Many persons look upon this type of cases as almost wholly accounting for the problem of the unemployed. They are confirmed in this opinion by the fact that the out-of-work group in any trade at any time is, on the average, the least efficient group of workers in the trade. This results from selection by the employers. This selection is due to the relative not to the absolute efficiency or inefficiency of workers, and must result whenever there are any discoverable economic differences in the workers (all things considered) that are employed at the same wage. This would continue even tho the poorest workers were to raise their efficiency above that of the best men now retained. "Personal inefficiency" may explain a chronic low wage or absolute unemployability in a particular case, but it does not explain intermittent lack of work for those willing and able to work. Unemployment is a social problem and not merely an individual problem.
§ 15. #Maladjustment of wages causing unemployment.# It seems highly probable that the artificial maintenance of a wage above the competitive, or value-equilibrium, rate of the individual, whether this be done by sympathy, by custom, or by the action of trade unions, must cause some maladjustment of workers in relation to available jobs and thus increase unemployment. To doubt this is again to maintain the absolute inelasticity of the demand for labor with changes in its price.[10] If the true equilibrium wage in a certain industry were $3.00 a day, then a wage of $4.00 a day would attract to the trade more than enough workers to meet the demand for labor in normal periods (unless entry to the trade is controlled by monopoly power), and at length the losses from unemployment would balance the day-wages received in excess of the rate obtaining elsewhere for that quality of labor. Any artificial obstacles to change of occupation or to concessions in the kind of work done and in the rate of wages must operate to increase the maladjustment. So far as this maladjustment occurs, it may cause unemployment neutralizing the apparent gain of higher day-wages obtained by monopoly power. The very inertia of wages, however, in new price situations[11] makes the wage-workers resist more vigorously such a policy of wage concessions. Moreover, the difficulty here indicated is more particularly one occurring in static conditions and is to be distinguished from the dynamic maladjustments next to be considered.
§ 16. #Individual maladjustment in finding jobs.# Another kind of individual maladjustment is the failure of the jobless man to connect with the manless job. A certain amount of this maladjustment must exist in the most stable industries and in the most settled industrial conditions. Fluctuations occur in the market demand for the products of various establishments, requiring the taking on or laying off of some men. Fluctuations occur in the plans both of employers and of wage-workers as a result of age, of removal, for reasons more or less non-economic, of desire to change occupations, of variations in health, and of countless other causes. The needs of the employer for a worker, and of the worker for a job, are mutual. To a large degree these various fluctuations are mutually compensatory, workers going and coming, orders increasing here and decreasing there. Total jobs and total workers capable of filling the jobs, are at any moment in normal times equal quantities, if they can be brought together. But almost everywhere is lacking a real labor-market. The substitutes for it are largely ineffective: trade-union action, employers' associations, "want ads," cards in shop windows, weary walks from door to door, lines of waiting men outside of factories, private employment agencies. At their best the private employment agencies perform valuable services within limited fields, but they are uncoordinated, and utterly inadequate to meet the chief need, and at their worst they are the instruments of great abuses against the unemployed.
§ 17. #Public employment offices.# Vigorous efforts to create local "free employment offices," or "labor exchanges," began in a number of countries about 1895. The movement gained headway in the next ten years and has since steadily grown. In Germany the chief exchanges have been founded and conducted by the municipalities (while others are controlled by the unions and by groups of employers) and have remained largely decentralized, tho coöperating to some extent through voluntary state conferences of officials of the exchanges, and since 1915 required to report to the imperial statistical office. The total number of exchanges in Germany (in 1915) was nearly 3000. The general results have been remarkably good, altho not completely satisfactory.
