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Unemployment
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See also: employment
An 1837 political cartoon about unemployment in the United States.
CIA figures for world unemployment rates, 2006
Unemployment is the condition of willing workers lacking jobs or "gainful
employment". In economics, unemployment statistics measure the condition and extent
of joblessness within an economy. A key measure is the unemployment rate, which is the
number of unemployed workers divided by the total civilian labor force. The
unemployment rate is also used in economic studies and economic indexes such as the
Conference Board’s Index of Leading Indicators. Unemployment in an economic sense
has proved a surprisingly difficult thing to define, let alone "cure".
The terms unemployment and unemployed may sometimes be used to refer to inputs to
production that are not being fully used (apart from labor) — for example, unemployed
capital goods. In its most general, but uncommon usage, unemployment might also
denote objects not put to productive use.
Before industrialization unemployment has been said not to have been recognized as an
issue in rural areas, despite the "disguised unemployment" of rural laborers having little
to do, especially in conditions of overpopulation.
Contents
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1 Impact of unemployment on society
o 1.1 Individual costs
o 1.2 Economic benefits of unemployment
2 Competing theories as to causes of unemployment
o 2.1 Government spending as a cause or cure for unemployment
o 2.2 Debate on causes of unemployment
3 Types of unemployment
4 Measuring Unemployment
o 4.1 European Union (Eurostat)
o 4.2 United States Bureau of Labor Statistics
o 4.3 Limitations of the unemployment definition
5 Aiding the unemployed
6 Is there such a thing as involuntary unemployment?
7 Benefits of unemployment
8 See also
9 References
[edit] Impact of unemployment on society
Unemployment rate (as a percentage of the labor force) in the United States. Data source:
U.S. Bureau of Labor Statistics.
[edit] Individual costs
In the absence of a job when a person needs one, it can be difficult to meet financial
obligations such as purchasing food to feed oneself and one's family, and paying one's
bills; failure to make mortgage payments or to pay rent may lead to homelessness through
foreclosure or eviction. Being unemployed, and the financial difficulties and loss of
health insurance benefits that come with it, may cause malnutrition and illness, and are
major sources of mental stress and loss of self-esteem which may lead to depression,
which may have a further negative impact on health.
Lacking a job often means lacking social contact with fellow employees, a purpose for
many hours of the day, lack of self-esteem, mental stress and illness, and of course, the
inability to pay bills and to purchase both necessities and luxuries. The latter is especially
serious for those with family obligations, debts, and/or medical costs, where the
availability of health insurance is often linked to holding a job. Dr. M. Harvey Brenner
and others have shown that rising unemployment increases the crime rate, the suicide
rate, and causes a decline in healthiness.[1] However, during the Great Depression, when
unemployment rates exceeded 20% in many countries, the crime rate did not
increase.[citation needed] Because unemployment insurance in the U.S. typically does not even
replace 50% of the income one received on the job (and one cannot receive it forever),
the unemployed often end up tapping welfare programs such as Food Stamps — or
accumulating debt, both formal debt to banks and informal debt to friends and relatives.
Higher government transfer payments in the form of welfare and food stamps decrease
spending on productive economic goods, decreasing GDP.
Some hold that many of the low-income jobs aren't really a better option than
unemployment with a welfare state (with its unemployment insurance benefits). But since
it is difficult or impossible to get unemployment insurance benefits without having
worked in the past, these jobs and unemployment are more complementary than they are
substitutes. (These jobs are often held short-term, either by students or by those trying to
gain experience; turnover in most low-paying jobs is high, in excess of 30%/year.[citation
needed]
) Unemployment insurance keeps an available supply of workers for the low-paying
jobs, while the employers' choice of management techniques (low wages and benefits,
few chances for advancement) is made with the existence of unemployment insurance in
mind. This combination promotes the existence of one kind of unemployment, frictional
unemployment.
Another cost for the unemployed is that the combination of unemployment, lack of
financial resources, and social responsibilities may push unemployed workers to take jobs
that do not fit their skills or allow them to use their talents. That is, unemployment can
cause underemployment (definition 1). This is one of the economic arguments in favor of
having unemployment insurance.
