Unemployment Then and Now

By Michael Dumond

How does unemployment impact on people during the current recession compare to previous generations?  My grandmother used to tell us how her family moved to a farm during the Great Depression of the 1930’s and several unemployed relatives moved in to survive, living off the food produced at the farm and the little income from the one and only employed family member. This created a shared family support system but also stress due to crowding, different conflicting personalities and household responsibilities.  In 2009 the phenomenon of “boomerang” kids moving back home increased, with more multi-generational homes and one in six adults (49 million people) living in homes that included at least two adult generations. 6.6 million people are living in three generation homes (grandparents, parents and grandchildren, or aunts, nephews, and their children, or some other combinations including step-families) an increase of 30% since 2000.[i]   How cozy or crazy this feels for the people involved depends on the clash or blending of cultures, values and personal styles. The reduced opportunity for independence caused by the poor economy is the mother of necessity but not always a very flexible parent.

The chart (right) gives a snapshot of the percent of the US labor force that was unemployed at different historical points in twenty-year intervals.[ii] There are a few things to keep in mind when looking at this picture. One invisible group is the people who stopped looking for work because they were discouraged by not finding suitable employment. There are also millions of people who in desperation take any job they can find, such as a part-time position with no health insurance, even if they are “overqualified” and only earn half of what they used to earn. The underemployed are invisible to the public because they are not counted in the jobless rate. With these considerations in mind, the following numbers give us an indicator of what was going on in the overall economy over the past 8 decades.

Our unemployment rate as of November 2009 was 10%. This means one out of every ten people willing to work can’t find a job. In spite of their best effort to look for a job most people will not be able to find one quickly because for the few jobs opened there are far too many applicants (with a few exceptions in technical and medical fields). The amount of time it takes to find a job has increased from the start of the 2008/2009 Great Recession. In November of 2008 the number of people unemployed for more than 27 weeks was 2,192,000, and the average duration of unemployment was 19.9 weeks for all unemployed people. A year later these numbers had increased to 5,887,000 people unemployed longer than 27 weeks and 28.5 weeks as the average length of unemployment for all.[iii]

The federal-state unemployment compensation program was a by-product of the Great Depression, created as part of the Social Security Act of 1935.[iv] Originally most states paid benefits for 13-16 weeks, with each state designing its own benefit level and criteria within the basic federal guidelines. Fortunately for our generation there is extended unemployment compensation, which provides some financial stability but is generally much less than your regular earnings. In my home state of New Hampshire the maximum weekly unemployment amount is $427 (or the annualized equivalent of $22,204). The benefits generally cover a six-month period of being out of the workforce and even longer during severe economic downturns. However, due to the long recession of 2008-2010, these benefits will run out for many people before they can find work.

The Great Depression was a time when the old economy no longer worked, and families and the U.S. government had to invent a financial safety net, the New Deal, to adjust and survive. Although what North America is now experiencing during the Great Recession of 2008-2010 is not nearly as long or as deep as the Great Depression, we are gradually approaching something on that grand scale with our 10% unemployment (15.4 million people with our expanded population) and the prospects for a jobless recovery. However, as the chart on unemployment shows, we have had long periods of high unemployment since the great depression, most notably from 1981 (7.1%) to 1984 (7.5%), peaking in 1982 at 9.7% and 1983 at 9.6%. During most of the 1980’s, the unemployment rate did not dip below 7%.

Comparing the four 20 year periods, the generation working between 1930-49 was dealing with an overall average unemployment rate of 11.7% during that 20 year period. The period between 1950-1969 was our lowest unemployment rate, averaging 4.66%. The 1970-89 period was challenging at 6.74%, and the 1990-2009 was second best at 5.64%, though it ended in a negative cloud of 10% unemployment by December of 2009.

Keep in mind that these numbers are conservative estimates and don’t really capture all of the people who are out of work. Too often the high paying jobs that people lose in an economic downturn do not re-appear, and they are only able to eventually find lower wage jobs. This trend is especially difficult for experienced mid-career workers middle-aged (45-54) and older when earnings tend to be at their highest. A review of unemployment data from 2008 and 2009 shows that workers in three age groups have been most severely impacted by job loss, with an increase in unemployment from 5.8% to 9.9% for workers ages 25-34,  from 4.6% to 7.9% for workers ages 35-44, and 4.1% to 7.2% for workers ages 45-54.  These three age groups started 2008 with roughly the same number of employed people (31 million workers ages 25-34, 33m 35-44, and 34.6m 45-54). The work group ages 55-64, starting with 27.2 million workers, had the most moderate increase in unemployment from 3.7% to 6.6%, with women (6%) faring better than men (7.2%) as a percentage of the unemployed in this age group. For 2009, 8.3% of 25-54 year olds were unemployed, compared to 6.6% of 55-64 year olds.[v]

In the new rules economy the notion of loyalty and being retained by one company your whole working life has been replaced by what is convenient for corporate profit. Most of us are shocked to find out about this new rule during the actual job chopping crisis. We don’t want to think about the new rule of human resources; that we are often expendable and even seen as a liability when cut backs are needed. When the axe falls we are left to fend for ourselves – except for the modest unemployment check which is usually only half or less of what we were earning in our jobs. It is as if each of us is in our own tiny lifeboat of a sole-proprietor corporation called You, Inc.

Looking at unemployment as an indicator, I would suggest that we are better off than the previous generation who went through the 1930’s depression. We at least can collect unemployment compensation for an extended period and will not likely see unemployment rates rise beyond 10% overall. This rate varies substantially by sector, with construction hitting a 19.4% unemployment rate in November 2009 (up from 12.7% in November of 2008) while education and health services sectors were well below the average at 5.5% (up from 3.6% in November 2008).[vi] However, middle and upper middle income earning individuals may see their standard of living dive if they have worked their way up to a high paying position and then have it vanish in the chilling era of fast compassion-free market cost cutting.