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U N IT E D S T A T E S D E P A R T M E N T OF L A B O R
L. B. Schwellenbach, Secretary
BUREAU OF LABOR STATISTICS
Isador Lubixi, Commissioner (on leave)
A . F. Hinrichs, Acting Commissioner

+

Income From W ages and Salaries
in the Postwar Period
♦

Bulletin

7S[o. 845

For sale by the Superintendent of Documents, U . S. Government Printing Office
Washington 25, D. C. - Price 5 cents




Letter o f Transmittal
U n it e d S t a t e s D e p a r t m e n t op L a b o r ,
B u r e a u of L a b o r S t a t is t ic s ,
W ashington, D . C ., Septem ber M , 191+5.
Labor:

The S e c r e t a r y op
I have the honor to transmit a report on income from wages and salaries in
the postwar period. This report was prepared by Robert J. Myers and N.
Arnols Tolies. Margaret R. Cavallo supervised the tabulations and assisted
in the preparation of the estimates.
A. F. H in r ic h s , A ctin g C om m issioner.
H on. L . B. S c h w e l l e n b a c h ,
S ecretary o f L abor .

Contents
Page

Summary----------------Wages and salaries as a component of national income_____________________
Wartime trend of wage-salary income________________________________
Factors expected to affect level of wage-salary payments__________________
Alternative estimates of wage-salary income in postwar period_____________
Method of estimation________________________________________________
Automatic changes in wage-salary income____________________________
Wage-salary income under full employment___________________________
Medium or low employment_________________________________________
Wages, welfare, markets, and national income_____________________________
Wage-salary income and levels of living______________________________
Aggregate purchases of consumer goods________________________________
Wages and national income__________________________________________




(H )

1
2
2
3
5
6
7
8
10
11
11
12
13

Bulletin 7s[o. 845 o f the
U nited States Bureau o f Labor Statistics
[Reprinted from the M onthly L abor R e v ie w , September 1945]

Incom e From Wages and Salaries in the Postwar Period
Sum m ary

TOTAL payments for wages and salaries, exclusive of military pay,
more than doubled from 1939 to 1944, and accounted for a major part
of the increase in national income. In 1944 these payments reached
their highest annual level of 98 billion dollars. Several of the forces
that contributed to the wartime rise, however, can be expected to
reverse themselves, now that the vrar is over, and will tend to reduce
the volume of wage-salary income. Thus, by 1947, unless counter­
balanced by other changes, the reduction of the workweek, the loss of
shift premiums in the leading war industries, and the transfer of
workers from war production to lower-paid civilian production may
be expected to reduce wage-salary income by about 16.7 billion dol­
lars. This reduction, however, may be partially offset by increased
employment following demobilization of the armed forces.. If, in
addition to full employment, wage rates can be increased, wartime
wage and salary payments may be approximated.
With full employment and an increase of somewhat more than
10 percent in wage rates, the volume of wage-salary income can be
maintained at about the 1944 level. Full employment at current
rates, however, will mean a drop of 11 billion dollars. “ Medium”
employment at current rates will mean a decline of 22 billion dollars.
Low employment— about the 1939 level—would probably lead to a
reduction of wage rates and, estimating this reduction at 10 percent,
would result in a wage-salary income about 40 billion dollars below
that attained in 1944.
Even with a modest decrease in the volume of wage-salary income,
the level of living of most workers can be expected to improve in the
postwar period. This will be because a greater part of the workers7
income will be available for expenditure and because consumer goods
will be more plentiful and of better quality. The total volume of
consumer purchases will also increase if full employment is achieved,
and even with medium employment can be expected to maintain a
high level. Any drop in the volume of wage-salary payments, how­
ever, will probably be accompanied by a decline in national income.
669221°—45




(1 )

