Down and Out (Again): America’s Long Struggle with Mass Unemployment

Periodic spikes in unemployment are as American as the Big Mac.

From the early years of the nineteenth century through World War II, the American economy tanked at least every decade or two. U.S. history textbooks are filled with boldfaced subheadings that begin "The Panic of…" followed by an assortment of years, whether 1837, 1857, 1873, 1893 or 1907.

As the twentieth century progressed, the U.S. economy continued to sour with remarkable regularity: in 1914, 1920, and, of course, during the Great Depression. A long stretch of prosperity and stability followed World War II.

But by the end of the 1960s, the U.S. economy's historic case of the wobbles had returned. Hard times defined the '70s, the early '80s as well as the late '80s and the early '90s.

Now here we are again, dealing with the consequences of what is universally described as the worst economic crisis since the Great Depression. In the fall of 2009, the national unemployment rate peaked at 10.1 percent and today remains at a distressingly high level, just over nine percent.

What is just as American as all this, however, is providing help to the jobless during moments of mass unemployment. At least from the 1850s forward, during all of the downturns listed above, Americans took a variety of steps to aid the unemployed.

Nearly all of these efforts—including those that took place long before the New Deal—involved some degree of government action. However, before the 1930s, local governments, rather than Washington, took the lead in offering assistance.

Rediscovering this history underscores an important fact. Leaving the unemployed to fend for themselves, as some pundits and political leaders have recently proposed, would be a radical departure from the American past.

The Birth of a Policy Tradition

The possibility of truly widespread unemployment arose with the spread of manufacturing and wage labor in the decades leading up to the Civil War. Societies based primarily on agriculture do not experience "unemployment" in the same way as industrial ones do.

As the nation's first factories developed, primarily in the North, they increasingly forced self-employed craftsmen out of business and lured more and more Americans off the farm. By the time the South fired on Fort Sumter, cities like New York, Philadelphia, and Boston were filled with wageworkers. During every economic bust, those cities became filled with the unemployed.

Local governments were the first public entities to address mass joblessness. From early on, one of their leading strategies was increasing public employment.

When the ranks of the unemployed swelled after the economic panic of 1857, the mayor of New York put over a thousand men to work fixing up Central Park and gave others jobs constructing roads. Philadelphia pursued a similar but smaller program after thousands of protestors gathered in Independence Square demanding that public officials do something to help the jobless.

During the economic crisis of the 1870s, a number of cities increased spending on public works projects as a way to help the unemployed. Some also upped funding for public charity. In both the 1850s and the 1870s, public action supplemented the work of private organizations, such as churches and charitable societies.

The American economy crashed again in the early 1890s. Accurate employment statistics for the period are hard to come by, but according to some accounts, the national unemployment rate climbed as high as 17 percent.

During the especially harsh winter of 1893-94, many cities organized emergency committees to coordinate local campaigns on behalf of the unemployed. In some cities, mayors established these bodies. Elsewhere, they were founded and run by private organizations, like local chambers of commerce or large charities. Nonetheless, even privately run committees often collaborated closely with public officials and in many cases enjoyed quasi-public status.

Whether publicly or privately run, few if any of these emergency committees came close to meeting the needs of the unemployed. Nonetheless, they made sincere attempts to provide makeshift work on a number of public and private projects.

Unemployed men might find temporary employment crushing stone at nearby quarries, cleaning parks, building roads, laying sewers, or chopping wood. Some unemployed women found temporary jobs in laundries or sewing shops that were established specifically to provide work for the jobless. Most of the institutions that provided women with work were run by private charities but some received public subsidies as unemployment soared.

By the early twentieth century, local campaigns against mass unemployment had become commonplace.

When the First World War broke out in Europe, the American economy experienced a short but sharp economic downturn. As unemployment spread during the winter of 1914-15, nearly fifty American cities formed emergency committees to cope with surging unemployment.

According to one survey, almost a hundred cities accelerated construction on public works projects. Many cities sponsored "spruce up" or "odd jobs" campaigns to put the unemployed to work beautifying local surroundings or performing handiwork in private homes and at local institutions. Elsewhere, emergency committees ran "bundle days" to collect clothing for the destitute unemployed. Across urban America, cities combined public action and private effort to help the down and out.

By then, they were simply following tradition.

Enter the Federal Government — Hesitantly

During the First World War, the American economy kicked into overdrive to supply American and allied troops overseas. With the end of hostilities, thousands of wartime jobs threatened to evaporate at a moment when millions of American soldiers and sailors were about to return home in search of work. Commentators and public officials fretted that victory might come with a steep downside: yet another wave of unemployment.