Every industrial country of Europe has done something of this kind. Great Britain, however, after some experiments with a similar local system, established in 1909 the first national system of "labor-exchanges." In America the movement is developing in three directions, through municipal, state, and federal offices. These are united (since 1913) in an "American Association of Public Employment Offices." In 1915 there were known to be 99 state and city employment offices distributed through 30 states, besides federal offices operated in 18 cities in connection with the Bureau of Immigration. The clearly recognized task is now to coördinate these various agencies into an efficient national system, eliminating partizan politics and elevating the management of all branches to the plane of professional service. Through these agencies can be operated an industrial service, analogous in function to the weather bureau, and reporting from day to day the pressure of demand and the prospects for labor in the various parts of the country. The economic results of a complete, exclusive, and efficient service of this kind would far exceed its legitimate cost to the community.
§ 18. #Fluctuations of industry causing unemployment.# Any one of the maladjustments in employment thus far considered may occur at a given moment, in static conditions of industry. But there are also maladjustments resulting from more general industrial changes throughout a period of time. The two main types of these are seasonal and cyclical changes, the one occurring within a year, and the other occurring within the longer period of the business cycle. At the downward swing of these seasonal and cyclical changes the number of would-be workers exceeds the number of jobs [12] and the resulting unemployment is greatest when the minor and the major swings are both downward, about midwinter in a period of industrial depression. Thus in 1893-94, and to a lessening degree in 1894-95, 1895-96; in 1907-08, and 1914-15. Of course employment offices alone are no remedy for the exceptional difficulties of such times, and the individual, whether he be an unfortunate "out-of-work" or a more fortunate well-wisher, feels helpless in the face of the overwhelming burden of distress. Such a situation is declared by the radical communists to spell the bankruptcy of the wage-system; while the most conservative students of the subject confess that this periodic chaos in the labor market is the strongest indictment of, and involves the gravest dangers to, the existing economic and social order.
§ 19. #Remedies for seasonal fluctuations.# But of late there has been a growing hope that an answer may be found to this economic riddle of the Sphinx. A number of different measures are being experimentally tested and applied. Many years of effort will be required for the perfecting of these plans separately and collectively. Some of these plans may be here indicated, however briefly. To remedy seasonal fluctuations within the establishments output may be regularized by taking orders in advance; by producing various products successively in the same factory; by overcoming weather conditions as has been done successfully in brick and tile making, ditch digging, and building operations; by transferring workers from one department of an establishment to another; by improving the employment departments so as to build up a more stable force, thus reducing the great expense of "hiring and firing" and the loss through training "green hands"; by varying the length of the working day while keeping the same working force throughout the year; by coöperating with other industries to build up a regular working force and transferring it from one establishment to another with seasonal changes.
Of great aid in a number of these measures is a broader industrial training for the workers, making them more able to change from one occupation to another. For this purpose every period of unemployment and of temporary shortening of the working day ought to be used as a time for trade education, by the recently devised and successfully applied "short-unit courses for wage-earners."[13]
§ 20. #Reducing cyclical unemployment and its effects.# The maladjustments due to the movement of the business cycle are even more difficult to remedy completely, but are diminished by every measure that helps to reduce the great financial fluctuations.[14] Further, many communities have already begun to plan large public works more systematically so that they may be carried on mainly when private business is more slack. A comparatively small amount of such work would serve as a gyroscope to preserve the balance of employment for a large part of the less skilled workers. It has been estimated by Bowley, an English statistician, that in the United Kingdom, it would be necessary to set aside only 3 per cent of the annual expenditure for public works to be used additionally in years of industrial depression, in order to balance the wage loss at such times. This is a well-nigh incredibly small proportion, hardly as great as that of the weight of the gyroscope compared with the car or ship to which it is applied. It is hardly to be doubted that hitherto, in America, public undertakings have been executed much more largely in periods of business prosperity, and have been diminished during "hard times," thus greatly accentuating the harmful swing of the labor-demand. Finally, unemployment insurance, which has already been applied by parliamentary legislation in Great Britain to a group of nearly 3,000,000 wage-workers, is an indispensable and highly hopeful measure of relief. The place of this in a general system of industrial insurance will be indicated in the next chapter.
[Footnote 1: See above, ch. 20, sec. 1.]