the greatest employers of more labor; for low prices alone will make possible the wider use of familiar comforts and semiluxuries, which constitute the "wanted" goods to the 75 percent of American consumers still below the decent standard of "American" living.

Nevertheless, it will not be enough to absorb our unemployment rapidly. We will need Government cooperation, on a practical basis, for some years, both as a stimulator of private employment and as an emergency maker of useful public employment. The next greatest helpers will be educators and parents and young people themselves, if they will look realistically at the problem of jobs. We must stop turning out large numbers of second- and third-grade lawyers, doctors, and other professional people, white-collar folk generally, for there is no room for them at a decent income, whereas there is room for highly skilled and specialized workers of many kinds. We will need to drop the silly idea that no father is doing right by John or Nell if he doesn't furnish forth a college education. We have, incredibly, permitted the idea to circulate that you can climb to a superior social level merely by going to college and that somehow there are two classes of people with a social gulf between them-the manual worker and the white-collar worker. This idea has sidetracked millions of fine candidates for skilled-labor jobs. It has even helped make criminals out of young men who feel inferior and unsuccessful if they do manual work.

By its success at subdivision of labor shall we know effective modern civilization. The huge number of unemployed is a sign that we have been failing. We have too many unnecessaries and incompetents; too few of one skill, too many of another; too few here, too many there. Business can't right the situation, unaided. An effective program calls for teamwork by Government, educational institutions, publicists, business, and the unemployed themselves. We shall only raise another political storm if we expect industry to do the job alone, only to have it fail.

[From the American Economic Review, March 1937]

UNEMPLOYMENT RELIEF AND INSURANCE

(BY EMERSON ROSS, WORKS PROGRESS ADMINISTRATION)

During the last several years the Federal Government has been slowly shaping a program of security for the destitute unemployed. The two principal features of this program are the Social Security Act and the works program. Unemployment made necessary the institution of these complementary activities and the need for them will remain as long as unemployment remains a serious problem.

Today there is a growing conviction in some quarters, however, that business recovery has removed the necessity for a broad Federal program designed to ameliorate suffering arising from unemployment. This viewpoint is based upon the assumption that the depression which began in 1929 created the first and only serious unemployment problem in the history of the United States, that unemployment is not a serious problem today, and that business cycles can be eliminated. or controlled in the future. If one grants these premises, the need for unemployment insurance and a Federal works program can indeed be questioned. The thesis maintained here, however, is that unemployment of varying intensity has been a part of our industrial system for decades, that unemployment today is a serious problem, and that it will probably continue to be so for an indefinite period. Since this is the case, the present recovery should not be used as an excuse for dismantling the Federal security program. It should instead be utilized as a breathing spell during which the several complementary parts of an intensive security program can be welded together more adequately. First, let us examine briefly the situation prior to 1929. Estimates of unemployment by Prof. Paul H. Douglas covering the period from 1897 to 1926 for four major industries show an average of 10 percent unemployed. Other estimates covering certain periods prior to the depression and a number of local censuses of unemployment all point unmistakably to a continuing volume of unemployment. Even in prosperous periods, such as 1923 and 1926, there were more than 1.5 million persons out of work in this country. It is true that exceptions can be taken to these estimates and to the local censuses and unemployment studies. Controversies concerning methods, however, cannot obscure the fact that the problem has been with us year in and year out. Nevertheless, unemployment was generally regarded during the predepression era as a negligible and transitory nuisance. In the popular mind, unemployment was often considered to be a consequence of personal ineptitude. The view was also entertained that unemployment was at worst a minor matter of short duration. The failure to view the problem of relief and unemployment as a permanent problem created by conditions beyond the control of the individual and locality led to a policy of Federal inaction. The drive for unemployment in

surance in the twenties could not surmount the concept that unemployment was negligible, a personal matter, or a problem to be met by local poor relief.

This predepression conception of unemployment was largely instrumental in fashioning the haphazard and wholly inadequate relief policies of that period. Local governments and local private charities were called upon to support those rendered destitute by unemployment or by other causes. The fragmentary data available for the period on expenditures, numbers aided, and so forth, reveal a picture that is a sad commentary on this Nation. In many areas the local poor law machinery was never established, in others it operated with inefficiency and harshness, while in only a few communities did local public relief and private charity provide fairly adequate standards.

It is not generally recognized that in the decades prior to the recent depression relief needs advanced sharply. In 16 major cities public relief expenditures increased from $1.5 million in 1911 to $20 million in 1928, to $28 million in 1930, and to over $64 million in 1931. Despite this increase, adequate standards and coverage were not attained. The local public and private agencies simply did not, and frequently could not, care for the problem.

During the depression years, however, need for Federal aid became generally accepted. In the latter part of 1932, and more extensively during 1933-35, action was taken in the form of extensive relief and works program and the passage of the Social Security Act. The present danger is that under the spell of recovery no further efforts will be made to integrate this program and that vital parts may be scrapped as unnecessary.

American business has recovered rapidly from the low point of the depression. Unemployment has declined substantially, dividend payments have exceeded even the prosperity levels of the latter twenties, and innumerable other business indicators show rapid improvement. It is true that we have cut the unemployment figure of 15 million for the early part of 1933 by at least one-third. It is equally true, however, that the lowest reliable figure places unemployment at about 8.5 million persons for October. This estimate is substantiated by the fact that there are some 6.8 million persons on the active registration files of the U.S. Employment Service. This latter figure does not represent the complete total, for many unemployed do not register at the employment offices. Furthermore, relief data show a large group of unemployed on the relief programs and substantiate the thesis that the unemployment problem is still with us in a serious form.