These fears underpinned the federal government's first, ambivalent foray into fighting mass joblessness.

In his first major speech after the end of the war, President Woodrow Wilson called for the acceleration of public works projects in states and cities across the country to help the "large floating residuum of labor" that would likely accompany the country's adjustment from war to peace. He also endorsed a proposal of Secretary of the Interior Franklin Lane to allocate $100 million in federal money to put men to work reclaiming "arid, swamp, and cut-over lands" with the potential of making arable "some three hundred million acres" of farmland.

Congress refused to fund the multimillion-dollar program.

Still, even without congressional backing, a number of federal agencies took action in the months following the armistice. The War Labor Board, the Department of War, and the Department of Labor all put pressure on governors and mayors to forge ahead with as many public works projects as they could. The National Council of Defense established an Emergency Committee for Soldiers and Sailors in order to help returning military personnel find jobs. The committee also urged local governments to spend more and more on public projects.

By the fall of 1919, the economy seemed stable and the federal government turned to other concerns. As it turned out, however, a much worse economic crisis lay just around the bend. In the final months of 1920, the U.S. economy began to falter amid an international slump. By the following summer, the Secretary of Labor estimated that over five and a half million people were out of work – by most accounts the largest number of unemployed Americans in U.S. history up to that time.

As was the tradition, local governments were the first to respond to the unemployment epidemic of the early 1920s. A number of cities appropriated special funds to help tide the unemployed over by giving them food, coal, or cash while others once again pushed ahead public works projects. Some state governments also took action by boosting funding for public employment bureaus or authorizing cities to offer special bond issues for projects that would create jobs.

As the crisis persisted, however, the federal government once again entered the fray. In the fall of 1921, President Warren Harding convened a national conference on unemployment.

The meeting was the brainchild of Harding's Secretary of Commerce, Herbert Hoover. Hoover is usually remembered as the president who failed to help the unemployed in the early years of the Great Depression. Nonetheless, in 1921, he urged some form of federal action because it was "inconceivable" that the United States "could allow any suffering amongst those of our people who desire to work."

The President's Conference on Unemployment resulted in a number of federal innovations. Its members endorsed one of the first instances of what we now call federal stimulus spending: $75 million in matching grants to states for highway construction. The measure was meant to increase employment opportunities and also funnel money toward industries related to road building. Hoover successfully used the conference's endorsement to convince Congress to pass the plan.

Next, conference members established a standing committee to study how the United States could stave off future economic downturns. By the end of the 1920s, the committee had produced a set of landmark studies that signaled a new federal commitment to stabilizing the economy.

Finally, the conference established a special committee charged with overseeing emergency campaigns to offer support to the unemployed. The conference's final report stated emphatically that helping the unemployed was primarily a "community problem," rather than a federal one. Cities, and secondarily states, would remain at the front of the battle.

Nonetheless, conference members embraced a plan to use the power and prestige of the federal government to pressure state and local officials into intensifying their efforts as well as adopting a set of best practices.

In crafting their recommendations, the members of the President's conference explicitly rejected tactics that central governments in a number of European countries, especially Great Britain, had come to embrace to fight unemployment.

In 1911, Great Britain had adopted one of the world's first systems of unemployment insurance. It was funded by a combination of employer and employee contributions and state subsidies. At first the law covered only a small number of workers in the most economically volatile industries. In 1920, however, just before Harding and Hoover called the unemployment conference, Great Britain dramatically expanded the system so that it covered more than eleven million workers. Over the next decade, ten other countries would establish similar programs.

Hoover was strongly opposed to state-sponsored unemployment insurance, as were the majority of the men and women he invited to attend the unemployment conference. Thus, he and his fellow conferees championed new forms of federal action even as they resisted the creation of a truly powerful, centralized state.

Moreover, they feared that giving the unemployed public funds without making them perform some sort of productive labor would sap the nation's work ethic and create a class of Americans dependent on government handouts. In urging local governments to take action, members of the conference particularly underscored their belief that public employment was better than government charity.

Even though the members of the President's conference endorsed only a limited federal intervention, Washington's heightened involvement did seem to make a difference.

More cities undertook emergency campaigns in the early 1920s than ever before, doubtless in part due to federal prodding. By one count, over two hundred cities mobilized to help the jobless. The sale of municipal bonds shattered all previous records in the wake of the President's conference, an indication that cities were piling up debt to fund public works projects as never before.

In addition, a wide array of cities came up with makeshift tasks to get the jobless back to work.

Fort Smith, Arkansas established a rock-pile "where men break big stones into little ones, to be mixed with cement and sand to improve local streets." In Fort Dodge, Iowa, the unemployed were put to work in abandoned coalmines to earn wages and bring down the local price of coal.