2
Wages and Salaries as a Component o f National Incom e

The importance of wages and salaries in the lives of individuals is
more commonly appreciated than is the influence of aggregate wagesalary payments on the economy of the Nation. About nine-tenths
of the adult population of the United States regard a wage or salary as
their chief source of livelihood, but few understand the significance of
such payments as the largest component of national income. Tax
deductions from the pay envelope are commonly thought of only as an
individual affliction and not as a major source of revenue for operating
the Federal Government,
The influence of wage-salary income on the volume of business
activity has received increasing emphasis among economists in recent
years, however, and it is now rather generally agreed that, if current or
higher prices continue, a high level of such income is a prerequisite to
optimum production and full employment after the war. This is
because of the importance of wages and salaries as the source of income
that is required for the purchase of consumer goods and indirectly for
the stimulation of capital outlay. The drastic curtailment of Govern­
ment orders at the end of the war, unless offset by heavy and sustained
buying by the consumer and by private business, will result in wide­
spread closing of stores and factories and the loss of employment
for millions of persons.
The volume of wage-salary payments m the postwar period will, of
course, reflect a considerable variety of factors, including rates of pay,
hours of work, the composition of the labor force, and the level and
pattern of employment. To attain proper balance in combining such
factors is undoubtedly one of the most complex and delicate problems
that will be faced in the reconversion period. The purpose of the
present article is not. to urge the adoption of one policy or another with
regard to these critical factors, but rather, as an aid in policy formula­
tion, to evaluate their influence.
WARTIME TREND OF WAGE-SALARY INCOME

Before presenting the estimates of postwar wage-salary income that
form the basis for this discussion, it will be helpful to review the
recent trend of this segment of national income and to discuss the
major economic considerations that presage future change. The
wartime trend of wage and salary payments is reflected in table 1,
which shows the major sources of wages and salaries from 1939 to
1944 inclusive. Several features of this summary table are of interest
in connection with the present discussion, particularly the magnitude
of the wartime increase in wage-salary income, the importance of war
work in accounting for that increase, and the present dominant posi­
tion of manufacturing industry.
Wage and salary income, exclusive of payments to members of the
armed forces,1 more than doubled between 1939 and 1944, and in the
latter year achieved the unprecedented total of 98 billion dollars.
This was almost two-thirds of the total national income in 1944, and
1 W age and salary income, as discussed in this article, excludes payments to military personnel but is
otherwise interpreted broadly and includes all compensation to private individuals for their services as
employees. T he amounts referred to are gross earnings, before deductions for income taxes or social security
taxes, and include perquisites, where found, as well as monetary payments. Including payments to members
of the armed forces, the aggregate of all wage and salary income in 1944 was 113 billion dollars.




3
represented an average annual income of approximately $2,310 per
worker.2 The greatest increase, it will be noted, came from 1940 to
1943; approximately full production was achieved by the latter year.
T able

1.— Estim ated W age and Salary Incom e, by Source, 1 9 3 9 -4 4 1
[In millions!
Source

All sources _
Manufacturing...........................................................
M in in g .______ ____________________________ __
_
Contract construction..............................................
Transportation and utilities....................................
Trade................................ .................... .....................
Finance, insurance and real estate.........................
S ervice3 and miscellaneous.....................................
Agriculture (hired hands)........................................
Governm ent*............................................................

19448

1943

1942

1941

1940

$98,131

$92,500

$76,204

$59,528

$48,050

$43,847

42.448
2,204
2,615
9,787
12,498
2,948
10,689
1,631
13,311

40,796
2,039
3,670
8,390
11,347
2,812
9,467
1,452
12,527

30,653
1,835
4,644
6,961
10,452
2,648
8,551
1,177
9,283

21,503
1,600
2,753
5,875
9,824
2,508
7,624
900
6,941

15,372
1,332
1,674
5,167
8,404
2,324
6,826
752
6,199

13,189
1,178
1,550
4,913
7,772
2,248
6,402
738
5,857

1939

i Data are from U. S. Department of Commerce, Bureau of Foreign and Domestic Commerce. Figures
for 1939 to 1943, inclusive, are based on table 14, of National Income and National Product in 1943, in Survey
o f Current Business, April 1944. B F D C estimates of agricultural wages and salaries have been added,
however, and payments to members of the armed forces excluded; the data for “ government” for 1942 and
1943 have been revised. T he 1944 data represent preliminary figures supplied b y courtesy of the B F D C .
Revisions of some of the estimates for the years 1939-43 appear in the June 1945 issue of the Survey of Current
Business; these do not affect the conclusions reached in this article, however, and have not been taken into
account.
> Preliminary.
* Includes domestic service.
* Excludes work-relief wages and all payments to the armed forces.

