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Unemployment and Non-Employment in Interwar Britain

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  • Ed Butchart

Abstract

Britain already had a serious unemployment problem in the 1920s, but the situation worsened markedly after 1929. We investigate the cause of the higher rates of unemployment experienced throughout the 1930s. The most obvious explanation, that aggregate demand was weaker in the aftermath of the Great Depression, does not stand up to close scrutiny. An alternative explanation is that the emergence of long-term unemployment generated hysteresis effects which enervated the market-clearing mechanism. Although we find that the duration composition of unemployment statistically significantly influenced wage determination we note that real wage growth between 1932-39 was modest. It was not the case that the fruits of economic recovery fed through to wages at the expense of jobs. Instead, we highlight important movements in the labour participation rate over the course of the interwar period. The participation rate declined sharply in the early 1920s, but subsequently recovered. The non-employment rate - the fraction of those of working age who are not in work - consequently paints a different picture of the interwar period than the unemployment rate. In particular, the 1930s do not emerge as having had a more serious problem of joblessness than the 1920s. Hence we tentatively conclude that unemployment was higher during the 1930s largely because the unemployment rate was becoming a more accurate measure of joblessness.

Suggested Citation

  • Ed Butchart, 1997. "Unemployment and Non-Employment in Interwar Britain," Oxford Economic and Social History Working Papers _016, University of Oxford, Department of Economics.
    • Handle: RePEc:oxf:esohwp:_016
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    References listed on IDEAS

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    1. N. F. R. Crafts, 1987. "Long-term unemployment in Britain in the 1930s," Economic History Review, Economic History Society, vol. 40(3), pages 418-432, August.
    2. Beenstock, Michael & Warburton, Peter, 1991. "The market for labor in interwar Britain," Explorations in Economic History, Elsevier, vol. 28(3), pages 287-308, July.
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    7. Blanchard, Olivier J. & Summers, Lawrence H., 1987. "Hysteresis in unemployment," European Economic Review, Elsevier, vol. 31(1-2), pages 288-295.
    8. Heim, Carol E., 1984. "Structural Transformation and the Demand for New Labor in Advanced Economies: Interwar Britain," The Journal of Economic History, Cambridge University Press, vol. 44(2), pages 585-595, June.
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    Cited by:

    1. Alasdair  Crockett, 2000. "Variations in Churchgoing Rates in England in 1851: Supply-side Deficiency or Demand-led Decline?," Oxford Economic and Social History Working Papers _036, University of Oxford, Department of Economics.
    2. Paul A. David & Gavin Wright, "undated". "General Purpose Technologies and Surges in Productivity: Historical Reflections on the Future of the ICT Revolution," Working Papers 99026, Stanford University, Department of Economics.
    3. Federico Varese & Meir Yaish, 1998. "Altruism:The Importance of Being Asked. The Rescue of Jews in Nazi Europe," Economics Series Working Papers 1998-W24, University of Oxford, Department of Economics.
    4. Liam Brunt, 1999. "An Arbitrage Model in Crop Rotation in 18th Century England," Oxford Economic and Social History Working Papers _032, University of Oxford, Department of Economics.
    5. Liam Brunt, 1999. "An Arbitrage Model in Crop Rotation in 18th Century England," Economics Series Working Papers 1999-W32, University of Oxford, Department of Economics.
    6. Paul A. David & Gavin Wright, "undated". "General Purpose Technologies and Surges in Productivity: Historical Reflections on the Future of the ICT Revolution," Working Papers 99026, Stanford University, Department of Economics.
    7. Liam Brunt, 2000. "Where theres Muck theres Brass The Market for Manure in the Industrial Revolution," Oxford Economic and Social History Working Papers _035, University of Oxford, Department of Economics.
    8. Federico Varese & Meir Yaish, 1998. "Altruism:The Importance of Being Asked. The Rescue of Jews in Nazi Europe," Oxford Economic and Social History Working Papers _024, University of Oxford, Department of Economics.

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