It deals Theory of Employment

1. N.DHINAKARAN
ASSISTANT PROFESSOR OF ECONOMICS
VIVEKANANDA COLLEGE
TIRUVEDAKAM WEST
MADURAI
Course Title : Macro Economics-I
Course Code: : 01CT 51

3. Full Employment
Meaning:
Full employment refers to a situation all those who are able to work and
are willing to work ( at the existing wage rate ) are getting work.
Definition:
Keynes defines full employment as the absence of involuntary
unemployment.

6. Unemployment
• MEANING
When large number of persons of working age, willing to work and able to work
cannot find employment at the prevailing wage rate.
Definition
According to NSSO defines unemployment as a situation in which all those who
owing to lack of work are not working but either seek work through employment
exchanges, intermediaries, friends or relatives or by making applications to
prospective employers or express their willingness or availability for work under
prevailing condition of work and remunerations.
UNEMPLOYMENT RATE
MEANING
According to NSS defines unemployment rate as the number of persons
unemployed per 1000 persons in the labour force.

7. Types of Unemployment
Open unemployment
Seasonal unemployment
Disguised unemployment
Industrial unemployment
Educated unemployment

8. Technological unemployment
Frictional unemployment
Casual unemployment
Structural unemployment
Cyclical unemployment
Chronic unemployment

10. Say’s Law of Market
• Say’s law of markets is the core of the classical theory of employment.
J.B.Say (1776 – 1832) was a French Economist and an industrialist. He was
influenced by the writings of Adam Smith and David Ricardo. J.B. Say
enunciated the proposition that “Supply creates its own demand”. Hence
there cannot be general over production or the problem of unemployment in
the economy.

12. Assumptions of the Say’s law of market
 No single buyer or seller of commodity or an input can affect price.
 Full employment.
 People are motivated by self interest and self – interest determines economic decisions.
 The laissez faire policy is essential for an automatic and self adjusting process of full
employment equilibrium. Market forces determine everything right.
 There will be a perfect competition in labour and product market.
 There is wage-price flexibility.
 Money acts only as a medium of exchange.
 Long - run analysis.
 There is no possibility for over production or unemployment.
 Unutilized resources used until reaches full employment.
 No Government intervention automatic Price adjustment mechanism operated.
Interest rate flexibility leads is saving – Investment equality

13. Propositions and Implications of the law
1. Full employment in the economy
2. Proper Utilization of Resources
3. Size of the Market
4. Automatic Adjustment Mechanism
5. Role of Money as Neutral
6. Laissez Fair Policy
7. Saving as a social virtue

14. Criticisms of Say’s Law
1. Supply does not create its demand
2. Self – adjustment not possible
3. Money is not Neutral
4. Over Production is Possible
5. Underemployment situation
6. State Intervention
7.Equality through Income
8. Wage –cut no solution
9. Demand creates its own supply

15. Pigou’s View of Unemployment

16. Keynesian Theory of Employment

17. Difference Between Classical Theory of Employment and Keynesian Theory of
Employment

19. THANK YOU