Manufacturing industry, which paid out about 43 percent of all
wages and salaries in 1944, tripled its payments during the 5-year
period and exceeded all other major sources in rate of increase.
Individual manufacturing industries, to be sure, showed proportion­
ately greater increases than the group as a whole, ranging to more than
30-fold in the transportation-equipment group, which produces
primarily ships, aircraft, and tanks. Government ranked second
among the major sources, with 14 percent of all wage-salary payments
in 1944 and with an increase of more than 125 percent. The civilian
personnel of the War and Navy Departments accounted for most of
the increase. All of the major sources of wage-salary payments
showed gains during the 5-year period, but the increase for the finance,
insurance, and real-estate group was less than 25 percent. It will be
noted that wages and salaries in contract construction reached their
peak in 1942 and have subsequently declined.
Table 1 fails to bring out an additional development that may be
readily established by examination of other material. Employment
and hours, and hence total wage-salary income, increased more in
the high-wage than in the low-wage industries. The existence of
relatively high wage rates in the war industries at the outbreak of
the war greatly facilitated recruitment for those industries and con­
tributed substantially to the rise of aggregate wage-salary income.
Factors Expected to A ffect Level o f W age-Salary Paym ents

Only a drastic change in the nature of our economy could have
produced in the brief span of 5 years the prodigious increase in wagesalary payments reflected in table 1. With the end of the war,
8 This figure represents the approximate average payment to workers employed regularly throughout the
year and is computed b y dividing aggregate wage-salary income b y 42,400,000, the average number of civil­
ians employed for wages and salaries in 1944. If divided among all the different individuals who were em­
ployed at any time during the year, wage and salary payments would yield a somewhat smaller average.




4
however, several of the factors underlying that increase have shown
a tendency to reverse themselves. Even at this early stage of the
postwar period it is possible to identify, and in some cases to evaluate,
the major factors that will affect the volume of wage and salary
payments.
Among the foreseeable economic developments of importance in
the present discussion, four will probably tend to depress the level of
wage-salary payments: (1) The reduction of the hours of work, (2)
the resumption of a peacetime pattern of employment, (3) a drop in
the rate of output of workers paid on an incentive basis, resulting from
shorter runs of individual products, and (4) a decrease in the oppor­
tunities for pay supplements. Another probable change, which will
tend to increase wage-salary payments, will be (5) an improvement in
the quality of the labor force. Two other factors, of transcendent
importance, but unpredictable, are (6) the level of employment, and
(7) the level of wage rates. The relationship of each of these factors
to the level of wage-salary income deserves brief discussion.3
Reduction of the workweek will mean not only fewer hours in pay
status every week but also, in most cases, the loss of premium over­
time payments. Millions of workers who put in a 48-hour week
during the war have already reverted to a 40-hour week. This
means a reduction of only one-sixth in hours of work but a decrease
in weekly wages amounting to 23 percent. Hours of work in manu­
facturing industry averaged slightly more than 45 per week in 1944,
but in the postwar period can be expected to fall to about 38.4 Com­
*
parable reductions will occur in many nonmanufacturing industries.
The transfer of workers from war production to the service trades
and the manufacture of consumer goods implies a shift from high-wage
to low-wage industries and from high-wage cities to low-wage cities
and rural communities. No reduction of basic wage rates is assumed
in this statement. The ex-aircraft assembler who is reemployed in a
textile mill will suffer a decline in wages even though basic wage rates
in both industries remain unchanged. Although some of the industries
expected to flourish in peacetime pay wages comparable to those in
the war industries, the great majority have considerably lower scales.6
Despite expected increases in the efficiency of labor, the output of
incentive workers may decline for a time after the war, thereby reduc­
ing wage incomes. Any such decline in output will reflect the re­
sumption of variety production for private consumers, necessitating
shorter runs and more frequent changes of materials, equipment, and
operations than in war production. Because only the minority of all
workers are paid on an incentive basis and because the decline in out­
put is not expected to be substantial, the influence of this develop­
ment on wage-salary income will be relatively unimportant.6
The chief loss in the form of pay supplements after the war will be
the disappearance of premium payments for late-shift work in certain
3 The influence of most of these factors during the transition from a peacetime to a war econom y was
discussed, with additional detail, in Trends in Factory Wages, 1939-43, in M onthly Labor R eview, N ovem ­
ber 1943.
< This assumes a 40-hour week with a deduction for labor turn-over, absenteeism, and similar factors.
* For a comparison of wage rates in war and non war industries as of i943, see The Level of Factory Wages
in Wartime, in M onthly Labor Review, October 1943.
6 It is believed by some that the output of incentive workers will increase slightly in the postwar period,
owing to liberalization of tolerances, etc. In any event, the net influence of this factor will probably be neg­
ligible. Possible reduction of the earnings of incentive workers through lowered output should not be con­
fused with the reduction that may take place as a result of lower piece or bonus rates. In practice it is al­
most impossible to distinguish the influence of these two factors, since work units (in most incentive-wage
industries) are in continual process of change, and subtle changes in the liberality of payment are virtually
undetectable.




