The Jobless, and Why

November 18, 1963

The Department of Labor has announced that unemployment in October amounted to 5.5 percent of the labor force. It has been above 5 percent since late 1957.

These figures puzzle Europeans, whose official unemployment estimates are much lower. When I was in Europe in September, I was repeatedly asked for an explanation. My answer ran something like this:

1—It’s hard to tell whether the contrast is really as great as official estimates indicate. We count our unemployment differently from you. You usually count only the registered unemployed on the insurance rolls. We count in addition estimates based on a census sampling.

These additional unemployed are very generously estimated. Let me quote the Labor Department’s own words (from its September monthly report): “The unemployed total from the household survey includes all jobless persons who were looking for work, regardless of whether or not they were eligible for unemployment insurance. Also counted as unemployed are persons waiting to be called back to jobs from which they had been laid off; those scheduled to start new wage or salary j;obs within 30 days (except students); and those who would have been looking for work except that they were temporarily ill or believed no work was available in their line of work in the community.”

Of course if we count as unemployed everybody who says he wants job, but is not even bothering to look for one, we can get a high total.

And the wider our inclusions in the “labor force” the higher our estimates of “unemployment.”

2—The crucial question is how much of our statistical unemployment represents real economic distress. We get some light on this when we break the unemployed into categories. Then we find that (in September) the unemployment rate of males 16 to 19 years old was 14.7 percent, but that of males 25 to 34 years old was only 3.3 percent. For single men the unemployment rate was 10.5 percent, but for married men (“wife present”) the rate was only 2.3 percent. Most unemployed youths are probably supported by their parents. Those who really need jobs most, tend to have them most.

We also get instructive results when we ask how long the unemployed have been unemployed. We find that 47.8 percent, or nearly half, have been unemployed less than five weeks. Only 25.2 percent have been unemployed more than fifteen weeks, and only 14.3 percent more than 27 weeks (when unemployment insurance normally runs out). Stated another way, only 1.5 percent of the labor force are unemployed for more than fifteen weeks.

3—American legislation raises the unemployment rate. Our constantly rising legal minimum wage rate tends especially to cause unemployment among the lowest-paid workers. This is one reason why the jobless rate among colored workers averages 9.2 percent, compared with 4.2 percent among white workers.

4—Unemployment is also increased in the U.S. by high and long unemployment-insurance payments. We even subsidize strikes by unemployment insurance if the strike, say in New York, goes on for more than seven weeks. The extent of unemployment is not unrelated, also, to the size of relief payments.

5—Finally, of course, and perhaps most importantly, our Federal labor legislation is so drawn (and applied by the NLRB) that employers are almost impotent to resist excessive union demands. This encourages many unions to press demands that price a large percentage of their members out of the market, and even drive some employers out of business.

When I finished my answer, my European questioner would often ask: “But why don’t the American authorities correct the situation?” I replied that the causes I had emphasized were almost never publicly mentioned. Unemployment in the U.S. is officially attributed to two factors: (1) “insufficient aggregate demand” and (2) “automation.” Both explanations are fallacious; both lead to harmful policies. The “insufficient demand” theory causes pressure for constant deficit spending. And if automation throws people out of jobs on net balance, how can we explain why American employment this year is at the highest level on record?