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Full Employment and Involuntary Unemployment

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Full Employment

It is a situation in which all of those people who are willing and able to work at an existing wage rate without any undue difficulty, get work. In general, the term Full Employment means that there is no unemployment in an economy; i.e., everyone gets a job. In simple terms, full employment means that the demand for labour in the economy is equal to its supply. But, in macroeconomics, even during full employment some types of unemployment can exist. It means that full employment does not result in zero unemployment or cent per cent employment.

The two types of unemployment that can exist under full employment are as follows:

1. Frictional Unemployment:

Frictional unemployment means temporary unemployment, which exists during the time period when a worker leaves one job and joins another job. Such type of unemployment arises because of the labour market imperfections like lack of perfect mobility from the side of workers and lack of market information among the workers regarding job availability. Besides these, frictional unemployment may exist because of the introduction of new machines, breakdown of plant, or nationalisation in the production process.

2. Structural Unemployment:

Structural Unemployment is the type of unemployment in which people remain unemployed because of a mismatch between the unemployed people and the demand for workers of a particular type. In simple terms, structural unemployment is associated with the structural changes in an economy. For example, because of advancements in technology, workers who do not have enough knowledge to work on advanced technological machines or equipment will be unemployed until they take some training course.

The presence of Frictional Unemployment and Structural Unemployment in an economy is termed the Natural rate of Unemployment.

Note: The workers mentioned in full employment consist only labour force, i.e., the working population and not the total population. The labour force is that part of the population which mentally and physically able and willing to do work and does not consist of children and old persons.

Involuntary Unemployment

It is a type of unemployment in which all those people who are willing and able to get work at an existing wage rate, do not get work. In simple terms, under involuntary unemployment, people are unemployed against their wishes or under some compulsion. Besides, while determining the total unemployment of an economy, only involuntary unemployment is considered.

Voluntary Unemployment

It is a type of unemployment in which even though a person is physically and mentally fit is unemployed because of his unwillingness to do work at an existing wage rate. While determining the total unemployment of an economy, voluntary unemployment is not considered.


Last Updated : 06 Apr, 2023
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