Consumer Demands and Economic Pressures
Lastly, the benefits from full employment have led to high demands for goods and services. Given the information, the U.S. economy has seen a substantial growth in employment due to various factors such as consumer confidence. A main contributor for consumer confidence is the accessibility of disposable income. To correlate, according to Nahavandi (2018) “Personal disposable income is expected to increase at almost twice the rate of the overall economy” (p.58), which allows companies to invest back into business operations to better serve its target customers by enhancing their production of goods and services. Additionally, as the demand of goods and services increase at the price of the market value, the demand curve shifts to the right, which therefore shows the willingness of consumer confidence. With that in mind, as the market continues to adapt to consumer trends, businesses would need to implement business strategies that will allow them to remain competitive in the market.
As market trends continue to impact the day-to-day operations of businesses, the production of goods and services will fluctuate to meet market trends. Although, however, if a consumer is willing to pay more for a product, the more hours a business is willing to increase the production of goods and services. This, however, will be determined from various factors such as consumer preference, budgets, and marketability. In closing, the benefits of full employment do trickle down into the production of goods and services. As consumer confidence grows, businesses will be more willing to invest in production to remain competitive in the market to not only reach its target audience but possibly explore a wider range of consumers. As the market trends continue to change it will be interesting to see how businesses adapt and adjust to the market while implementing strategies to increase the production of goods and services.
Although there have been positive outcomes of full employment, there has also been an increase in prices due to inflationary pressures from the market. As the demand of the production of goods and services increase, the price to produce such services increase, too. With that in mind, as the prices begin to increase so does the chance of inflation. To understand inflation, it is important to know that inflation is determined by the Consumer Price Index and Chained Price Index, which gives economists a direct reflection of price increases and consumer trends. For instance, consumer trends such as bargain shopping has been a direct correlation of inflation.
For example, according to Nahavandi (2018), “Instead of demanding higher wages, households have conditioned themselves to stretch their paychecks by bargain shopping and are focused on meeting their essentials” (p.59), which has caused inflationary pressures to build up. With inflationary pressures on the rise, the purchasing power of consumers begins to decrease, which could have an impact of the cost of living. Additionally, if inflation becomes too high, the value of money and investments from consumers will begin to decrease. As mentioned earlier, consumers will have more disposable income with the production of goods and services.
However, as disposable income increases, there will be a market trend where there will be few goods to purchase, which then results in inflationary pressures in the economy. With too few goods to purchase and prices increasing, the purchasing power will decrease and have a direct correlation of how consumers will adapt to trends to make up the loss of value on investment purchases such as owning a home. To further explain, according to Nahavandi (2018), “the stagnant household wages and salaries are insufficient to absorb the output and propel the economy” (p.58). Given the information, there are serious implications of inflation that directly reflect with full employment. Although full employment enhances disposable income, the rise of too few goods to purchase in the market increases inflationary pressures within the economy which could directly reflect the loss of value in finances.
Overall, full employment has many benefits as well as many consequences. As full employment continues to be a debatable topic, economists will argue on both sides of how full employment is a likely consequence of inflation or how certain policies entice potential employees with higher wages. Given the information, full employment does contribute to an organization’s ability to adapt and adjust to current market trends to remain competitive within the market. With consumer trends, inflation, and other external factors to consider, full employment will continue to fluctuate and represent either a healthy or stagnant labor market. As time goes on, it will be interesting to see how opportunity and market repercussion, minority employment, prosperity and adjustments in aggregate demand, and consumer demand and economic pressures contribute to the complexity of full employment.