How employment Affects Capitalism

According to Lowe (2006), most cases of unemployment have resulted from capitalism, which is a dominant social system in most countries. Capitalists argue that unemployment and underemployment are essential in fuelling their profits, which escalates the economy. Capitalists have always viewed employment as a way of tampering with the profits of their firms. When businesses increase output and there is less demand for services, capitalists take the initiative of cutting off the number of employees. Subsequently, when there is a higher rate of employment and available jobs in the market, capitalists feel threatened and incapacitated as far as the terms and conditions of employment are concerned. Capitalism influences a system of largely private ownership that accommodates new ideas and innovations. Capitalists have always defended their reasons to hire and fire as their basic right (Lowe, 2006). Their systems gain support through coercion, which is destabilized by availability of employment. This explains why capitalism is affected by employment.

Inflation as an Obstacle to Full Employment Policies

Inflation promotes imperfections such as monopolies and oligopolies, which act as a hindrance to full employment policies. Inflation promotes the obstacles to full-time employment especially in most developing countries. This has pressurized most governments to create employment, as it is their mandate to guarantee employment to its citizens (Lowe, 2006). High levels of aggregate demand are a great contributor to high-level economy and full employment, which prospers when economic, social and political measures are observed. Effective economic measures are the major steps towards curbing inflation and attaining full employment (Lowe, 2006). Different governments, especially in the emerging economies, must address the raging power of trade unions and full employment alongside inflation. Governments’ policies are also affected by immense losses that result from inflation. Increase of inflation is a major contributor towards tighter monetary policies, which hinders full employment and wage growth by slowing down the economic growth. If the inflation rate is at a point of potential output, then this will result to lesser cases of unemployment and hence reduce the inflationary pressures at work in the economy. In addition, the trade-off between inflation and unemployment has a fixed influence on the future inflation rate that affects the results of the target of unemployment rate despite the annual inflation rate.





Lowe, A. (2006). The Path of Economic Growth, Cambridge: Cambridge University Press.


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