This feared cost of job loss can spur psychological anxiety, weaken labor unions and
their members' sense of solidarity, encourage greater work-effort and lower wage
demands, and/or abet protectionism. This last means efforts to preserve existing jobs (of
the "insiders") via barriers to entry against "outsiders" who want jobs, legal obstacles to
immigration, and/or tariffs and similar trade barriers against foreign competitors. The
impact of unemployment on the employed is related to the idea of Marxian
unemployment. Finally, the existence of significant unemployment raises the oligopsony
power of one's employer: that raises the cost of quitting one's job and lowers the
probability of finding a new source of livelihood.
[edit] Economic benefits of unemployment
See also: Full employment
Unemployment may have advantages as well as disadvantages for the overall economy.
Notably, it may help avert runaway inflation, which negatively affects almost everyone in
the affected economy and has serious long-term economic costs. However the historic
assumption that full local employment must lead directly to local inflation has been
attenuated, as recently expanded international trade has shown itself able to continue to
supply low-priced goods even as local employment rates rise closer to full employment.
The inflation-fighting benefits to the entire economy arising from a presumed optimum
level of unemployment has been studied extensively. Before current levels of world trade
were developed, unemployment was demonstrated to reduce inflation, following the
Phillips curve, or to decelerate inflation, following the NAIRU/natural rate of
unemployment theory.
Beyond the benefits of controlled inflation, frictional unemployment provides employers
a larger applicant pool from which to select employees better suited to the available jobs.
The unemployment needed for this purpose may be very small, however, since it is
relatively easy to seek a new job without losing one's current one. And when more jobs
are available for fewer workers (lower unemployment), it may allow workers to find the
jobs that better fit their tastes, talents, and needs.
As in the Marxian theory of unemployment, special interests may also benefit: some
employers may expect that employees with no fear of losing their jobs will not work as
hard, or will demand increased wages and benefit. According to this theory,
unemployment may promote general labor productivity and profitability by increasing
employers' monopsony-like power (and profits).
Optimal unemployment has also been defended as an environmental tool to brake the
constantly accelerated growth of the GDP to maintain levels sustainable in the context of
resource constraints and environmental impacts. However the tool of denying jobs to
willing workers seems a blunt instrument for conserving resources and the environment -it reduces the consumption of the unemployed across the board, and only in the shortterm. Full employment of the unemployed workforce, all focused toward the goal of
developing more environmentally efficient methods for production and consumption
might provide a more significant and lasting cumulative environmental benefit and
reduced resource consumption. If so, the future economy and workforce would benefit
from the resultant structural increases in the sustainable level of GDP growth.
[edit] Competing theories as to causes of unemployment
Open unemployment of the sort defined above is associated with capitalist economies.
Preliterate communities are thought to treat their members as parts of an extended family
and thus not to allow them to be unemployed — in the effort to preserve the group. In
precapitalist societies such as European feudalism, the serfs (though clearly dominated
and exploited by the lords) were never "unemployed" because they had direct access to
the land (and the needed tools) and could thus work to produce crops. Just as on the
American frontier during the nineteenth century, there were day laborers and subsistence
farmers on poor land, whose position in society was somewhat analogous to the
unemployed of today. But they were not truly unemployed, since they could find work
and support themselves on the land.
Under both ancient and modern systems of slave-labor, slave-owners never let their
property be unemployed for long. (If anything, they would sell the unneeded laborer.)
Planned economies such as the old Soviet Union or today's Cuba typically provide
occupation for everyone, using substantial overstaffing if necessary. (This is called
"hidden unemployment," which is sometimes seen as a kind of underemployment,
definition 3.) Workers' cooperatives — such as those producing plywood in the U.S.
Pacific Northwest — do not let their members become unemployed unless the co-op
itself goes bankrupt.
On the other hand, under capitalism the individual profit-seeking employer does not have
to bear the complete social costs of laying off or firing workers, so they are willing to live
with (or even profit from) the existence of unemployment — unless employees are able
to win good severance packages or protection from the government (such as restrictions
on firing and lay-offs, although some doubt if even these help since they may make
employers more reluctant to take the risk of hiring someone in the first place). (That is,
there is arguably a market failure due to the existence of external costs of firing or laying-
off of people.) On the "supply side," workers' lack of significantly positive net worth
(beyond equity in a home or a car) makes it very difficult for them to go into business for
themselves to avoid unemployment. Economist Edward Wolff estimates that in 1995 in
the U.S., families with adults aged 25-45 in the middle income quintile could sustain their
current consumption for only 1.2 months (or live at 125% of the poverty standard for 1.8
months) based on their financial reserves. Poorer quintiles of course had more difficulty!
