During the Great Depression in the early 1930s, the U.S. economy came to a halt. Many individuals lost their jobs as the production of goods and services declined. The labor market had a surplus of available workers. Even specialists were competing for a fewer number of jobs. This period of high unemployment caused social strife, mass migrations and extreme poverty.

An example of this poverty was the rise of shantytowns known as "Hoovervilles." They were named after President Herbert Hoover, who was widely blamed for the economic depression. Many individuals who had lost their jobs were reduced to living in these spontaneous migrant camps. Their houses were shacks built from packing crates, sheets of tin, or any other material that could be salvaged. There was no clean running water, no sewer system and no electricity. The Hoovervilles, which sprang up across the nation, were centers of poverty and misery.

CS Question #2: What caused the rise of Hoovervilles?

Unlike with the Great Depression, after the epidemic of a disease known as the "black plague" swept through Europe in the Middle Ages, labor became scarce and unemployment decreased. At that time, Europe was ruled by the feudal system. In the feudal system, government power was spread over various local castle-dominated districts. The power to govern was held by a few kings and spread down to lesser nobles. Serfs were forced to cultivate land and serve their lord or master. Their wages were often meager, and they lived in near poverty.

Following the spread of the black plague through Europe, feudalism changed very quickly. So many individuals died that workers became exceedingly scarce. Even the poorest members of the working class saw their wages increase dramatically. The demand for labor to cultivate lands, maintain buildings and perform other necessary tasks was high. The feudal social system weakened to the point of near collapse. Serfs were no longer tied to one master. If serfs left one manor, it was easy for them to find a job at another manor. The lords who controlled the land had to increase salaries for the workers or risk losing them to other employers. Eventually, this change in the labor market greatly benefited the serfs. Many lords granted serfs freedom and, in some cases, land of their own.

CS Question #3: What was the effect of a scarce labor pool on the feudal system?

Unemployment has many effects on the economy. If maintained at the correct level, unemployment is considered a positive situation. Unemployment can keep inflation - the increase in the price of consumer goods - in check. Low inflation allows for lower interest rates. Lower interest rates lead to more investment by businesses. More investment leads to increased production and the creation of jobs.

If unemployment becomes too high, however, other problems occur. Wages decrease, which causes the demand for goods and services to decrease. A decrease in consumption leads to further unemployment. The overall economy can be disrupted to the point of economic depression.

CS Question #4: How much unemployment is healthy for the economy?

Further Thought:

1. Why does the government mandate a minimum wage?
2. How does unemployment affect the demand for consumer goods?
3. How did President Roosevelt's administration deal with the Great Depression? How did this differ with the ideas and policies of President Hoover?