The effect of the differential duration is to bias the the reported race differential in the direction of overstating it. To illustrate, suppose that over a given year there were ten black workers, four of whom were each unemployed for three months, with each of their unemployment not overlapping with the others. Further assume there were ten whites, one of whom was unemployed for the entire year. The incidence of unemployment, twelve worker months, is the same for both groups. Yet the reported unemployment rate using the 1900 census procedure would have been 40 percent for nonwhites (four were unemployed out of ten), and 10 percent for whites. Using current measurement procedures, the reported rate for both racial groups would have been 10 percent.
Making a number of assumptions, it is possible to estimate a point-in-time unemployment rate for 1900 which is highly consistent with the official (Lebergott) annual data.10 Doing so, we obtain a white unemployment rate of 6.47 percent and a nonwhite rate of 7.57 percent. The racial differential is about 17 percent, with the absolute differential being slightly more than one percentage point. The 1930 data suggest actually a slightly lower unemployment rate among nonwhites—5.17 percent—than among whites—6.19 percent. Assuming the 1900 and 1930 observations are reasonably representative of intervening years, it would seem reasonable to conclude that the white/nonwhite unemployment differential was of a negligible magnitude in the period from 1900 to 1930.
TABLE 1.3 AGE, RACE AND GENDER DIFFERENTIALS IN UNEMPLOYMENT RATES, 1900–88
Further examination of the data suggests the large racial differential in unemployment rates had its genesis in the 1930s and 1940s, with an additional aggravation of that difference in the 1970s. While Americans often pride themselves on reducing racial economic distinctions over time, the evidence on unemployment is highly inconsistent with that sanguine interpretation. Other data on employment confirm the deterioration in black job opportunities.11 It would appear that over time, racial variations in the natural rate of unemployment have grown very substantially.
GENDER DIFFERENCES
To a dramatically smaller extent, the same phenomenon exists with respect to male-female differentials. The 1900 data show a moderately higher female unemployment rate, but the 1930 numbers actually show women with a significantly lower incidence of unemployment, while in 1940 there was virtually no gender differential. Summarizing the data to 1940, it probably would be safe to conclude that gender differentials before 1940 were not systematic and minor in magnitude. By contrast, since 1950, female unemployment rates have tended to be consistently higher than male ones, especially in the 1960s and 1970s, although the differentials have narrowed significantly in recent years.
TEENAGE UNEMPLOYMENT
Teenage unemployment has consistently been higher than that for older Americans, although the differential reported in the 1930 census was very modest. Between 1930 and 1940, the teenage unemployment differential soared, then narrowed somewhat in the 1950s. On balance, the teenage differential has widened since 1950, as is demonstrated by comparing 1950 and 1989, years in which the aggregate unemployment rate was identical. In 1989, the teenage unemployment rate was 2.8 percentage points greater than in 1950.
The Importance of Unemployment
Why has unemployment become such a major policy issue as the United States has moved through the twentieth century? Why does it seem to dominate the nation’s thinking whenever there is any significant rise in it, as occurred, for example, in the early 1990s? Possibly, this increased concern with the phenomenon can be traced to its present magnitude being appreciably higher than in the earlier part of the century. Perhaps unemployment is truly a more serious problem today than previously. However, the evidence in this respect is mixed. On the one hand, counterbalancing the higher absolute level of the unemployment rate, the variability of unemployment has possibly narrowed with the passage of time. At the same time, though, certain unemployment differentials, especially the racial one, appear to have widened. But in the other direction, what about the growth of public “social safety-net” programs designed to lessen the economic distress generated by unemployment? Do they, or do they not, make unemployment less of a problem?
There are, in fact, no clear answers as to why unemployment has increased in importance. Changes in its actual incidence do not seem to offer any clearcut clues. This may be due to unemployment being, more than anything else, a somewhat complex psychological problem. Today, data describing the actual unemployment rate are much more readily available than in the early part of this century. Every month, like clockwork, usually on the first Friday, the Bureau of Labor Statistics announces its estimate of the previous month’s unemployment rate. Thus, there is much greater general knowledge of the volume of unemployment. In turn, what becomes important to people is the current level of unemployment compared to the level that they anticipate. If they are expecting double-digit levels for the unemployment rate, as existed in late 1982 and early 1983, single-digit levels seem wonderful. On the other hand, if they have become accustomed to low-level single-digit numbers, such as the 5.1 to 5.3 percent unemployment rates that marked 1989, an increase of as little as two percentage points can seem to represent a dramatic deterioration in the unemployment situation.
As a consequence, in combination with the greater knowledge of current levels of unemployment, the very existence of variability in its level, even though it be less than in earlier years, becomes the basis for the importance attached to unemployment in the arena of public policy. Changes in unemployment seem to have become at least as important, if not more so, than its actual level. Therefore, any understanding of the contemporary view of the unemployment problem requires insight into the sources of variation in the unemployment rate.
NOTES
1. The Shorter Oxford English Dictionary (Oxford: Clarendon Press, 1933), 2: 2296, dates the origin of the term “unemployment” to 1888. The term “unemployed” in the modern sense was used as early as 1667. Alfred Marshall uses the term twice on a single page of his Principles of Economics, 8th ed. (London: Macmillan, 1920), p. 710, but nowhere else, although he refers to “inconstancy” of employment in two places.
2. Using the American Economic Association’s Index of Economic Journals (Homewood, Ill: Richard D. Irwin, 1961), we counted unemployment-related articles within the classifications 2.310, Income and Employment Theory—General; 2.311, Underemployment, Full Employment; and 19.202, Employment, Unemployment (counting, among the geographically oriented items, only those for the United States). For the 1890s, there were two articles on statistics of unemployment. In the 1930s, there were sixty articles listed in these classifications, plus numerous other articles in related classifications.
3. See A.C. Pigou, Industrial Fluctuations (London: Macmillan, 1927), p. 185, or his Theory of Unemployment (London: Macmillan, 1933), Part V.
4. For a table on urbanization by decade, see Richard K. Vedder, The American Economy in Historical Perspective (Belmont, Calif.: Wadsworth, 1976), p.