The objectives of full employment and economic growth, though interrelated in some respects, are also incompatible with each other and have basic differences. They are interrelated in the sense the both help and reinforce each other.

A policy of full employment promotes economic growth and a policy of economic growth increases employment. But in most of the cases, the two objectives of full employments and economic growth come into conflict with each other.

Employment may be increased even with uneconomic industrial units. Again, promotion of economic growth through basic and heavy industries may not generate many employments, at least in the short period. The main differences between the objectives of full employment and economic growth are discussed below:

(i) Full employment means full utilisation of job opportunities within the limits of available resources. Economic growth means creation of additional employment opportunities by developing new economic resources.


(ii) Full employment is a static concept. It refers to the utilisation of existing production capacity of the economy under static conditions i.e. with given economic resources, production methods and technol­ogy. Economic growth, on the other hand, is a dynamic concept.

It involves the increase in the productive capacity of the economy by developing additional economic resources, improving technol­ogy and exploiting new investment opportunities.

(iii) Full employment is a short-term concept. It means elimination of unemployment in the short-run. Economic growth is a long-term concept. It means increasing the volume of employment in the long period.

The policy of full employment involves giving employment at current wage rates, whereas the policy of economic growth aims at providing employment at ever-increasing wage rate, thus improving the living standards of the people.


(iv) The policy of full employment is a demand-oriented policy. It aims at increasing the effective demand because deficiency of effective demand is the main cause of unemployment. The policy of economic growth is a supply-oriented policy. It concentrates on increasing the productive capacity of the economy by increasing the volume of economic resources.

(v) The policy of full employment is more suitable for the developed economies, while the policy of economic growth is more suitable for less-developed or developing economies.