The emergence of mass unemployment: Wages and employment in shipbuilding between the wars

Recent macroeconomic analysis of interwar labour markets argues that the introduction of the eight-hour day in January 1919 amounted to a supply side shock to the economy. In the short term and in concert with a monetary contraction, it is held responsible for the slump of 1920-21. In the long term it is held to have increased the natural rate of unemployment. This paper argues that this thesis is flawed as far as the shipbuilding industry is concerned. The post-war slump was due to a negative exogenous shock to demand. The long-run employment problems which the industry faced were due to the aquisition of excess capacity as a result of the war and post-war boom and subsequent demand side problems.