Considering unemployment in Ecuador during the Great Depression

Abstract

The Great Depression struck Latin America through the commerce: the reduction in revenues from the external commerce spread to the rest of the economy, resulting in the continue decreasing of the monetary supply. The Ecuadorian monetary policy until 1932, based on the gold standard, faced the phenomenon of deflation, which caused real salaries to grow. Since 1932, the monetary supply increased due to the abandonment of the gold standard, which caused real wages to decreased. In the same period, from 1928 to 1935, the primary data of the central offices of eight institutions shows that public employment decreased abruptly from 1928 to 1930, from 109.4 to 83.1 points (1927=100). After 1930, there was a quick recovery until 1932, and, from this point in time, it remained relatively stable until 1935. This article constructs, for the first time in the Ecuadorian historiography, an employment index which serves to see employment as the adjustment variable of the Great Depression.

LABOR CONTEXT IN ECUADOR IN THE 1930s: ACTIVE ECONOMIC POPULATION, LEGAL CONTEXT AND MINIMUM WAGES

“…That is, until 1932, taking into account the deflationary phenomenon, real wages increased because nominally they remained stable since 1929. After 1932, when policies related to the gold standard are set aside, inflation has a direct impact on wages: real wages decreased while employment increased due to the growth of the money supply, confirming the Phillips curve (Naranjo 2021). As can be seen in figure 3, the growth of inflation stops in 1937, with which it can also be said that wages begin to stabilize from the same year.…”

“…This is one of the great differences that we find with the Latin American region, whose GDP will fall -16% in the same period (Mitchell 1993:762-764). Nonetheless, the impact in the Ecuadorian economy was mainly registered in the international commerce, which diminished in 55% by 1932 (Naranjo 2021). Within this context, the article develops three themes: economically active population and purchasing power; legal context on working conditions; and, a brief review on the implementation of the minimum wage in Ecuador and some Latin American countries.…”