Employment and the Business Cycle
THE dual problem of employment and unemployment has recently attracted an unusual amount of attention. In part, the enhanced interest in the problem may be traced to the extraordinarily severe and widespread depression through which all industrial countries of the world have been passing. Interest of this sort, generated by depression, is commonly of a temporary nature -intense while unemployment is severe, but dwindling rapidly as acute unemployment disappears. A second and perhaps more enduring interest in certain problems of employment has sprung up during the past decade. Among business men, elements of cost involved in labor turnover, generally ignored a dozen years ago, have now become so widely recognized as to set a high premium on the stabilization of employment. Again, industrial leaders now see ways in which the employment cycle affects costs of maintenance of plant. In a business depression, underemployment of labor brings with it underemployment of factory space, machinery, railway cars, and many other forms of capital; in a business boom, the efficiency of labor tends to decline, not only because new workers of lower average grade are then hired, but also because indifference to work probably increases in the face of plentiful jobs in other establishments, and because overtiming probably increases industrial fatigue. A third cause for interest in employment lies in the profound influence of employment on the buying power of the population. Any shrinkage of employment tends to curtail the effective demand of the working group involved; this curtailment of demand may lead to further shrinkage of employment in other lines, then to further curtailment of demand, and so on. In every depression this vicious circle rapidly spreads until it involves, directly or indirectly, a very large part of the urban population. Moreover, employment affects buying power not only through its direct influence on the volume of earningsbut also indirectly through its influence on the rise and fall of rates of wages. In short, the three problems of labor turnover, the utilization of capital, and