While it may seem uncontroversial to say that full employment should be one of the principal goals of UK economic policy in the 21st century, there is no firm consensus on what 'full employment' actually means: does it involve a low unemployment rate alone, or a low unemployment rate combined with a low rate of inactivity and high employment rate?

By reducing levels of both unemployment and inactivity among the working-age population, policies designed to increase the employment rate could help to raise the incomes of low-income households, and ease the burden on the tax and benefit system. Adopting full employment as a goal also presents opportunities to address both regional inequalities and those associated with gender and disability, and to enable more people to access the paid work which is vital for a sense of social identity, participation and wellbeing in modern society.

This report briefly reviews employment policy and outcomes in the UK, and developments in the labour force, throughout the postwar period. It then considers the potential benefits of full employment for individuals, families and the state - and the potential trade-offs between employment on the one hand and inflation, real wages and productivity on the other - before finally setting out a vision of what full employment might look like, and how it should be defined.