production of durable goods and is in a position to maintain prices at relatively high levels by decreasing output and employment, the fluctuations in production and employment are enormous. On the other hand, in non-durable-goods industries where the business units are smaller, competition is keen, prices are relatively flexible, and production and employment fluctuate relatively little.

In addition to the factors noted above, technological changes contribute to the volume of unemployment. No simple set of causes can be said to govern technological displacement. It is certain, however, that technological displacement results at least in temporary unemployment; that is, during the period of the readjustment of the supply of labor to the altered demand. Thus, in any period some unemployment from this source will exist. This is true even if technological improvements do not alter the total demand for labor. When, however, in a given period the rate of technological improvement is greater than the growth of output-i.e., when the total demand for labor is reduced-unemployment of more than a temporary character arises. With constant technological improvement as a feature of our changing economic order, some amount of unemployment can be expected at all times.

The extent of technological improvement since the war can be seen by recent studies which indicate that the overall productivity of labor increased by 39 percent from 1920 to 1935. From 1923 to 1929, however, the growth of total production in all industry was faster than the rise of productivity and total employment increased throughout the period. This increase in total employment occurred despite actual declines in the manufacturing, agricultural, and mining industries. Since 1929 productivity has continued to increase. The average increase since 1929 for all lines of economic activity (goods and services combined) is estimated at about 10 percent.

Changes in the available supply of labor must also be considered. Each year approximately half a million workers are being added to the labor supply. This represents a net addition of workers, after allowing for the deaths and retirement of older workers, and these annual additions to the labor supply will continue for some time to

come.

There are additional factors which affect the supply of labor. When unemployment and lower incomes are widespread, persons not gainfully employed look for jobs in an effort to add to depleted family incomes, as do also housewives and young persons leaving school prematurely. Older workers do not retire so soon. Other additions to the labor supply consist of persons formerly independent or selfemployed. While the magnitude of these additions to the labor supply cannot be definitely stated, there is every evidence that they are not insignificant. None of these factors is taken into consideration in any of the current estimates of unemployment.

In attempting to estimate the level to which production must rise to reduce unemployment to the 1929 average, the two main factors just outlined-changing productivity and changes in the labor supplyare of outstanding importance. To reduce unemployment to the 1929 average of about 1.8 million, production would have to rise to a point where it would absorb both the technologically displaced workers and the additions to the labor supply since 1929. It is estimated that in

1937 this would require a 20-percent increase in total production over 1929, or approximately 45 percent over 1936. Further technological advances and continued annual additions to the labor supply will, of course, necessitate still higher levels of production with each succeeding year if unemployment is to be reduced to the level of 1929.

In summary, unemployment has been, is, and will continue to be perhaps the most pressing of all social and economic problems. Should production in 1937 return to the 1929 level, the unemployed would still number from 7 to 7.5 million persons. For the more distant future, a large volume of unemployment seems very likely, and 4 million unemployed probably represents the minimum to be expected even during prosperity periods. The minimum will, of course, be substantially increased during depression periods. Enlightened public opinion, therefore, must recognize the permanence of this problem and thus make possible a diversified and long-range program to meet the needs of the unemployed.

In considering measures to mitigate the effect of unemployment, it must be recognized that no single type of program can solve the problem. The complexity and diversity of the unemployment problem must be considered. Experience with relief for the past 3 or 4 years shows the unemployment problem to be more varied than is commonly believed. A program designed to meet adequately the needs of the unemployed should include unemployment insurance, employment offices, direct relief, a training program, and a work program.

It has been said by some that unemployment insurance alone will care for most of the unemployment problems. Unquestionably unemployment compensation should be an important part of any program, but it cannot stand alone. Its limitations are indicated by the following factors.

The duration of unemployment for a large segment of those out of work extends well beyond the waiting and benefit period. For instance, the average urban worker on relief in May 1934, had lost his last job at his usual occupation in the winter of 1931-32. Furthermore, many groups such as farmers, rural workers, domestics, and the normally self-employed are not covered by insurance plans. The inexperienced worker and those unemployed at present obviously cannot contribute and are not covered.

The uneven incidence of unemployment would prevent many nominally covered workers from contributing sufficiently to draw benefits for any appreciable period of time. Industrial policies throw many out of work who stand little chance of reemployment. The hiring age policies of many industries make it virtually impossible for many workers over 40 or 45 to get jobs. Furthermore, high employment standards of certain industries exclude not only the older workers but also the inexperienced workers and those who are not able to keep up the high speeds demanded.

In short, unemployment insurance is a first line of defense and can play an important part in a security program. A relief program must be maintained, however, for those workers who exhaust their benefits before obtaining jobs. This part of the program should be primarily a work program, although direct relief is essential to care for those who, for one reason or another, cannot obtain work relief employment.

Finally, a training program should be developed to retrain workers and to provide training for the inexperienced workers.

