Labour Markets in Recession and Recovery: The UK and the USA in the 1920s and 1930s

Abstract

We examine the labour market experience of the UK and the US in the recessions of the early 1920s and the early 1930s and the subsequent recoveries. These were deep recessions, comparable to that of 2008-9, but the recoveries were very different. In the UK the recovery of the 1920s was incomplete but that of the 1930s was rather less protracted than in the US. By contrast the US experienced very strong recovery in the 1920s but weaker recovery from the much deeper recession of the 1930s. A key ingredient to understanding these patterns is the interaction between economic shocks and labour market institutions. Here we survey the large literature on interwar labour markets to identify the key elements that underpinned labour market performance. We find that developments in wage setting institutions and in unemployment insurance inhibited a return to full employment in interwar Britain while in the US, New Deal legislation impeded labour market adjustment in the 1930s. We conclude with an assessment of the policy responses to labour market crises in the past and in the present.

Broadcasting cookery: BBC radio programmes in the 1920s and 1930s

“…Similarly subject to these worsening international trends, the United Kingdom suffered less than the United States and Germany although it still produced a long-term male unemployment rate exceeding a quarter by 1936. However, the impact was not uniform across the country and long-term unemployment rates were worse for men than for women, declined with skill level, increased with age and varied widely across industrial sectors with the effect that it was most pernicious in the north of the country (Hatton and Thomas, 2013). Priestley, in 1933, had characterized England, at least, as being a historical and geographical patchwork with the old England of cathedrals, inns and quaint highways little changed; the nineteenth century England of the industrial Midlands and north undergoing decline, and the twentieth century England of suburban development, new industries and modern factories 'all glass and white tiles and chromium plate' (Priestley, 1933, p. 404).…”

Labour frictions in interwar Britain: industrial reshuffling and the origin of mass unemployment

“…Trade unions experienced an important transformation during the trans-war and early interwar period. According to Hatton and Thomas (2012), there was a significant increase in the trade union density (members as a share of the labour force), between 1913 and 1920 (from 22% to 44%), before a decline to the pre-war levels (24% in 1931) (Bain and Price, 1983). If the rise of the trade union density had an impact on employment, it is plausible to assume that this influence was dissipated as membership declined through the 1920s iii .…”

“…According to Hatton and Thomas (2012), in trades and occupations without proper structure (i.e. without trade unions), the trade boards acted to fix a minimum wage.…”

“…Scholars pinpoint several potential frictions: high unemployment benefits (Benjamin and Kochin, 1979), institutional changes in the early 1920s (Hatton and Thomas, 2012), regional divergence (Booth and Glynn, 1975), and structural change in the composition of industry (Eichengreen, 1988). The nature and magnitude of such frictions, however, have not yet been quantified.…”

“…The NAIRU measures the minimum level of unemployment below which inflation would accelerate as a consequence of higher wages, which can be thought at as an indicator of the natural unemployment rate. According to Hatton and Thomas (2012), Britain saw a significant increase in the NAIRU in the interwar period. This is in line with the persistent high unemployment throughout these decades.…”