The labour market is at full employment where?

Question: The labour market is at full employment where?

The labour market is the place where the supply and demand for jobs meet, with the workers or labour providing the services that employers demand1. Full employment is a situation where all available labour resources are being used in the most efficient way possible. Full employment does not mean that there is no unemployment, but rather that the unemployment rate is as low as possible without causing inflation.

There is no definitive answer to the question of which country or region has achieved full employment, as different sources may use different definitions and indicators. However, some possible ways to measure the degree of full employment are:

The natural rate of unemployment: This is the unemployment rate that is consistent with a stable inflation rate. It reflects the frictional and structural unemployment that exists even when the labour market is in equilibrium. The natural rate of unemployment may vary across countries and over time, depending on factors such as demographics, labour market institutions, and technology.

The non-accelerating inflation rate of unemployment (NAIRU): This is the unemployment rate below which inflation tends to rise. It is similar to the natural rate of unemployment, but it also takes into account the cyclical fluctuations in aggregate demand and supply. The NAIRU may change over time due to changes in inflation expectations, productivity growth, and other factors.

The employment-to-population ratio: This is the percentage of the working-age population that is employed. It reflects both the labour force participation rate and the unemployment rate. A higher employment-to-population ratio indicates a higher level of labour utilisation and a lower level of underemployment.

According to the International Labour Organization (ILO), the global employment-to-population ratio was 58.7% in 2019, down from 61.2% in 1991. The regional employment-to-population ratios ranged from 42.6% in Northern Africa to 69.1% in Eastern Asia in 2019. The ILO also estimated that the global unemployment rate was 5.4% in 2019, with regional unemployment rates ranging from 2.4% in Eastern Asia to 12.8% in Northern Africa.

Based on these indicators, some of the countries or regions that have achieved or approached full employment in recent years are:

Japan: Japan has one of the lowest unemployment rates in the world, at 2.8% in 2019. Its employment-to-population ratio was 77.6% in 2019, well above the global average. Japan’s low unemployment rate reflects its ageing population, tight labour market, and strong work ethic.

Germany: Germany has also maintained a low unemployment rate, at 3.1% in 2019. Its employment-to-population ratio was 75.8% in 2019, among the highest in Europe. Germany’s low unemployment rate reflects its high-quality education system, flexible labour market policies, and export-oriented economy.

Singapore: Singapore has a high employment-to-population ratio, at 67.7% in 2019. Its unemployment rate was 2.3% in 2019, one of the lowest in Asia. Singapore’s high labour utilisation reflects its open and competitive economy, skilled workforce, and pro-business environment.

These are just some examples of countries or regions that have achieved or approached full employment in recent years. However, it is important to note that full employment is not a static concept, but rather a dynamic one that depends on various factors and may change over time. Therefore, it is not possible to give a definitive answer to the question of where the labour market is at full employment.