Since not all unemployment may be "open" and counted by government agencies, official
unemployment may be very low even under capitalism. Most poorer capitalist countries
lack a modern welfare state and unemployment insurance so that it is very difficult to
afford being unemployed for very long: they often end up taking jobs below their skill
levels. Those who might be counted as "unemployed" in the rich countries end up instead
being underemployed (definition 1) and not counted.
Others argue that unemployment actually increases the more the government intervenes
into the economy. For example, minimum wages raise costs of doing business and
businesses respond by laying off workers. Laws restricting layoffs make businesses less
likely to hire in the first place leaving many young people unemployed and unable to find
work.
The results of both actions lead to less productivity and are claimed to incur a higher cost
on society as a whole. The results lead to not just higher unemployment but may increase
poverty. This is why the less market oriented countries of Europe often sustain
substantially high unemployment rates in comparison to the United States; that is,
government induced employment through policies designed to protect the worker. The
welfare state then responds with various benefits that are paid for by the middle and
upper class which reduces their ability to consume and is theorised to reduce the
incentive to work hard and innovate. Economists like Ludwig Von Mises, Milton
Friedman, Friedrich Von Hayek, and many others not only believe that the welfare of
society decreases with this kind of intervention but that these economic policies are not
sustainable.
[edit] Government spending as a cause or cure for unemployment
Some economists have found high correlations between government spending as a
percentage of GDP to unemployment from 1981 to the present using data from the
Bureau of Labor Statistics. The correlation between government spending was actually
negative during the 1940 to 1980 period; however, the Misery Index was steadily rising
during this period.
These same economists state that the unemployment supply curve is actually vertical, that
labor will work under any condition provided work is available, and the economic
element with the most power to shift it is government.
[edit] Debate on causes of unemployment
There is considerable debate amongst economists as to what the main causes of
unemployment are. Keynesian economics emphasizes unemployment resulting from
insufficient effective demand for goods and service in the economy (cyclical
unemployment). Others point to structural problems (inefficiencies) inherent in labour
markets (structural unemployment). Classical or neoclassical economics tends to reject
these explanations, and focuses more on rigidities imposed on the labor market from the
outside, such as minimum wage laws, taxes, and other regulations that may discourage
the hiring of workers (classical unemployment). Yet others see unemployment as largely
due to voluntary choices by the unemployed (frictional unemployment). On the other
extreme, Marxists see unemployment as a structural fact helping to preserve business
profitability and capitalism (Marxian unemployment).
Though there have been several definitions of voluntary (and involuntary)
unemployment in the economics literature, a simple distinction is often applied.
Voluntary unemployment is attributed to the individual unemployed workers (and their
decisions), whereas involuntary unemployment exists because of the socio-economic
environment (including the market structure, government intervention, and the level of
aggregate demand) in which individuals operate. In these terms, much or most of
frictional unemployment is voluntary, since it reflects individual search behavior. On the
other hand, cyclical unemployment, structural unemployment, classical unemployment,
and Marxian unemployment are largely involuntary in nature. However, the existence of
structural unemployment may reflect choices made by the unemployed in the past, while
classical unemployment may result from the legislative and economic choices made by
labor unions and/or political parties. So in practice, the distinction between voluntary and
involuntary unemployment is hard to draw. The clearest cases of involuntary
unemployment are those where there are fewer job vacancies than unemployed workers
even when wages are allowed to adjust, so that even if all vacancies were to be filled,
there would be unemployed workers. This is the case of cyclical unemployment and
Marxian unemployment, for which macroeconomic forces lead to microeconomic
unemployment. For more details, see unemployment types.
Some say that one of the main causes of unemployment in a free market economy is the
fact that the law of supply and demand is not really applied to the price to be paid for
employing people. In situations of falling demand for products & services the wages of
all employees (from president to errand boy) are not automatically reduced by the
required percentage to make the business viable. Others say that it is the market that
determines the wages based on the desirability of the job. The more people qualified and
interested in the job, the lower the wages for that job become. Based on this view, the
profitability of the company is not a factor in determining whether or not the work is
profitable to the employee. People are laid off, because pay reductions would reduce the
number of people willing to work a job. With fewer people interested in a particular job,
the employees bargaining power would actually rise to stabilize the situation, but their
employer would be unable to fulfill their wage expectations. In the classical framework,
such unemployment is due to the existing legal framework, along with interferences with
the market by non-market institutions such as labor unions and government. Others say
many of the problems with market adjustment arise from the market itself (Keynes) or
from the nature of capitalism (Marx).
