The progress made during the war in breaking down employment prejudice with regard to age, sex, and race, as well as physical disability, may well carry over into the postwar period. In those plants that accepted older workers, women, and Negroes on the basis of their ability, employers may not soon dispense with their services. A "RESERVE" OF UNEMPLOYED PERSONS An unemployment "reserve" designed to provide flexibility or meet emergency demands for labor is not necessary because an ample reserve of labor is provided by persons outside the labor force and by the possibility of lengthening hours of work. Only those persons actively seeking work at a specified time are counted as unemployed, and among those not seeking work there are many who will enter the labor force in response to increased demand for workers. The ready expansibility of the labor force was demonstrated during the war when 8 million extra workers were recruited from among housewives, students, retired persons, and others who would not have sought work if prewar trends had continued. To some extent this was a direct result of the war (e. g., drafting of youths who might have stayed in school, and need for jobs on the part of servicemen's dependents), but in great part it was simply a response to the availability of jobs at good pay. More than two-fifths of the wartime extra workers were men and women over the age of 35 years—a group that could not have been affected to a very great extent by direct war pressures. Another illustration of the reserve provided by persons outside the labor market is the sensitivity of the labor force to seasonal fluctuations in labor demand. In 1944-when unemployment averaged only 840,000-agricultural employment had a net seasonal upswing of 3,000,000 between January and July and about 600,000 workers were recruited by trade establishments during the Christmas season. Thus, persons normally outside the labor force provide a versatile and conveniently scattered reservoir able to meet such contingencies as may arise. Estimates of Frictional Unemployment The complex classification of the components of unemployment makes it difficult to estimate them separately. For this reason, the available estimates of frictional unemployment are of a summary character. ESTIMATES FROM VARIOUS SOURCES Dr. Yntema has described the nature and extent of unemployment under conditions of full employment as follows: Workers would be free to move from less to more desirable jobs even though that would entail some loss of gainfully occupied time. Similarly, consumers and producers would have freedom of choice, even though that would lead inevitably to temporary maladjustments in some places and in some industries between the jobs to be had and the men and women seeking work. Moreover, there would be some unemployables whose productivity was too low to qualify for the wages which prevailed for the jobs they sought. At the optimum level of employment, the labor market would not be so tight as to prevent the maintenance of a reasonably stable price level . . . . In normal times frictional unemployment would be higher [than during the war], probably from 2 percent to 5 percent [of the labor force]." The National Planning Association's estimate of a postwar (1950) labor force makes allowances for 1.5 million frictionally unemployed or 2% percent in a total labor force of 61.5 million." The London Economist suggested that in Great Britain 500,000 unemployed-including transitional, seasonal, and some structural unemployment is consistent with "full employment" so long as any pockets of continuing unemployment in particular areas or industries are quickly drained away.' This represents an unemployment rate of 21⁄2 percent of the British labor force. Fortune magazine, analyzing frictional unemployment, stated that in the immediate post-conversion period, "4 million unemployed may be too few," depending on the distribution and the mobility of the labor force. But later, "if things are managed skillfully, 4 million idle men and women may be absurdly too many. Then we should approach the rock-bottom minimum of 1 or 2 million willing employables who are unemployed only because they are changing jobs.” Karl T. Schlotterbeck in a publication of the Brookings Institution wrote: We are inclined to believe that even under generally favorable conditions there would perhaps be out of work on the average over a period of years as many as 4 million (7 percent of the total labor force). In the best years-under boom conditions-the level might fall as low as 3 million (5 percent of the total labor force). In other years it might rise as high as 5 million (8%1⁄2 percent of the total labor force). Only when the number out of work exceeded 4 million need the employment situation occasion real concern. It should be clearly understood that this total does not represent a permanent army of unemployed-seeking jobs in vain.' ESTIMATES BASED ON PAST EXPERIENCE As indicated above, there is a fairly wide range in the several estimates of the amount of unemployment consistent with "full employment" in the postwar world. The variation results in part from differences in the conception of the components to be included in frictional unemployment, and in part from inability to measure Theodore O. Yntema: Full Employment in a Private Enterprise System, in American Economic Review, March 1944, Supplement (p. 107). • National Planning Association, National Budgets for Full Employment, Washington, April 1945. 