Salt Lake City gave the unemployed lodging and meal tickets in exchange for chopping decrepit railroad ties and light poles into kindling that the city could sell. In Pittsfield, Massachusetts a "flying shovel squadron" comprised of otherwise jobless men rushed to clear off snow-covered sidewalks whenever they were called.

Hoover eventually claimed that the emergency campaigns of 1921 had helped over a million Americans. There is no concrete evidence to back up this claim. What is easier to glean, however, is that a number of American leaders, including Hoover, deemed the 1921 fight against unemployment a success.

The experience convinced him that a combination of small-scale stimulus spending, federal cheerleading, and state, local, and private action could effectively address mass unemployment.

When unemployment spread again in the early years of his own presidency, Hoover followed a similar approach to the one he had advocated in the early 1920s. The results were not only disastrous for millions of unemployed Americans, but also ushered in a major watershed in the long history of America's struggle against mass unemployment: Franklin Delano Roosevelt's New Deal.

The New Deal and the Regularization of Unemployment Relief

The Great Depression brought the end of America's long tradition of relying on emergency, community-based campaigns to ameliorate widespread unemployment. After the depression hit, most local governments ran out of money relatively quickly and state governments struggled to fill the breach.

Until the final years of his presidency, Hoover resisted the creation of large-scale, federal programs to aid the unemployed. Instead, for most of his tenure, he pushed a series of highway bills, much like the one he convinced Congress to pass in 1921, along with a handful of other, relatively small-scale federal public works projects.

He especially used the Presidency as a bully pulpit to urge mayors, governors, and private organizations to take action. With state and local governments as well as private charities largely tapped out, Hoover's reluctance to embrace more aggressive federal programs left millions of Americans without meaningful aid.

In the final year of his presidency, Hoover expanded federal initiatives, particularly by creating the Reconstruction Finance Corporation (RFC). The RFC was in part designed to lend money to state and local governments to help them finance public works projects. In the face of nationwide misery, however, the program proved to be too little, too late. In 1932, Hoover lost all but six states in his re-election bid.

Hoover's successor, Franklin Delano Roosevelt, was far more willing to create federal programs to help the unemployed. During his first term in office, Roosevelt famously created an "alphabet soup" of agencies to pull the nation out of the Great Depression.

A number of these new agencies were geared directly toward helping the jobless. The Federal Emergency Relief Administration, the Civilian Conservation Corps, the National Youth Administration and, most famously, the Works Projects Administration all used federal dollars to put unemployed Americans to work, whether clearing brush, building roads, schools and bridges, or even transcribing the life stories of ex-slaves in the rural South.

It is crucial to underscore, however, that Franklin Roosevelt envisioned most of these programs as temporary measures. Much like Hoover, Roosevelt feared that an endless supply of public jobs would make Americans overly dependent on government largesse. He hoped to get Washington out of most aspects of unemployment relief as soon as possible.

In 1937, when economic recovery appeared on the horizon, Roosevelt moved quickly to cut a number of the federal government's unemployment programs. This sharp reduction in government spending sent the economy crashing again, creating the "depression within the depression." The return of economic hard times, in turn, spurred Roosevelt to call for the resurrection of many of the programs he had just gutted.

Roosevelt did not want the federal government to remain the nation's employer of last resort. Still, he favored the creation of a permanent program to provide temporary assistance to Americans who lost their jobs.

In 1935, at the urging of the Roosevelt administration, Congress passed the Social Security Act. Among its many provisions, the act created the nation's first system of unemployment insurance.

Funded by state and federal taxes on employers, the system was designed to provide a short-term salary replacement for unemployed Americans. Much more than his alphabet soup of federal agencies, the creation of a permanent system of unemployment insurance comprised Roosevelt's most lasting contribution to the history of unemployment relief.

The new government unemployment program recognized periodic downturns in the economy for what they were—inevitable—and created a regularized system to cope with the intermittent waves of unemployment that had proven inherent to a modern, industrialized economy.

By the end of World War II, the United States had traded in one policy tradition for another. It abandoned emergency, local campaigns on behalf of the unemployed and instead embraced the systematic use of government-sponsored unemployment insurance. With a few exceptions, the United States has addressed mass unemployment in much the same way ever since.

Additionally, during the Great Depression and later during World War II, American policymakers learned an important lesson: that government spending could serve as a powerful antidote to flailing private markets.

Hoover had begun toying with stimulus spending in the early 1920s. But the Roosevelt administration's experience in 1937—when slashing government programs had caused an economic tailspin—and during World War II—when a flurry of government spending finally pulled the nation out of the Great Depression—convinced generations of Americans that stimulus spending could act as a powerful economic stabilizer.