In developing countries, unemployment is often caused by burdensome government
regulation. The World Bank's Doing Business project shows how excessive labor
regulation increases unemployment among women and youths in Africa, the Middle East
and Latin America.
[edit] Types of unemployment
Main article: unemployment types
Main article: Graduate unemployment
Frictional
When moving from one job to another, the unemployment temporarily
experienced when looking for a new job.
Structural
Caused by a mismatch between the location of jobs and the location of jobseekers. "Location" may be geographical, or in terms of skills. The mismatch
comes because unemployed are unwilling or unable to change geography or skills.
Cyclical (Demand deficient unemployment) unemployment
When there is not enough aggregate demand for the labor. Caused by a business
cycle recession.
Technological
Caused by the replacement of workers by machines or other advanced technology.
Classical (real-wage)
When real wages for a job are set above the market-clearing level, commonly
government (as with the minimum wage) or unions, although some (such as
Murray Rothbard, America's Great Depression p. 45) suggest that even social
taboos can prevent wages from falling to the market clearing level.
Marxian
When unemployment is needed to motivate workers to work hard and to keep
wages down.
Seasonal
When an occupation is not in demand at certain seasons. For example,
construction workers in winter, ski instructors in summer.
[edit] Measuring Unemployment
Though many people care about the number of unemployed, economists typically focus
on the unemployment rate. This corrects for the normal increase in the number of people
employed due to population increases and increases in the labor force relative to the
population — and thus the normal increase in the number of unemployed workers.
The unemployment rate is expressed as a percent, and calculated as follows:
As defined by the International Labour Organization, "unemployed workers" are those
who are currently not working but are willing and able to work for pay, currently
available to work, and have actively searched for work.[2] The civilian labor force ("total
labor force") is the sum of all workers, both unemployed and employed - all those willing
and able to work for pay.
The ILO describes 4 different methods to calculate the unemployment rate:[3]
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Labour Force Sample Surveys are the most preferred method of unemployment
rate calculation since they give the most comprehensive results and enables
calculation of unemployment by different group categories such as race and
gender. This method is the most internationally comparable.
Official Estimates are determined by a combination of information from one or
more of the other three methods. The use of this method has been declining in
favor of Labour Surveys.
Social Insurance Statistics such as unemployment benefits, are computed base on
the number of persons insured representing the total labour force and the number
of persons who are insured that are collecting benefits. This method has been
heavily criticized due to the expiration of benefits before the person finds work.
Employment Office Statistics are the least effective being that they only include a
monthly tally of unemployed persons who enter employment offices. This method
also includes unemployed who are not unemployed per the ILO definition.
[edit] European Union (Eurostat)
Eurostat, the statistical office of the European Union, defines unemployed as those
persons age 15 to 74 who are not working, have looked for work in the last four weeks,
and ready to start work within two weeks, which conform to ILO standards. Both the
actual count and rate of employment are reported. Statistical data is available by member
state, EU12, EU15, EU25, EU27, EA11, and EA13. Eurostat also includes a long-term
unemployment rate. This is defined as part of the unemployed who have been
unemployed for an excess of 1 year.[4]
Three methods of data collection are used in the European Union. The European Union
Labour Force Survey (EU-LFS) collects data on all member states each quarter. For
monthly calculations, national surveys or national registers from employment offices are
used in conjunction with quarterly EU-LFS data. Monthly unemployment rates are
interpolated from monthly data from member states to provide "harmonised data".[5]
At this time, Germany's unemployment data is collected separately from the (EU-LFS).
[edit] United States Bureau of Labor Statistics
There was an official measure of 6.8 million unemployed in the U.S. as of April 2007, a
rate of 4.5%.[6]
Unemployment rate for US states in 2004
The Bureau of Labor Statistics measures employment and unemployment (of those over
16 years of age) using two different labor force surveys[7] conducted by the United States
Census Bureau (within the United States Department of Commerce) and/or the Bureau of
Labor Statistics (within the United States Department of Labor) that gather employment
statistics monthly. The Current Population Survey (CPS), or "Household Survey",
conducts a survey based on a sample of 60,000 households. This Survey measures the
unemployment rate based on the ILO definition.[8]The data is also used to calculate 5
other unemployment rates as a percentage of the labor force based on different definitions
noted as U1 through U6:[9]
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U1: Percentage of labor force unemployed 15 weeks or longer.
