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The Microeconomics of Depression Unemployment

Published online by Cambridge University Press:  03 March 2009

Robert A. Margo
Robert A. Margo
Affiliation:
The author is Associate Professor of Economics, Vanderbilt University, Nashville, TN 37235
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Abstract

Microeconomic evidence reveals that the incidence and duration of unemployment in the 1930s varied significantly within the labor force. Long-term unemployment, which was especially high by historical standards, may have been exacerbated by federal relief policies.

Type
Papers Presented at the Fiftieth Annual Meeting of the Economic History Association
Information
The Journal of Economic History , Volume 51 , Issue 2 , June 1991 , pp. 333 - 341
Copyright
Copyright © The Economic History Association 1991

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References

I am grateful to Charles Calomiris, Susan Carter, Stanley Engerman, Thomas Ferguson, Lou Galambos, Helen Hunter, and Mary MacKinnon for their helpful comments.Google Scholar

1 Baily, Martin, “The Labor Market in the 1930s,” in Tobin, James, ed., Macroeconomics, Prices and Quantities: Essays in Honor of Arthur Okun (Washington, DC, 1983).Google Scholar

2 Exceptions are Bernanke, Ben, “Employment, Hours, and Earnings in the Great Depression: An Analysis of Eight Manufacturing Industries,” American Economic Review, 76 (03 1986), pp. 82–109;Google Scholarand Wallis, John Joseph, “Employment in the Great Depression: New Data and Hypotheses,” Explorations in Economic Historiy, 26 (01 1989), pp. 45–72.CrossRefGoogle Scholar

3 Palmer, Gladys, Employment and Unemployment in Philadelphia in 1936 and 1937 (Philadelphia, 1938).Google Scholar

4 U.S. Bureau of the Census, Census of the Population. 1940: Public Use Microdata Sample (Washington, DC, 1983). The 1940 census sample is arranged into 20 subfiles, each a random sample of the population. My analysis is based on the first subfile.Google Scholar

5 Darby, Michael, “Three and a Half Million U.S. Employees Have Been Mislaid: Or, an Explanation of Unemployment, 1934–1941,” Journal of Political Economy, 84 (02 1976), pp. 1–16);CrossRefGoogle Scholarsee also Kesselman, J. and Savin, N. E., “Three and a Half Million Workers Never Were Lost,” Economic Inquiry, 16 (04 1978), pp. 176–91.CrossRefGoogle Scholar

6 The underrepresentation of relief jobs in the Northeast appears to undercut the WPA's belief that the distribution of relief jobs matched the distribution of population; see Margo, Robert A., “Interwar Unemployment in the United States: Evidence from the 1940 Census Sample,” in Eichengreen, B. and Hatton, T., Interwar Unemploymern in International Perspective (Dordrecht, The Netherlands, 1988), p. 350.Google Scholar

7 U.S. Federal Works Agency, Final Report of the WPA Program, 1935–1943 (Washington, DC, 1946), p. 41.Google Scholar

8 Wallis, “Employment in the Great Depression,” pp. 65–66.Google Scholar

9 Baily, “The Labor Market,” p. 53.Google Scholar

10 It is possible that the long-term unemployed on work relief differed from the nonrelief long-term unemployed in unobservable ways that would have made them less employable had (marginal) improvements in aggregate demand occurred. In this case, the WPA would not have had a causal effect on reemployment probabilities. I am grateful to Charlie Calomiris for this point.Google Scholar

11 Margo, “Interwar Unemployment,” p. 345.Google Scholar

12 U.S. Federal Works Agency, Final Report, p. 32.Google Scholar

13 Turnover statistics in manufacturing suggest that the average duration of new jobs created in the 1930s was very short by historical standards; see Baily, “The Labor Market,” pp. 28–31, 48.Google Scholar

14 Quoted in Bakke, E. W., The Unemployed Worker (New Haven, 1940), pp. 421–22.Google Scholar

15 U.S. Federal Works Agency, Final Report, p. 32.Google Scholar

16 Darby, Michael, “Three and a Half Million U.S. Employees Have Been Mislaid: Or, an Explanation of Unemployment, 1934–1941,” Journal of Political Economy, 84 (02 1976), pp. 41.CrossRefGoogle Scholar

17 For a similar conclusion, see Baily, “The Labor Market,” p. 53.Google Scholar

18 Keyssar, Alexander, Out of Work: The First Century of Unemployment in Massachusetts (Cambridge, MA, 1986);Google Scholarand Margo, Robert A., “The Incidence and Duration of Unemployment: Some Long-Term Comparisons,” Economics Letters, 32 (01 1990), pp. 217–20.CrossRefGoogle Scholar

19 Jacoby, Sanford M., Employing Bureaucracy: Managers, Unions, and the Transformation of Work in American Industry, 1900–1945 (New York, 1985).Google Scholar

20 Jensen, Richard, “The Causes and Cures of Unemployment in the Great Depression,” Journal of Interdisciplinary History, 19 (Spring 1989), pp. 553–83.CrossRefGoogle Scholar