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« Previous Entry | Main | Next Entry » Can We Really Compare Today's Unemployment Numbers With Those During the Great Depresssion? Name:
Ed Delaney
Question/Comment: After the rebroadcast of your interview with Robert Solow I had a discussion with my daughter, who is a high school junior. She noted that Solow mentioned the unemployment rate in the Great Depression was 25 to 30 percent. However, there are more women employed outside of the home today. If the current unemployment rate is nearing eight percent, but it takes two incomes for most families to get by, can we really compare today's unemployment with that of the 30s? Paul Solman: We can, but your daughter is right, Ed, we need to make a lot of modifications. Here are a few reasons the unemployment rate might currently be WORSE than reported, compared to the Great Depression and reasons unemployment itself might not be as big a problem. WORSE THAN REPORTED 1) "Discouraged" workers who have not looked for work in the past MONTH were removed from the official tally way back in 1994. Add them back in, and you add plus two percent or so to the unemployment rate. 2) Part-time workers looking for full-time work, including the so-called "self-employed" who really aren't. If counted as unemployed, they would add another five percent or more. 3) Then there are the working age "disabled" who draw Social Security disability benefits - millions more of them in the past few decades. Add a few percent more. 4) And what about the roughly two million Americans in prison? Ex-convicts have an unemployment rate estimated at 60 percent or more. If they were out on the street, they'd presumably add to the unemployment number as well. Make all these adjustments, as we tried to a few years ago and today's 7.2 percent unemployment might be somewhere between 15-20 percent, compared to the Great Depression. At least one well-known economist, John Williams, makes a similar adjustment on his website. BETTER THAN IN THE '30s 1) Today's safety net is much sturdier, and more extensive, than what we had in the 1930s: social security; unemployment insurance; bank insurance; Medicare and Medicaid. Yes, those on disability might otherwise be unemployed and, yes, they don't get much. But during the Great Depression, the government couldn't spare a dime on them. And yes, far more Americans are in prison, but at least they don't go hungry. 2) Families were bigger back then, and generally supported by just one bread-winner. So there was more hardship per lost job than there is today. -- Posted January 13, 2009 | Comments (3) | Permalink
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Republicans are to blame for causing the Great Depression and the current economic collapse by favoring monopolies, big business and the wealthy. These policies squeeze the masses between relatively low wages and high taxes and prices. The Federal Reserve is forced to try to maintain the standard of living by expanding the money supply, which produces unsustainable credit-driven booms. Eventually, consumers credit runs out, especially since the debt financing from the savings of the wealthy is at high interest rates. When markets fall, brokerage firms, that lend money on the margins (e.g., several dollars for every dollar an investor deposits), call in loans, which cannot be paid back. Banks fail as debtors default on debt.
Democrats make sure depressions continue until world war. They believe in a nationally planned economy including higher taxes on corporate profits, increased federal government control over the economy and money supply, intervention to control prices and agricultural production, complex social programs and wider acceptance of unions. Interference in the economy help cause depressions, and government efforts to prop up the economy after only makes things worse by delaying the market's adjustment. We need a new political party that favors free markets, small business, the middle class and antitrust.
Lovely. Great site.
Thank you for this honest evaluation and comparative analysis of the unemployment rate formulas used "post 1994" and during the Great Depression.
This fact drives many in the HR industry crazy - when we see pundits telling us to not be concerned by the climbing jobless rate because we are nowhere near the jobless rate in the Great Depression. When in fact, if you use the same formulas in the comparison - the resulting rates are getting closer than is being represented to the public.
Such platitudes by these so-called pundits are disingenuous and not an accurate comparison. Clearly, the statements are meant to instill calm in the masses.
Again, it is refreshing to see someone publish an honest assessment of the job less rate differences between these two time periods.
Thank you.