U2: Percentage of labor force who loss jobs or completed temporary work.
U3: Official unemployment rate per ILO definition.
U4: U3 + "discouraged workers", or those who have stopped looking for work
because current economic conditions makes them believe that no work is
available for them.
U5: U4 + other "marginally attached workers", or those who "would like" and are
able to work, but have not looked for work recently.
U-6: U5 + Part time workers who want to work full time, but can not due to
economic reasons.
Note: "Marginally attached workers" are added to the total labor force for
unemployment rate calculation for U4, U5, and U6.
The Current Employment Statistics survey (CES), or "Payroll Survey", conducts a survey
based on a sample of 160,000 businesses and government agencies that represent 400,000
individual employers.[6] This survey measures only nonagricultural, nonsupervisory
employment; thus, it does not calculate an unemployment rate, and it differs from the
ILO unemployment rate definition. This survey also does not measure the These two
sources have different classification criteria, and usually produce differing results.
Additional data is also available from the government, such as the unemployment
insurance weekly claims report available from the Office of Workforce Security, within
the U.S. Department of Labor Employment & Training Administration.[10]
It is important to note that these statistics are for the U.S. economy as a whole, hiding
variations among groups. For April 2007 in the U.S., the unemployment rates for the
major worker groups were as follows:[6]
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adult men: 4.0 %
adult women: 3.8 %
Caucasians: 3.9 %
Hispanics or Latinos (all races): 5.4 %
African American Descent: 8.2 %
teenagers: 15.3 %
These percentages represent the usual rough ranking of these different groups'
unemployment rates. The absolute numbers change over time and with the business
cycle. The Bureau of Labor Statistics provides up-to-date numbers via a pdf linked here.
The BLS also provides a readable concise current Employment Situation
Summary,updated monthly.
[edit] Limitations of the unemployment definition
The unemployment rate may be different from the impact of the economy on people. The
unemployment figures indicate how many are not working for pay but seeking
employment for pay. It is only indirectly connected with the number of people who are
actually not working at all or working without pay. Therefore, critics believe that current
methods of measuring unemployment are inaccurate in terms of the impact of
unemployment on people as these methods do not take into account:
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The 1.5% of the available working population incarcerated in U.S. prisons (who
may or may not be working while incarcerated).
Those who have lost their jobs and have become discouraged over time from
actively looking for work.
Those who are self-employed or wish to become self-employed, such as
tradesmen or building contractors or IT consultants.
Those who have retired before the official retirement age but would still like to
work (involuntary early retirees).
Those on disability pensions who, while not possessing full health, still wish to
work in occupations suitable for their medical conditions.
Those who work for payment for as little as one hour per week but would like to
work full-time. These people are "involuntary part-time" workers.
Those who are underemployed, e.g., a computer programmer who is working in a
retail store until he can find a permanent job.
Involuntary stay-at-home mothers who would prefer to work.
Graduate and Professional school students who were unable to find worthwhile
jobs after they graduated with their Bachelor's degrees.
On the other hand, the measures of employment and unemployment may be "too high".
In some countries, the availability of unemployment benefits can inflate statistics since
they give an incentive to register as unemployed. People who do not really seek work
may choose to declare themselves unemployed so as to get benefits; people with
undeclared paid occupations may try to get unemployment benefits in addition to the
money they earn from their work. Conversely, the absence of any tangible benefit for
registering as unemployed discourages people from registering.
However, in countries such as the United States, Canada, Mexico, Australia, Japan and
the European Union, unemployment is measured using a sample survey (akin to a Gallup
poll). According to the BLS, a number of Eastern European nations have instituted labor
force surveys as well. The sample survey has its own problems because the total number
of workers in the economy is calculated based on a sample rather than a census.
It is possible to be neither employed nor unemployed by ILO definitions, i.e., to be
outside of the "labor force." These are people who have no job and are not looking for
one. Many of these are going to school or are retired. Family responsibilities keep others
out of the labor force. Still others have a physical or mental disability which prevents
them from participating in labor force activities.
