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United States home front during World War II

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Through World War II, Full employment and Hyperinflation

The labor market changed radically during World War II. Peacetime conflicts concerning race and labor took on a special dimension because of the pressure for national unity. The Hollywood film industry was important for propaganda. Every aspect of life from politics to personal savings changed when put on a wartime footing. This was achieved by tens of millions of workers moving from low to high productivity jobs in industrial centers. Millions of students, retirees, housewives, and unemployed moved into the active labor force. The hours they had to work increased dramatically as the time for leisure activities declined sharply.

Gasoline, meat, clothing, and footwear were tightly rationed. Most families were allocated 3 US gallons (11 L; 2.5 imp gal) of gasoline a week, which sharply curtailed driving for any purpose. Production of most durable goods, such as new housing, vacuum cleaners, and kitchen appliances, was banned until the war ended. In industrial areas housing was in short supply as people doubled up and lived in cramped quarters. Prices and wages were controlled. Americans saved a high portion of their incomes, which led to renewed growth after the war.

Full employment and federal economic policies

The US reached full employment after entering World War II in December 1941. Under the special circumstances of war mobilization, massive war spending doubled the gross national product (GNP). Military Keynesianism brought full employment and federal contracts were cost-plus. Instead of competitive bidding to get lower prices, the government gave out contracts that promised to pay all the expenses plus a modest profit. Factories hired everyone they could find regardless of their lack of skills—they simplified work tasks and trained the workers, with the federal government paying all the costs. Millions of people changed their day-to-day activities – farmers left marginal operations, students quit school and housewives joined the labor force.

The policy was to insist on providing war supplies as soon as possible, regardless of cost and inefficiencies. Industry quickly absorbed the slack in the labor force and the tables turned such that employers needed to actively and aggressively recruit workers. As the military grew, new labor sources were needed to replace the 12 million men serving in the military. Propaganda campaigns started pleading for people to work in the war factories. The barriers for married women, the old, the unskilled—and (in the North and West) the barriers for racial minorities—were lowered.

Federal budget soars

In 1929, federal expenditures accounted for only 3% of GNP. Between 1933 and 1939, federal expenditures tripled. Spending on the war effort quickly eclipsed spending on New Deal programs. In 1944, government spending on the war effort exceeded 40% of GNP. These controls shared broad support among labor and business, resulting in cooperation between the two groups and the government. This cooperation resulted in the government subsidizing business and labor through both direct and indirect methods.

Wartime welfare projects

Conservative domination of Congress during the war meant that all welfare projects and reforms had to have their approval, which was given when business supported the project. For example, the Coal Mines Inspection and Investigation Act of 1941 significantly reduced fatality rates in the coal-mining industry, saving workers' lives and company money. In terms of welfare, the New Dealers wanted benefits for everyone according to need. However, conservatives proposed benefits based on national service—especially tied to military service or working in war industries—and their approach won out.

The Community Facilities Act of 1940 (the Lanham Act) provided federal funds to defense-impacted communities where the population had soared and local facilities were overwhelmed. It provided money for the building of segregated housing for war workers as well as recreational facilities, water, and sanitation plants, hospitals, day care centers, and schools.

The Servicemen's Dependents Allowance Act of 1942 provided family allowances for dependents of enlisted men. Emergency grants to states were authorized in 1942 for programs for day care for children of working mothers. In 1944, pensions were authorized for all physically or mentally helpless children of deceased veterans regardless of the age of the child at the date the claim was filed or at the time of the veteran's death, provided the child was disabled at the age of sixteen and that the disability continued to the date of the claim. The Public Health Service Act, which was passed that same year, expanded federal-state public health programs and increased the annual amount for grants for public health services.

The Emergency Maternity and Infant Care (EMIC) program, introduced in March 1943 by the Children's Bureau, provided free maternity care and medical treatment during an infant's first year for the wives and children of military personnel in the four lowest enlisted pay grades. One out of seven births was covered during its operation. EMIC paid $127 million to state health departments to cover the care of 1.2 million new mothers and their babies. The average cost of EMIC maternity cases completed was $92.49 for medical and hospital care. A striking effect was the sudden rapid decline in home births as most mothers now had paid hospital maternity care.

Under the 1943 Disabled Veterans Rehabilitation Act, vocational rehabilitation services were offered to wounded World War II veterans and some 621,000 veterans would go on to receive assistance under this program. The G.I. Bill (Servicemen's Readjustment Act of 1944) was a landmark piece of legislation, providing 16 million returning veterans with benefits such as housing, educational and unemployment assistance and played a major role in the postwar expansion of the American middle class.

Fair Employment Practices

In response to the March on Washington Movement led by A. Philip Randolph, Roosevelt promulgated Executive Order 8802 in June 1941, which established the President's Committee on Fair Employment Practices (FEPC) "to receive and investigate complaints of discrimination" so that "there shall be no discrimination in the employment of workers in defense industries or government because of race, creed, color, or national origin".

Growing equality of income

A major result of the full employment at high wages was a sharp, long-lasting decrease in the level of income inequality (Great Compression). The gap between rich and poor narrowed dramatically in the area of nutrition because food rationing and price controls provided a reasonably priced diet to everyone. White collar workers did not typically receive overtime and therefore the gap between white collar and blue collar income narrowed. Large families that had been poor during the 1930s had four or more wage earners and these families shot to the top one-third income bracket. Overtime provided large paychecks in war industries and average living standards rose steadily, with real wages rising by 44% in the four years of war, while the percentage of families with an annual income of less than $2,000 fell from 75% to 25% of the population.

In 1941, 40% of all American families lived on less than the $1,500 per year defined as necessary by the Works Progress Administration for a modest standard of living. The median income stood at $2,000 per year, and 8 million workers earned below the legal minimum. From 1939 to 1944, wages and salaries more than doubled, with overtime pay and the expansion of jobs leading to a 70% rise in average weekly earnings during the course of the war. Membership in organized labor increased by 50% between 1941 and 1945 and because the War Labor Board sought labor-management peace, new workers were encouraged to participate in the existing labor organizations, thereby receiving all the benefits of union membership such as improved working conditions, better fringe benefits, and higher wages. As noted by William H. Chafe, "with full employment, higher wages and social welfare benefits provided under government regulations, American workers experienced a level of well-being that, for many, had never occurred before". According to one study over 60% of Americans lived in poverty in 1933, and under 40% did so by 1945.

As a result of the new prosperity, consumer expenditures rose by nearly 50%, from $61.7 billion at the start of the war to $98.5 billion by 1944. Individual savings accounts climbed almost sevenfold during the course of the war. The share of total income held by the top 5% of wage earners fell from 22% to 17% while the bottom 40% increased their share of the economic pie. In addition, during the course of the war, the proportion of the American population earning less than $3,000 (in 1968 dollars) fell by half.

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