Can We Really Compare Today’s Unemployment Numbers With Those During the Great Depresssion?

BY busadmin  January 13, 2009 at 4:10 PM EST

Job postings in Oakland, Calif.; AP photo

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.