As David Leonhardt explained in a great New York Times column in 2008, this all started in the U.S. with Carroll D. Wright, who as head of the Massachusetts Bureau of the Statistics of Labor during the economic hard times of the 1870s set out to measure joblessness while excluding people he considered malingerers:
The survey asked town assessors to estimate the number of local people out of work. Wright, however, added a crucial qualification. He wanted the assessors to count only adult men who “really want employment,” according to the historian Alexander Keyssar. By doing this, Wright said he understood that he was excluding a large number of men who would have liked to work if they could have found a job that paid as much as they had been earning before.
Wright went on to become the first commissioner of what is now the BLS. And when the U.S. government finally started measuring unemployment on a monthly basis in 1940 it was with a similar understanding that you didn’t count as unemployed unless you really wanted to work. The employment survey was initially conducted by the New Deal-era Works Progress Administration, then handed over to the Census Bureau in 1943. In 1959 the BLS took over responsibility for analyzing and publishing the data, although the Census Bureau continued (and continues) to collect it in a monthly in-person and telephone survey of 60,000 households.
In the surveys of the early 1940s, those who said they would have looked for work but didn’t think there were any jobs available (what are now called discouraged workers) were counted as unemployed. There were concerns that these answers weren’t reliable -- anybody can say they want to work, but if you aren’t actually looking for work you may not mean it -- so in 1945 the survey was changed to count only those who were actively looking for work as unemployed.
As Josh Zumbrun reported in the Wall Street Journal last week, that didn’t stop Reader’s Digest from alleging in 1961 that the government was including discouraged workers to boost the unemployment rate and provide “fodder for the communist line.” Amid the resulting uproar, President John Kennedy appointed University of California at Berkeley economist Robert A. Gordon (yes, the father of noted productivity-growth skeptic Robert J. Gordon ) to head a Committee to Appraise Employment and Unemployment Statistics.
Gordon dismissed the Reader’s Digest charges as nonsense, but in an attempt to make the measurement process even less subjective his committee recommended that the employment survey-takers ask more detailed questions and only count as unemployed those who had looked for a job in the previous four weeks and could describe at least one search method that they had used. The recommendations went into effect in 1967.
Tests of the new survey in 1966 found that it reduced the measured unemployment rate by only about one-tenth of a percentage point. And the new, more detailed questionnaire gave the BLS its first actual count of discouraged workers, which Commissioner Julius Shiskin used along with other metrics in 1976 to compile a range of unemployment measures labeled U-1 through U-7. “No single way of measuring unemployment can satisfy all analytical or ideological interests,” he said at the time.