Full Employment: A Survey of Theory, Empirics and Policies

Full employment is a political choice, not just an economic metric.

Executive Summary

Full employment is not a fixed benchmark but a contested policy goal. Economists and policymakers define it differently: some tie it narrowly to the lowest unemployment rate consistent with stable inflation (often referred to as the NAIRU), while others view it as eliminating involuntary unemployment or ensuring access to decent work. These choices reflect political priorities as much as technical assessments.

Definitions shape mandates and outcomes. A narrow NAIRU-based definition subordinates employment goals to inflation control, while broader approaches elevate employment as an objective in its own right, legitimising stronger use of fiscal, labour-market, and social policies.

Measurement frames the policy response. Unemployment, underemployment, vacancies, hours worked, and participation rates each capture different dimensions of labour-market slack. Reliance on a single indicator risks misdiagnosis; a multi-metric dashboard provides a more reliable basis for policy.

Concepts map onto distinct policy strategies. Instrumentalist approaches align with stabilisation frameworks; realist approaches emphasise employment security; reconstructivist approaches experiment with job guarantees or wider social definitions of work. Each framework implies a different mix of fiscal, monetary, and industrial instruments.

The stakes are high. Ageing populations, technological change, and the green transition are reshaping labour demand. Clarifying how full employment is defined and measured is central to sustaining growth, cohesion, and democratic legitimacy in Europe.

Key Contributions

Bridges theoretical and empirical debates across labour economics, macroeconomics, and political economy.
Proposes a new typology of instrumentalist, realist, and reconstructivist approaches to full employment.
Highlights the normative stakes, showing that definitions and measurements of full employment reflect political priorities as well as economic reasoning.