'Full Employment: The Aim, in The Economist, October 3, 1942 (p. 408). Transition to Peace, in Fortune, January 1944 (p. 190). Karl T. Schlotterbeck, Postwar Reemployment, The Brookings Institution, 1943 (p. 19). the size of these components. In the following analysis an attempt is made to eliminate value judgments as to the nature or the size of the components to be included. The discussion is concerned only with the amount of measurable unemployment actually found in past periods characterized by general economic prosperity and the absence of serious labor shortages. It is believed that such periods, in general, reflect the concepts defined in this article and, in addition, provide some statistical evidence for quantitative analysis. Unemployment estimates for New York City during 1943 and for the United States during the period of the 1920's are examined as indicative of the level of unemployment under conditions of satisfactory employment opportunity. However, a particular volume of unemployment should not be defined as frictional unless something is known about the nature and causes of unemployment. A constantly changing group of unemployed averaging 2 million workers moving between jobs might be compatible with a condition of satisfactory employment opportunity. But a stagnant pool of 1 million workers unemployed continuously for a long period of time would not. The New York City Experience New York City was relatively slow in responding to the defense-war boom because of its concentration of production in consumer-goods industries and comparative lack of war industry. The ratio of unemployment to total labor force in New York City in November 1941 was over 13 percent-approximately double the unemployment rate in other large cities.10 By November 1942-although the unemployment rate in New York City had been reduced to 5%1⁄2 percent— unemployment was a sufficiently serious problem to cause Governor Dewey to appoint the Hanes Committee to study its solution. The New York Times, in an editorial commenting on the need for the appointment of this committee, stated: "In the face of a national manpower crisis and a national need for full production, New York City, the greatest industrial city in the Nation, has large unemployment and idle factories and idle machines, while many of its smaller businesses face the threat of extinction." As late as the first quarter of 1943, unemployment was regarded as a grave problem by Governor Dewey and Mayor LaGuardia.12 In quantitative terms, the number of persons unemployed at the beginning of 1943 constituted somewhat less than 5 percent of the total civilian labor force. 11 10 Unemployment rates from unpublished data of Bureau of the Census, Monthly Report on the Labor Force. 1 New York Times, November 12, 1942 (p. 24). 12 Idem, February 20, 1943 (p. 1), January 6, 1943 (p. 29). The turning point in the unemployment situation occurred around April 1943, largely as the cumulative result of the induction of many men into the armed services, the migration of New Yorkers to war production centers, and the increased placement of war contracts in the metropolitan area. Col. Robert P. Johnson, Chairman of the Smaller War Plants Corporation, noted that the reduction in the number of distressed plants had brought this troublesome problem to a manageable point.13 In addition, the Hanes Committee noted "a marked improvement in the unemployment trend." 14 By the middle of the year, Anna Rosenberg, Regional Director, War Manpower Commission, reported the beginning of shortages in many skills and specialized occupations. 15 As 1943 drew to its close, New York City's officials had oriented their manpower planning toward dealing with the developing labor shortages. In November, Stephan S. Sheridan, Acting WMC Director, pointed out that the unemployed were no longer numerous enough to meet quotas for essential manpower. Manpower requirements, he stated, are going to be met through the recruitment of new women workers and by the transfer of men from nonessential to essential industries. 16 At the close of 1943 the unemployment rate had dropped to 2%1⁄2 percenthalf the rate at the beginning of the year. By January 1944 a survey conducted by the New York Times in the metropolitan area indicated an immediate need for both skilled and unskilled workers in war plants.17 Over the year, New York City had progressed from a situation in which unemployment was regarded as a serious public problem to one in which signs of a tight labor market were evident. Thus, sometime in 1943, probably in the second quarter, this area passed through a phase in which unemployment ceased to be an important problem and no serious labor shortages had developed; at that time about 3.3 percent of the labor force was looking for work. The Period of the Twenties The years of lowest unemployment during the 1920's are generally accepted as typical of conditions affording satisfactory employment opportunity. At the same time, however, the Nation did not suffer from a general labor shortage; some concern existed over the frictional unemployment created by technological advances. According to 13 New York Times, April 23, 1943 (p. 27). 14 Idem, April 12, 1943 (p. 16). 15 Idem, June 4, 1943 (p. 12). 16 Idem, November 19, 1943 (p. 16). 17 Idem, January 9, 1944 (p. 7). Isador Lubin's study of the absorption of the unemployed during the twenties, "dispossessed workers did not easily find new employment." 18 The lowest rates of unemployment during the decade were in 1920, 1923, 1926, and 1929. The year 1920, however, may be too closely allied to the abnormal wartime period to be considered representative. And 1929-an unstable year ending in financial crisis-may also be a poor year to choose as a guide. The remaining years, 1923 and 1926, are recognized as representative of conditions of high prosperity. Estimated unemployment averaged 3.9 percent of the labor force in 1923 and 3.7 percent in 1926. Thus, experience during past periods characterized by ample employment opportunity and the absence of serious labor shortages indicates that necessary frictional unemployment should not exceed 3 to 4 percent of the civilian labor force. For a civilian labor force of approximately 60 million-the current total-this rate would mean a range of roughly 2 to 2%1⁄2 million unemployed. To the extent that past levels contained a "reserve" of unemployed, and to the extent that frictions in the labor market can be reduced through such measures as effective vocational guidance and employment service, the volume of frictional unemployment may be brought below the levels indicated by past experience. There is little reason to believe, however, that it need exceed such levels. 18 Isador Lubin, The Absorption of the Unemployed by American Industry, The Brookings Institution, Washington, 1929 (p. 15). |