1930s Unemployment
Who Were the Unemployed?

Economic histories of interwar Britain portray the period in two radically different ways. 'Traditional' accounts suggest that the interwar years were for the citizens of Britain a time of persistent depression, gloom and failure. The period was dominated by unsatisfactory economic performance, which reflected a combination of structural difficulties, shocks to the world economy, and misguided economic policies. 'Revisionist' histories of the UK paint a different and rosier picture of the interwar years. Aggregate statistics suggest that output per employed worker grew more rapidly in the period 1924-37 than it had over the four decades from 1873 to 1913, and that the living standards of the working class rose.

Any attempt to reconcile these accounts must focus on the incidence of unemployment, argues Research Fellow Barry Eichengreen in Discussion Paper No. 85. British unemployment remained at historically high levels throughout the interwar years, averaging 14% of the insured population over the entire period and rising to a staggering 22% in the depths of the Great Depression. Even if UK economic performance was more than respectable in aggregate, not everyone shared in its fruits, Eichengreen observes.

Whether the experiences of a worker are best described in terms of the traditional pessimism or the revisionist optimism depends on whether that worker experienced unemployment. It is remarkable, Eichengreen observes, that the debate between the traditionalists and revisionists has proceeded without any detailed analysis of who was at risk of unemployment. In his Discussion Paper, Eichengreen attempts such an analysis by focussing on working-class unemployment in one particular area of interwar Britain, in order to establish the incidence of unemployment and the variables associated with it. This provides what Eichengreen describes as the first analytical support for the observations of contemporary onlookers cited subsequently by historians.

The analysis makes use of the 'New Survey of London Life and Labour', a study of working-class London conducted by the London School of Economics in the depths of the Great Depression, and described by Eichengreen and Susan Freiwald in an earlier CEPR paper (No. 51). Approximately 27,000 cases were recorded in the course of the survey, from which Eichengreen drew a 10% sub- sample as the basis for a cross-section analysis of the incidence of unemployment. He supplemented the findings for the interwar period with new results obtained using the British General Household Survey of 1975, in order to provide a comparative perspective on the interwar pattern of unemployment.

Eichengreen's analysis indicates clearly that the incidence of unemployment in the Great Depression was not distributed uniformly across workers. It was concentrated disproportionately on those with low earnings and few additional financial resources. Although the New Survey does not contain adequate information on occupation, Eichengreen conjectures that unemployment fell more heavily on unskilled workers. There was an unusually low risk of unemployment among those who owned rather than rented their homes and who may therefore have had higher permanent income and greater financial reserves. Finally, Eichengreen found that adult male members of households which received relatively high levels of income from sources other than the earnings or unemployment benefits ran a relatively low risk of unemployment. Thus, heads of households which relied most heavily on their wage income ran the greatest risk of losing it to unemployment. Overall, it appears to have been primarily workers with low incomes in households with few other resources who were most subject to unemployment.

Eichengreen also finds a contrast between the interwar period and the 1970s in the labour force participation of wives of unemployed males. Eichengreen found that during the interwar period, unemployment fell most heavily on married men whose wives were also in the labour market. In contrast, during the 1970s unemployment was concentrated among men whose wives were not participants in the labour market. These differences, Eichengreen suggests, reflect the shifting influences of the 'added-worker effect' (the tendency of wives to enter the labour force in an effort to replace the earnings of their unemployed husbands) and the 'discouraged-worker effect' (the tendency of unemployment to discourage secondary workers from seeking market work). The positive association between husbands' unemployment and wives' labour force participation, which contrasts sharply with the negative association found for the postwar period, suggests that the interwar period was distinguished by the extent to which households responded to the impact of unemployment through entry into the labour market by women. Further analysis of female labour supply decisions is clearly in order, Eichengreen concludes.


Unemployment in Interwar Britain: New Evidence from London
B Eichengreen

Discussion Paper No. 85, December 1985 (HR)