Key Figures Behind Unemployment Measurement and Theory
William Beveridge (1879-1963)
A British economist and social reformer whose Unemployment: A Problem of Industry (1909) was among the first serious attempts to treat unemployment as a structural feature of industrial economies rather than a moral failing of the unemployed. Beveridge helped establish Britain's labor exchanges and national insurance scheme, later served as director of the London School of Economics, and in 1942 produced the report on social insurance that shaped the postwar British welfare state. The Beveridge curve, named in his honor, plots the job vacancy rate against the unemployment rate: the two normally move in opposite directions, and shifts of the whole curve outward are read as a deterioration in how efficiently workers and jobs are matched.
Arthur Okun (1928-1980)
The economist who supplied the bridge between the unemployment rate and the output data. In a 1962 paper on potential GNP and its measurement, Okun documented a stable empirical relationship in U.S. data between changes in the unemployment rate and the gap between actual and potential output — the relationship taught as Okun's law. It made the unemployment rate usable as a proxy for the output gap, which matters because potential output cannot be observed directly. Okun chaired the Council of Economic Advisers under President Johnson and later worked at Brookings. He also devised the Misery Index. It is worth stressing that Okun's law is a fitted empirical regularity, not an identity, and its estimated coefficient has changed over the decades.
A.W. Phillips (1914-1975)
A New Zealand-born engineer turned economist at the London School of Economics whose 1958 article examined nearly a century of British data on money wage changes and unemployment and found an inverse relationship between them. Plotted, that relationship became the Phillips curve, quickly reinterpreted by other economists in terms of price inflation rather than wage inflation and, in the 1960s, sometimes treated as a stable menu of policy choices. Phillips himself was more cautious about that reading than many of his popularizers. He is also remembered for the MONIAC, a hydraulic machine built in 1949 that modeled the flow of income through an economy using colored water.
Milton Friedman (1912-2006) and Edmund Phelps (b. 1933)
Working independently in the late 1960s, Friedman and Phelps argued that the apparent inflation-unemployment trade-off could not survive being exploited. Their reasoning: the trade-off exists only while inflation is unanticipated, and once workers and firms adjust their expectations, unemployment returns to a natural rate determined by the structure of the labor market — leaving only higher inflation behind. The implication is a vertical long-run Phillips curve and an accelerating price level if policymakers persistently target a lower rate. The stagflation of the 1970s, in which inflation and unemployment rose together, was widely read as confirmation. Friedman received the Nobel Memorial Prize in 1976 and Phelps in 2006.
Julius Shiskin (1912-1978)
Commissioner of the Bureau of Labor Statistics from 1973 until his death, Shiskin came to the job as one of the government's foremost statisticians, having developed the X-11 seasonal adjustment method that underpins the monthly figures the public sees. Seasonal adjustment matters enormously for the unemployment rate: raw employment swings predictably with school terms, harvests, and holiday retail hiring, and without adjustment those regular movements would swamp the cyclical signal. Shiskin also worked on the composite business cycle indicators and, in a 1974 newspaper article, described several rough tests for identifying a recession — one of which, two consecutive quarters of falling real GDP, escaped into general usage as if it were an official definition.