Economic Relief in Recession: Poverty and Unemployment Benefits During the Great Depression in Britain

This paper assesses the distributional and poverty mitigation impacts of the British unemployment insurance system at the peak of the Great Depression. Initially designed as a true insurance program, by 1928 it had evolved into a large-scale social welfare program providing flat-rate benefits to up to two million workers. Using a novel dataset of wages at the industry and county level from January 1928 to December 1932, we analyze the extent to which the program redistributed income across earnings quantile, industry, and geographic groups. Our findings indicate that the program reduced earnings inequality across industries and counties by up to 32% and mitigated much of the economic distress of the Great Depression, especially for lower-paid workers and those in industries with high unemployment rates. This suggests that generalized, relatively cheap social welfare programs can be effective tools for providing broad-based support and mitigating poverty during crises.