Typically, employment and the labor force include only work done for monetary gain.
Hence, a homemaker is neither part of the labor force nor unemployed. Nor are full-time
students nor prisoners considered to be part of the labor force or unemployment. The
latter can be important. In 1999, economists Lawrence F. Katz and Alan B. Krueger
estimated that increased incarceration lowered measured unemployment in the United
States by 0.17 percent between 1985 and the late 1990s. In particular, as of 2005, roughly
0.7% of the US population is incarcerated (1.5% of the available working population).
Children, the elderly, and some individuals with disabilities are typically not counted as
part of the labor force in and are correspondingly not included in the unemployment
statistics. However, some elderly and many disabled individuals are active in the labor
market.
For the fourth quarter of 2004, according to OECD, (source Employment Outlook 2005
ISBN 92-64-01045-9), normalized unemployment for men aged 25 to 54 was 4.6% in the
USA and 7.4% in France. At the same time and for the same population the employment
rate (number of workers divided by population) was 86.3% in the USA and 86.7% in
France.
This example shows that the unemployment rate is 60% higher in France than in the
USA, yet more people in this demographic are working in France than in the USA, which
is counterintuitive if it is expected that the unemployment rate reflects the health of the
labor market [11].
In the early stages of an economic boom, unemployment often rises. This is because
people join the labor market (give up studying, start a job hunt, etc.) because of the
improving job market, but until they have actually found a position they are counted as
unemployed. Similarly, during a recession, the increase in the unemployment rate is
moderated by people leaving the labor force.
Due to these deficiencies, many labor market economists prefer to look at a range of
economic statistics such as:
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Labor market participation rate (the percentage of people aged between 15 and 64
who are currently employed or searching for employment)
The total number of full-time jobs in an economy
The number of people seeking work as a raw number and not a percentage
The total number of person-hours worked in a month compared to the total
number of person-hours people would like to work
[edit] Aiding the unemployed
The most developed countries have aids for the unemployed as part of the welfare state.
These unemployment benefits include unemployment insurance, welfare, unemployment
compensation and subsidies to aid in retraining. The main goal of these programs is to
alleviate short-term hardships and, more importantly, to allow workers more time to
search for a good job.
In the U.S., the unemployment insurance allowance one receives is based solely on
previous income (not time worked, family size, etc.) and usually compensates for onethird of one's previous income. To qualify, one must reside in their respective state for at
least a year and, of course, work. While 90% of citizens are covered on paper, only 40%
could actually receive benefits as unemployment is based on an antiquated system created
in the Social Security Act of 1935.[neutrality disputed] In cases of highly seasonal industries the
system provides income to workers during the off seasons, thus encouraging them to stay
attached to the industry. To calculate the unemployment insurance benefits you might
receive, see the page at the Economic Policy Institute.
In the United States, the New Deal made relief of the unemployed a high priority, with
many different programs. The goal of the Works Progress Administration (WPA) was to
employ most of the unemployed people on relief until the economy recovered.
FERA/WPA director Harry Hopkins testified to Congress in January 1935 why he set the
number at 3.5 million, using FERA data. At $1200 per worker per year he asked for and
received $4 billion.
"On January 1 there were 20 million persons on relief in the United States. Of these, 8.3
million were children under sixteen years of age; 3.8 million were persons who, though
between the ages of sixteen and sixty-five were not working nor seeking work. These
included housewives, students in school, and incapacitated persons. Another 750,000
were persons sixty-five years of age or over. Thus, of the total of 20 million persons then
receiving relief, 12.85 million were not considered eligible for employment. This left a
total of 7.15 million presumably employable persons between the ages of sixteen and
sixty-five inclusive. Of these, however, 1.65 million were said to be farm operators or
persons who had some non-relief employment, while another 350,000 were, despite the
fact that they were already employed or seeking work, considered incapacitated.