Obviously, then, unemployment has been for some time and is today, a serious problem. But what of the future? In deciding future Federal policy with reference to the problem of providing security for the unemployed, the following questions are of pressing importance: What will be the extent of unemployment in the immediate future? What volume of unemployment must we be prepared to face in the more distant future? What measures must be adopted to meet this problem? Unemployment will doubtless remain at a high level during 1937. Estimated unemployment has declined from 11.6 million in January 1936, to almost 8.6 million in October (Nathan). The 8.6 million figure, however, is for October, which is usually the lowest month in the year. For the full year of 1936 the monthly average unemploy

ment will be about 9.8 million. A decline of 25 percent during 1937 would leave 7.3 million unemployed, a decline of 2.5 million. To achieve this, industry in general would have to reemploy 3 million persons, the other half million representing the new annual addition to the labor supply. Average employment in 1934 was almost 2 million over the previous year; in 1935 almost 500,000 over 1934; and in 1936 approximately 2 million over 1935. In none of these 3 recovery years has employment increased by 3 million. Is it possible that industry in general will accomplish this in 1937?

A positive answer, of course, is impossible. Should industrial production in 1937 return to the 1929 levels, reemployment may even exceed 3 million. But even with a return to 1929 levels in 1937, unemployment would range between 7 and 7.5 million workers. A return to 1929 levels of production would mean an increase in industrial production of 18 percent over the average for 1936. Many observers predict no more than a 10-percent rise, while some experts deny that any increase will occur. In any case, we can look forward to a substantial volume of unemployment in 1937.

Even if the optimistic forecast of 7 to 7.5 million unemployed in 1937 be accepted, however, it is obvious that the need for a Federal works program will be nearly as great as it was in 1936. It is often said that an increase in employment should produce a corresponding decline in the number receiving relief. This statement overlooks the fact that no more than half of the unemployed are receiving relief. It overlooks the fact that any increase in employment can come from a number of sources: the experienced unemployed on relief, the experienced unemployed not on relief, the new workers coming on the labor market, and the surplus workers on the farms. Workers on the relief rolls certainly do not receive all the new jobs, nor even most of them. In brief, it is not to be expected that reemployment will absorb an equal number from the relief rolls and the works program. The presence of a large number of unemployed who are not on relief rolls or employed on the works program makes this impossible.

Looking into the more distant future it seems inevitable that a vexing problem of unemployment must be confronted. It is obviously impossible to project unemployment estimates very far into the future. There appears to be little doubt, however, that a sizable problem will exist as long as we have a highly industrialized and rapidly changing economy based on prices and profits.

Factors which lead to unemployment are numerous. By far the most important are those associated with cyclical fluctuations. Any stabilization of these cyclical fluctuations would, of course, remove the peaks and valleys, although much unemployment would undoubtedly remain due to other causes.

Intelligent efforts to stabilize the cyclical variations in the present economic system should obviously be encouraged. There are, however, certain strategic factors in our economy which are tending to make stabilization more and more difficult to attain. Shifts in demand, of course, tend to produce instability. More important, however, is the fact that even minor shifts in the demand for consumers goods produce intensified fluctuations in the derived demand for durable capital goods. The intensification of fluctuations in the derived demand for durable producers goods is of special significance at the present time.

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Durable goods industries respond violently to a relatively small increase in consumer demand. Retardation in the rate of increase in demand, however, is inevitable and will lead to an intensified decline in the production of durable goods. It is important to remember that the recovery has proceeded for nearly 4 years; perhaps only 1 or 2 more years of increased demand are possible before the retarding influences operate to throw the durable goods industries into another period of inactivity.

The general principle of intensified fluctuation of demand for durable goods is well borne out by the recent depression. Production and employment declines were greatest in the durable goods industries, less marked in the semidurable, and least evident in the non-durable-goods industries. This is reflected in our relief data for industrial regions which, in a general way, showed a higher percentage of population on relief in those areas specializing in the production of durable goods. Total employment in the durable goods industries in 1929 averaged 4.5 million. In 1932 the number employed was slightly less than half the 1929 level. On the other hand, nondurable employment declined about one-fourth over the same period.

With growing industrialism, a nation concentrates a relatively larger part of its industrial labor on the production of durable capital goods. With generally rising living standards a relatively larger volume of the consumers goods take the form of durable consumers goods; e.g., radios, automobiles, electric refrigerators, household electrical appliances, etc. This country is producing greater volumes of durable goods each succeeding decade. Given a progressive technology there is reason to believe that this trend toward relatively greater volume of durable goods will continue. But since the durable goods industries are demonstrably more unstable in production and employment than are the non-durable-goods industries, it seems probable that the long-term trend is toward greater instability. The instability in durable goods production is due in part to the dispensable character of the wants they satisfy. The demand for durable consumers goods can be deferred for several years at a time while the existing supply is kept in use. The derived demand for durable producers goods fluctuates widely in response to these relatively small changes in consumers demand. Instability of this sort is an inherent characteristic of the present economic system in the absence of completely regimented consumption.

Evidence likewise shows that the growth of the size of the business unit increases job insecurity. Depression declines in employment are proportionally greater for workers in large firms than for those in smaller establishments.

The instability of employment is also affected by monopoly power and controlled prices. The relative price stability enjoyed by groups of large and highly centralized industries during the depression was achieved by drastic declines in production and consequently in employment. On the other hand, production and employment generally were more stable for those industries in which flexible prices are the rule. These factors of durability of goods produced, large size of business units, and price inflexibility are mutually reinforcing, and together exert a profound influence on the incidence of unemployment. When, as commonly occurs, the large-scale business unit is engaged in the