In March 1933, when the Great Depression had driven the U.S. economy to rock bottom, the unemployment rate stood at 25 percent. One out of every four Americans who had had a job in 1929 was queuing in a bread line rather than working on an assembly line.
The unemployment rate remained at historically high levels throughout the following decade. Despite massive increases in federal spending under President Franklin D. Roosevelt’s New Deal, 14 percent of the labor force still was unemployed in 1941.
Unemployment didn’t fall into single digits until after Pearl Harbor, when millions of men were drafted into the armed forces to fight the first axis of evil. Mobilizing America for global war, outfitting youngsters of the so-called Greatest Generation with military uniforms, equipping them with M-1 rifles and sending many to die in France’s hedgerows or the South Pacific’s jungles not only dramatically lowered the overall unemployment rate, but also drew millions of women into the work force to help manufacture armaments.
Why did unemployment persist after FDR took the oath of office in March 1933, pledging to end Herbert Hoover’s perceived indifference to the economic hardships facing millions of American citizens, epitomized by Gen. Douglas MacArthur’s brutal routing of the “Bonus Army” gathered on the mud flats of Anacostia? Didn’t the alphabet soup of work-relief programs the president subsequently launched - the Civilian Conservation Corps, the National Youth Administration, the Federal Emergency Relief Administration and especially the Works Progress Administration, to name just a few - create jobs for hundreds of thousands of unemployed Americans, providing them with sorely needed incomes without forcing them to suffer the stigmas of the dole?
The answer: The United States in the 1930s recognized that government-funded make-work jobs were not the same as real jobs.
To be sure, jobs financed at taxpayer expense were plentiful. But back then, the Bureau of Labor Statistics didn’t count people on work relief as employed. In fact, persons listed on Depression-era work-relief rolls were not included in the labor force at all.
Nowadays, the unemployment rate equals the number of unemployed persons divided by the total civilian labor force. If you are working as a temporary census enumerator or planting road signs along the highway courtesy of a government “stimulus” grant, you are considered employed.
The employment and unemployment statistics of the 1930s excluded people who would not be employed in the absence of public largesse.
People at that time recognized that someone who holds a job only because Congress has appropriated money for the position is not creating wealth but is merely the recipient of an income transfer. Those who at the time derided the WPA as “We Piddle Around” recognized the wasteful consequences of public profligacy.
Today, people holding make-work positions “created” by stimulus spending, jobs tax credits and government-directed “investments” in alternatives to fossil fuels and other “green” initiatives are counted as employed. If they weren’t, as they shouldn’t be, the unemployment rate would be much higher than 10 percent.
William F. Shughart II is a senior fellow with the Independent Institute and the Frederick A.P. Barnard distinguished professor of economics at the University of Mississippi.