Throughout most of its history, the United States had used employment on public works projects as a way of directly helping the unemployed during especially hard times. After World War II, however, pursuing public works projects took on a slightly different role: as a macroeconomic strategy for jumpstarting a stalled economy.

Unemployment Relief since World War II: A Trans-Partisan Policy Lives On

The end of the Second World War ushered in a moment of unprecedented prosperity for the United States. The war left the economies of Europe and Japan in tatters. By the 1950s, the United States was producing over fifty percent of the manufactured goods in the world at a time when the American people comprised merely six percent of the global population.

Moreover, the federal government regularly pumped huge sums of money into the economy to fund large-scale public works projects like the construction of the federal highway system and the enormous military build-up that accompanied the Cold War. Thriving private markets and high levels of public spending helped keep unemployment low for over two decades.

Still, unemployment levels continued to fluctuate from time to time. For the most part, the federal government found a straightforward method for addressing these blips: temporarily extending the maximum length of time that out-of-work Americans could receive benefits from the country's new unemployment insurance program. Congress first extended unemployment benefits in 1958 and did so again in 1961.

By the end of the 1960s, both inflation and unemployment were on the rise. The postwar economic boom was beginning to trail off. As periodic economic troughs once again became a normal feature of American life, the federal government largely pursued a similar course. Congress authorized a series of extensions of unemployment benefits throughout the 1970s and has done so with stunning regularity ever since.

Even Ronald Reagan championed such extensions during the deep recession that plagued his early years in office.

Reagan is usually remembered for his opposition to most forms of government spending. At the time, he was one of many public figures who blamed federal expenditures for causing a number of the nation's woes, including an inflationary spiral that dragged down the American economy in the late 1970s and early 1980s.

This line of thinking led Reagan and others to oppose large-scale stimulus spending as a macroeconomic remedy. Instead, policymakers, chief among them Paul Volcker, the head of the Federal Reserve, called for a dramatic increase in federal interest rates in order to curb inflation. As Volcker hiked up the price of borrowing, the economy dipped into a recession and unemployment levels rose. By November 1982, the national unemployment rate had climbed to nearly 11 percent.

As joblessness surged, Reagan embraced, rather than denounced, government action. In his State of the Union Address in January 1983, Reagan proposed the extension of unemployment benefits as well as offering "special incentives to employers who hire the long-term unemployed, providing programs for displaced workers, and helping federally funded and state-administered unemployment insurance programs provide workers with training and relocation assistance."

In fact, every Republican President to serve since World War II presided over an extension of federal unemployment benefits, belying the notion that offering government aid to the unemployed is a step on the road to socialism. Dwight Eisenhower was the first to authorize an extension. In 1970, when Richard Nixon did so, he cited the imperative "to provide security, equity, and dignity" to American workers throughout their lives.

In the face of yet another recession, George H.W. Bush cited the need to provide "critical support to the unemployed" and signed a law that temporarily doubled the amount of time that they could receive government payments.

The second President Bush extended general unemployment benefits four times during his years in office. When the economy sagged after the September 11 attacks, Bush II signed a bill that temporarily increased the number of weeks that the unemployed could receive benefits from thirteen to thirty-nine. Every single Republican in the House of Representatives voted for the measure. All but one did so in the Senate.

In 2003, Bush passed a similar extension, this time with unanimous Republican support in the Senate and only a handful of Republican detractors in the House. In 2008, as the current economic crisis took hold, Republicans – with Bush's approval – voted in large numbers to fund benefit extensions on two more occasions.

As these examples suggest, throughout U.S. history, pursuing government-backed unemployment relief has tended to transcend partisan lines.

The Democrat Woodrow Wilson called for state, local and federal aid to the unemployed just after World War I and so did his successor, Republican Warren G. Harding.

Republican Herbert Hoover and Democrat Franklin Roosevelt differed sharply on many fronts. Hoover primarily favored state and local initiatives to help the unemployed while Roosevelt was willing to let the federal government step in. Nonetheless, both men agreed – like generations of Americans before them—that unemployed Americans deserved some form of government assistance.

Opponents of the Obama administration have taken to calling his response to the current economic crisis "radical." At least in the case of stimulus spending and especially providing aid to the unemployed, they are wrong.

Instead, the Obama administration has merely extended the nation's remarkably long history of government-sponsored unemployment relief as well as its well-established albeit shorter history of using government spending to resurrect the economy.

Real radicalism would be to abandon these traditions and instead leave ailing private markets to nurse themselves back to health while jobless Americans needlessly suffer without government aid.

Check out a lesson plan based on this article: America and Unemployment