Economic dimensions of the unemployment problem

Canadian Labor Defense League (n. d.), p. 9. 50. Ibid., p. 15. 51. This was reported in all the major newspapers (le. Winnipeg Free Press, March 6, 1934). 52. The Toronto Telegram, Feb. 2, 1934. 53. The Toronto Mail and Empire, Feb. 5, 1934. 54. Toronto Daily Star, Feb. 14, 1934. 55. Ibid. 56. The Sedition of. .., op. cit., pp. 3-4. 57. Mass Unity Wins: The Story of the A. E. Smith Trial, pamphlet published by the Canadian Labor Defense League (n. d.), p. 10. 58. Ibid. 59. Ibid., p. 16 Economic dimensions of the unemployment problem MALCOLM C. BROWN The economics of unemployment has been discussed so extensively by social analysts, including economists, that one would think that everything of importance has been said. Yet it remains one of the more elusive economic problems. Unemployment rates exceeding 5.00, and often 6.00, percent in recent years bear testimony to the fact that the unemployment problem has not been "solved." Articles on unemployment tend to be faddish, with little empirical substance to recommend them. Because of the trend towards higher unemployment rates two jnterrelated hypotheses have been gaining support in Canada. The first is that employment is not responding to output increases as it used to and the second is that structural unemployment (particularly of a technological nature) is increasing. 1 Much of the paper will deal with the evidence relating to these two hypotheses. But before we consider the evidence it is useful to examine the problem of unemployment analytically. Perhaps the major surprise to laymen is the potential difficulties involved in achieving Journal of Canadian Studies 60. Ibid., p. 19. 61. Toronto Herald, March 9, 1934. 62. The Canadian Labor Defender (Sept.-Oct., 1935), Vol. 5, No. 12, p. 6. 63. The Toronto Daily Star, July, 1935. 64. The Vancouver Sun, June 25, 1935. 65. Ibid. 66. Ibid., July 3, 1935. 67. The Winnipeg Free Press, July 3, 1935. 68. Canadian Forum (April, 1932), p. 244. 69. John W. Dafoe, "Freedom of Public Opinion," cited In Ibid. (August, 1935), p. 341. 70. Saturday Night, October 19, 1935. full employment via economic policies. There seem to be so many simplistic policies that could guarantee jobs for everyone. The most obvious way would be to make the government an employer of last resort with our manpower centres being converted into agencies which would automatically hire all involuntarily unemployed workers at the minimum wage. Not only would such a policy guarantee full employment but it would also remove the need for unemployment insurance. Unfortunately the above policy, and others like it, would probably lower economic efficiency. Workers would no longer have the threat of unemployment to induce them to work hard. Moreover, they would have little incentive to accept the lower paying jobs (such as those in the service industries) given the alternative of guaranteed government jobs involving little work and responsibility . Finally, they would have less incentive to move from areas where employment opportunities are not available to areas where they are available. In effect, full employment would be obtained at the cost of considerable economic inefficiency in the allocation of human resources.2 Full employment policy, as conceived by economists, is consequently much more 55 complicated than is commonly realized. In so far as it is possible, full employment must be achieved without affecting firms' decisions about what to produce or workers' decisions about where and how hard to work. It is in this context that we can analyze Canada's unemployment problem, and policies that can be designed to deal with it. The Nature of Unemployment Unemployment is usually separated into at least three types - frictional unemployment , structural unemployment and demand deficient unemployment.3 Frictional unemployment is not a problem since it is comprised of workers who are currently in the process of moving from one job to another. But structural and demand deficient types of unemployment are problems, since they both imply involuntary unemployment. The former is comprised of workers who cannot find jobs because of inadequate training or education, undesirable (or at least disliked) personal traits, the state of technology, the nature of the industrial structure or some other structural determinant. The latter is...