Home > Uncategorized > What does the post WW II decline in hours worked in the USA teach us about the economy – and about economics?

What does the post WW II decline in hours worked in the USA teach us about the economy – and about economics?

What does the post WW II decline in hours worked in the USA teach us about the economy – and about economics? Why do economists gloss over this momentous event and why are they often not even aware of it? It’s not because of its size, as this decline was of the same magnitude as decline during the Great Depression [graph source: Higgs (2009)]

Knibb graph

This lack of interest in the comparison between the 1929-1933 and the 1944-1949 period becomes even more remarkable when we look at unemployment.

Between 1929 and 1933 unemployment went up from 3% to a devastating 25%. But after August 1944 unemployment only increased from 1% in august 1944 to 6.6% in 1949, an increase of 5.6% of which 2%-point took place in one single month, September 1945. Why aren’t economists more interested in this at first sight totally anomalous behavior of the economy? In some way or another, economic policies and events prevented the rise of mass unemployment – what does this period teach us? Why aren’t economists more interested in this question?

Merijn Knibbe

  1. January 5, 2016 at 8:12 am

    Dear Merijn, if you were to write a short paper on that, with the data and some hyptohesis, I would be interested to Report on it.

    • January 5, 2016 at 11:57 am

      Similarly, if you were to work your WEA Newsletter article into a more formal paper, we would be interested in publishing it in the next issue of the RWER.

  2. January 5, 2016 at 9:09 am

    Why aren’t economists interested? In my view they’re not interested because most economists are not really interested in economics. Most seem to prefer mathematics, operations research, and limited portions of philosophy (e.g., logic, positivism, etc.). In fact, I think having to study and communicate with real economic actors actually frightens most economists.

  3. Lyn Eynon
    January 5, 2016 at 7:12 pm

    I don’t have the data to confirm these but a couple of hypotheses come to mind.

    1) Returning servicemen displaced many women workers who were not then recorded as unemployed but disappeared from the labour force.

    2) Overtime fell sharply as capacity utilisation returned to more normal levels.

  4. January 6, 2016 at 9:42 am

    The mainstream ignores the postwar years too. OECD average unemployment 1953 to 1974: 3.2%. GDP growth 4.9%, inflation 4.5% (1960-1974). The neoliberal years have never matched that.
    http://sacktheeconomists.com

  5. February 5, 2016 at 1:19 am

    In the post-WWII period you are transitioning from a war-time economy to a peace-time economy — similar to the post-WWI depression. In 1929 you do not have this transition — the recession/depression is hitting a peace-time economy; an Ag Sector that was already in recession during the 1920s, and Industrial Sector that by 1929 was in overproduction and speculation. Couple the weakness in the economy with policies that would be inacted that would restrict economic activity (Fed rates kept high to protect the dollar (on the Gold Standard) and to rid the speculative “fever”, restrictive tarifs, Hoover inaction including his first two budgets, etc.) followed by the inevitable bank failures by December 1930, decreasing consumer spending and a fall in industrial production — and you have the calamity of a deflationary spiral that will last over 40 consective months. The economic perfomance of the policy-makers in the post-WWII period was not good, but it was not one of neglect or gross harm.

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