Overview
The book begins with the thesis that because individual employers are not capable of creating full employment, it must be the responsibility of the state. Full employment is defined as a state where there are slightly more vacant jobs than there are available workers, so people who lose jobs can find new ones immediately.
Unemployment should be aimed to be reduced to 3%. Beveridge claimed that the upward pressure on wages, due to the increased bargaining strength of labour, would be eased by rising productivity, and kept in check by a system of wage arbitration. The cooperation of workers would be secured by the common interest in the ideal of full employment.
The book was written in the context of an economy which would have to transfer from wartime direction to peace time. Government direction of labour (under the Essential Works Order) would cease, and workers would have a free choice of occupation.
Beveridge argued that pre-war unemployment, that hit great heights during the 1930s depression, was due to ineffective demand for industrial products, imperfect labour mobility and general labour market disorganisation. Instead, the economy should be planned, so that demand is socialised, and supply is maintained at all times.
To maintain demand, fiscal policy should be utilised. That means the Treasury's budget should gear towards increased spending when demand is otherwise down. The Social Security proposals in his better known Beveridge Report was an integral part of this.
Frictional unemployment could be remedied through the use of planning law and subsidies to draw the location of industry to the door of the labourer. The advantage of that would be fewer costs in housing and social dislocation which results from large movements of labour. Full use of employment exchanges - public employment agencies - could be used to channel mobile labour, such as younger people, where it is needed.
The evidential support for Beveridge's policy comes from the war experience. War solved unemployment by socialising demand.
Read more about this topic: Full Employment In A Free Society