Labour Markets in Recession and Recovery: The UK and the USA in the 1920s and 1930s

This chapter examines the labour market experience of the UK and US in the recessions of the early 1920s and early 1930s and the subsequent recoveries. Compared with 2008?09, these were deep recessions, but the recoveries were very different. In the UK, the recovery of the 1920s was incomplete but that of the 1930s was less protracted than in the US. By contrast, the US experienced strong recovery in the 1920s but weaker recovery from the deeper recession of the 1930s. A key ingredient to understanding these patterns is the interaction between economic shocks and labour market institutions. The literature on interwar labour markets is surveyed to identify elements that underpinned labour market performance. Developments in wage-setting institutions and in unemployment insurance inhibited a return to full employment in interwar Britain, while in the US, New Deal legislation impeded labour market adjustment in the 1930s.