Deducting this two million from the total of 7.15 million, there remained 5.15 million
persons sixteen to sixty-five years of age, unemployed, looking for work, and able to
work. Because of the assumption that only one worker per family would be permitted to
work under the proposed program, this total of 5.15 million was further reduced by 1.6
million--the estimated number of workers who were members of families which included
two or more employable persons. Thus, there remained a net total of 3.55 million workers
in as many households for whom jobs were to be provided." [Howard p 562,
paraphrasing Hopkins]
The WPA did not quite reach 3.5 million--its maximum was 3.3 million in November
1938. Worker pay was based on three factors: the region of the country, the degree of
urbanization and the individual's skill. It varied from $19/month to $94/month. The goal
was to pay the local prevailing wage, but to limit a person to 30 hours or less a week of
work. About 75 percent of WPA employment and 75 percent of WPA expenditures went
to public infrastructure, such as highways, airports, parks and libraries.
The WPA had numerous critics who said that political considerations helped decide
which states received the most funding. Civil rights leaders often complained that African
Americans were proportionally underrepresented. In New Jersey, they argued, "In spite
of the fact that Negroes indubitably constitute more than 20 per cent of the State's
unemployed, they composed 15.9 per cent of those assigned to W.P.A. jobs during 1937."
[Howard 287] Nationwide in late 1937, 15.2% were African American. The NAACP
magazine Opportunity hailed the WPA: [February, 1939, p. 34. in Howard 295]
It is to the eternal credit of the administrative officers of the WPA that discrimination on
various projects because of race has been kept to a minimum and that in almost every
community Negroes have been given a chance to participate in the work program. In the
South, as might have been expected, this participation has been limited, and differential
wages on the basis of race have been more or less effectively established; but in the
northern communities, particularly in the urban centers, the Negro has been afforded his
first real opportunity for employment in white-collar occupations
When unemployment disappeared in World War II, and almost no one was eligible,
Congress shut down the WPA in late 1943.
The statistics show:
Year
Workers employed
WPA
Families on relief 1935–41
Relief cases 1936-1941
Monthly average in 1,000
1936 1937 1938 1939 1940 1941
1,995 2,227 1,932 2,911 1,971 1,638
712 801 643
793 877 919
CCC and NYA
554 663 452
488 468 681
Other federal work projects
Public assistance cases
602 1,306 1,852 2,132 2,308 2,517
Social security programs
2,946 1,484 1,611 1,647 1,570 1,206
General relief
5,886 5,660 5,474 6,751 5,860 5,167
Total families helped
Unemployed workers (Bur Lab Stat) 9,030 7,700 10,390 9,480 8,120 5,560
65% 74% 53% 71% 72% 93%
Coverage (cases/unemployed)
source: Donald S. Howard, WPA and Federal Relief Policy. 1943 p 34.
Year Unemployment (% labor force)
1933 24.9
1934 21.7
1935 20.1
1936 16.9
1937 14.3
1938 19.0
1939 17.2
1940 14.6
1941 9.9
1942 4.7
1943 1.9
1944 1.2
1945 1.9
source: Historical Statistics US (1976) series D-86
[edit] Is there such a thing as involuntary
unemployment?
"Classical" ("laissez-faire") economists prior to the world Depression of the 1930s, and
"post-Keynesian" or "neoclassical" economists such as Milton Friedman in the
contemporary era, have denied the existence of what ordinary people consider "true"
unemployment; this is involuntary unemployment where the job-seeker, despite his
efforts, cannot seem to find a job (after allowing for a reasonable period of time to
negotiate the terms of employment with a new employer).
Classical/neo economics does not deny voluntary unemployment, such as taking a
vacation or a personal choice to refuse "lousy" wages.
But, as regards involuntary unemployment, the classical/neoclassical theorist relies on
"Say's law" which declares, in fine, that "markets clear" in an unfettered, unregulated
laissez-faire economy: every seller will find a buyer at some strike price, every buyer will
find a seller at some strike price, and "every Jack shall have his Jill" in a "free" market.
Sellers and buyers may refuse the strike price but this is taken as personal decision which
causes the selling, or buying, atom to leave the economic model.
This theory, this "law" relies heavily on the absence of government regulation and
assumes a developed economy without sabotage where labor strikes, as opposed to strike
(mutually agreed upon) prices, are illegal.
John Maynard Keynes, in The General Theory of Employment, Interest and Money, tried
to demonstrate that Say's law did not work in the real world of the 1930s Depression
because of oversaving and private investor timidity, and that in consequence people could
be thrown out of work involuntarily without being able to find acceptable new jobs.
