What happens to the economy when everyone is employed?
Posted by admin in Finance Thursday, 18 November 2010 21:59 3 Comments
I’ve always heard that a certain amount of unemployment is necessary for a stable economy. Why? If everyone was employed we’d all have money to spend, social services would not be needed thus lowering our taxes, and companies would have a steady stream of business thus not laying off extra staff. Also due to competition prices would most likely go down and the value of the dollar would go up. So why is it necessary to have unemployed people?
Sir Thomas More wrote Utopia a lon g time ago . I know it’s good to have dreams .
Hi Kyle –
Theoretically speaking, your question is interesting. But unfortunately, it is only theoretical because there will ALWAYS be unemployed people.
Businesses are constantly growing and contracting (adding/shedding jobs), people are constantly moving to and from different places, etc. So there will always be unemployed people.
Typically an unemployment rate less than 4% is considered ‘full employment’, so working off of that, your question begins to take on substance.
The statement ‘due to competition prices would most likely go down’ is accurate in the general economic sense, but it is not entirely true in that competition does not always result in reduced prices. Further, the idea that more competition and lower prices would result in the value of the dollar increasing is not completely true. The value of the dollar is determined by a plethora of factors, but primarily by the amount of money in the system (money supply). As we are seeing now, the value of the dollar is declining because the Fed is increasing the amount of money in the system by lowering interest rates.
So although it is a fun idea to contemplate, unemployment will always be with us.
Hope this helps!
Increased GDP. Hundred percent employment (including self employment) just not possible. However, if at all, wish full thinking becomes, True ! Country achieve increase in GDP.