Under this integrated program, unemployment insurance cares for those who lose their jobs for relatively short periods of time. For those who are unemployed for protracted periods the work and direct relief programs will provide income until they are reabsorbed by industry or by the old-age assistance and insurance systems. Employment offices should be an integral part of a coordinated program. Only through a clear recognition of the permanence of unemployment, however, can such a diversified program be established on a lasting basis. And only a diversified, well-planned program can take care of the complex of occupational and special groups found among the unemployed.

[From the Yale Review, Spring 1937]

UNEMPLOYMENT AND RECOVERY

(BY EDWIN E. WITTE)

The depression is definitely on the wane, and with it is passing the pessimism which led many Americans to lose faith that we would ever get back to the 1929 level. It now seems probable that before long production will pass this previous high mark.

Unemployment, however, still stands at an alarming total. There has been no nationwide count of the unemployed since 1930, but the American Federation of Labor and the National Industrial Conference Board (which seldom agree on anything) both estimate the number of the unemployed at the close of 1936 at between 8 and 9 million. Dr. Harold G. Moulton, president of the Brookings Institution, in November estimated the total number of the unemployed at between 5 and 6 million, but in its study, "The Recovery Problem in the United States," published in January, the Brookings Institution gives unemployment estimates which agree remarkably closely with those of the American Federation of Labor and the National Industrial Conference Board. Employment has increased only a little less rapidly than has production, but the total number of persons employed on other than governmental work projects is still more than 4 million less than the average for the year 1929. In addition, the labor force of the country is now more than 4 million greater than in that year.

Despite the many unemployed there are distinct shortages of labor in a considerable number of skilled trades. Complaints about the difficulties of getting craftsmen were made by employers as early as the spring of 1935, especially in the metal trades. These were declared to be wholly false by the Machinists' Union and the American Federation of Labor. According to their version there was no shortage of skilled workmen but only a shortage of nonunion craftsmen, produced by the refusal of many employers to hire union members. Since then complaints about labor shortages have multiplied, coming from all parts of the country and relating to many more skilled trades. Labor leaders still publicly deny that there is any shortage, but many of them privately admit that there is a shorage of really good mechanics in a considerable number of skilled trades.

These shortages are mainly local, although in electric arc welding, toolmaking, die-sinking, molding, patternmaking, and a number of other trades they are rapidly becoming nationwide. There are some mechanics out of work in all trades, but these are mainly poor workmen, and many of them have not actively engaged in their trades for years. In the metal industry the pinch of being unable to get enough skilled mechanics is already slowing up expansion, and in building construction serious shortages are developing in localities where there is a building boom. Even the WPA has experienced considerable diffi

culty in recent months in getting a sufficient number of skilled men for high-grade construction projects. While millions of unskilled, semiskilled, and white-collar workers are available, it is becoming increasingly difficult to find mechanics good enough for PWA work on the relief lists.

The major explanation for the paradox of shortages of skilled mechanics while there are millions of unemployed workmen is that this country has never trained enough craftsmen for the needs of industry. Until the World War this deficiency was made up by immigration from Europe. During the war and again in the twenties, the need for more skilled mechanics created great interest in apprenticeship and other training programs, but the number of craftsmen actually trained in this country was not sufficiently great to make up for the decrease in immigration. In the census of 1930 only 92,000 persons claimed to be apprentices in skilled trades, as compared with 750,000 workers under 24 years of age in these trades who were neither craftsmen nor apprentices. During the depression nearly all training programs were completely abandoned, and far more mechanics left the country than came in as immigrants.

The depression is now in its eighth year. In this period there has been a large turnover in the national labor supply. Fourteen million new workers, Brookings Institution has estimated, have come into industry, and 10 million experienced workers have dropped out. The new workers constitute more than one-fourth of the present labor supply of the country. The turnover among skilled workers has always been greater than among the unskilled. Many skilled mechanics in normal times become foremen, executives, and employers. In the depression the skilled men have shown themselves far more adaptable and energetic than the mass of the unemployed and, in consequence, many of them have gone into other lines of work. Owing to our failure in the past to train enough craftsmen to offset the reduction in the number of skilled immigrants, a much larger percentage of the skilled mechanics than of the workers generally is in the older age groups. The net result of all these factors is that while the normal replacement rate among all male workers in nonagricultural employments is about 2.8 percent per year, this rate has been at least 5 percent per year among the skilled workers throughout the depression. As the Brookings Institution has summarized the situation:

A rough estimate indicates that of 9 million male workers in 1930 whose productivity depended upon skill or prolonged training and experience, little more than 7 million are now available for active employment—a loss of nearly 2 million men.

Of these 7 millions many are now only doubtfully to be classified as skilled mechanics. Prolonged unemployment has dulled previously acquired skills and in not a few cases has completely destroyed them. Processes and materials have undergone a considerable change in many branches of the metal trades, as well as in other industries. Many men who were once very good mechanics now are little better than beginners, being handicapped by having to unlearn much that had become automatic to them before the depression. Some new skilled trades have come to the front in this period-for instance, arc welding-for which few workmen have ever been trained.

Until recently neither the Government nor industry was alive to this problem. There are many things that the Government might