This theoretic oddity of the classical and neo theories has, post-Keynes, had a strong
influence on government policy. Post-Keynes, the tendency is for government to curtail
and eliminate unemployment benefits and "make-work" government jobs, and to
encourage the job-seeker to use his imagination, both considering the job search a career
in itself and becoming-willing to accept lower wages, new "careers", or even relocation to
another city or country in order to fulfill the expectation created by Say's "law"...which
tends to broaden the "market" to a national or global level far beyond that which most
real people are comfortable with.
On the left, social theorists continue to question the distortions of community and, at
times, personality, that result from the pragmatic consequences of this economic
theorizing: on this, see Ehrenreich 2002 and 2006 (Barbara Ehrenreich, NICKEL AND
DIMED: On (not) getting by in America, Owl Books 2002: and BAIT AND SWITCH: The
(Futile) Pursuit of the American Dream). In a society committed on balance more to
laissez-faire than to Keynesian full employment, job seekers (blue collar in Ehrenreich
2002: white collar, in Ehrenreich 2006) make the theory real by expanding their horizons
of what constitutes an acceptable job and career.
Note, also, that involuntary unemployment doesn't exist in agrarian societies. Nor is it
formally recognized to exist in underdeveloped but urban societies such as the megacities of Africa and of India/Pakistan, given that, in such societies, the suddenly
unemployed person must meet his survival needs, by getting a new job quickly at any
strike price, entrepreneurship, or joining the invisible economy of the hustler (Pierre
Bourdieu, THE WEIGHT OF THE WORLD: Social Suffering in Contemporary Society).
From the narrative standpoint, whether the stories we tell ourselves, the stories related by
Ehrenreich, the narrative sociology of Bourdieu, or novels of social suffering such as
John Steinbeck's Of Mice and Men, involuntary unemployment certainly exists.
Surprisingly, it is denied to exist in at least some classical and neo-classical, laissez-faire
economic theories.
Even more surprisingly, effective job seekers (unlike Ms. Ehrenreich in Bait and Switch,
who failed to get hired as a publicist on a pretend job hunt she performed to get material
for her book) make a third step representing a "dialectical" advance over both
classical/neo economists, and writers on the left: they narrate their search using the
language of freedom of choice and taking responsibility (Bourdieu 2000) in a rather
conservative register, and often seem to have more success when they do this instead of
"whine".
[edit] Benefits of unemployment
Some critics of the "culture of work" such as anarchist Bob Black see employment as
overemphasized culturally in modern countries. Such critics often propose quitting jobs
when possible, working less, reassessing the cost of living to this end, creation of jobs
which are "fun" as opposed to "work," and creating cultural norms where work is seen as
unhealthy. These people advocate an "anti-work" ethic for life.
[edit] See also





Unemployment benefit
List of countries by unemployment rate
List of U.S. states by unemployment rate
Poverty
Employment Protection Legislation
Wikimedia Commons has media related to:
Category:Unemployment
[edit] References
1. ^ Virginia Tech, Department of Economics, Professor Richard Ashley's website,
Fact sheet on the impact of unemployment, retrieved May 25, 2007
2. ^ International Labour Organization, Bureau of Statistics,The Thirteenth
International Conference of Labour Statisticians, received July 21, 2007
3. ^ International Labour Organization, LABORSTA,[1], retrieved July 22,2007
4. ^ European Commission, Eurostat, retrieved July 23, 2007
5. ^ European Commission, Eurostat, retrieved July 23, 2007
6. ^ a b c U.S. Department of Labor, Bureau of Labor Statistics, "The Employment
Situation: April 2007", April 2007
7. ^ United States, Bureau of Labor Statistics,[2], retrieved July 23, 2007
8. ^ U.S. Department of Labor, Bureau of Labor Statistics, Current Population
Survey overview, retrieved May 25, 2007
9. ^ U.S. Department of Labor, Bureau of Labor Statistics, [3], retrieved August 22,
2007
10. ^ U.S. Department of Labor, Employment & Training Administration, Office of
Workforce Security, UI Weekly Claims
11. ^ Dean Baker, Center for Economic and Policy Research
Retrieved from "http://en.wikipedia.org/wiki/Unemployment"
Categories: Articles needing additional references from March 2007 | Articles with
limited geographic scope | USA-centric | All articles with unsourced statements | Articles
with unsourced statements since February 2007 | NPOV disputes | Economic problems |
Labor economics
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