5
war industries. It is not assumed that existing rules regarding such
premiums will be abrogated but only that reduction of the scale of
operations in these industries will reduce the need for late-shift work.7
The labor force in the postwar period should include a larger pro­
portion of experienced and skilled workers than does the present labor
force; hence a somewhat higher proportion in the higher pay brackets.
Many of the older workers now employed may be expected to retire,
and many of the youngest workers to return to school. Large numbers
of inexperienced women workers, some of them working at beginners’
rates, will withdraw from the labor market. On the other hand, sev­
eral million veterans will again seek employment, the majority of
them in their most vigorous and productive years and many of them
highly skilled.
More civilian workers will be available after the war than at present,
but the trend of employment may be either upward or downward.
With regard to this factor, however, there is virtually complete agree­
ment as to a goal of full employment. It is possible, therefore, that
legislation 8 as well as economic factors may help to determine tho
employment level actually achieved.
The postwar level of wage rates is no more predictable than the
postwar level of employment. Undoubtedly powerful forces will con­
tinue to exert upward pressure. Wage rates are already somewhat
higher than they were in 1944, and union pressure for increases to
offset high living costs and shorter hours of work is growing. Labor
shortages— at least in some localities and for specialized workers—will
stimulate competitive bidding by employers; some relaxation of wage
stabilization has already been made, and more is inevitable.
It is primarily through higher wage rates, moreover, that increased
labor productivity will affect wage-salary income. Although this
article makes no attempt to estimate the gain in productivity that
will occur in the postwar period, it is highly probable that this factor
will permit an increase in wage rates— possibly a substantial in­
crease— without a corresponding rise in prices.
Offsetting these upward pressures will be several important factors
tending to depress wage rates. Cut-backs in war plants and any rapid
demobilization of the armed forces will be sure to result in some un­
employment, and, if this is severe and prolonged, general wage cuts
will be hard to resist. With the return of competitive production for
the civilian market, employers will watch their unit costs of production
more closely. Aggressive union policy will be unable to protect large
numbers of unorganized workers, while “ down-grading” and dis­
guised wage cuts for incentive workers will be difficult to control
even in union establishments.
Alternative Estim ates o f W age-Salary Incom e in Postwar P eriod

Fortunately, the influence of most of the factors expected to affect
postwar wages and salaries can be -predicted with some confidence.
Thus, the reduction in wage-salary income that can be expected to
result from the resumption of a shorter workweek, the decline of latet The loss of premium payments in the war industries m ay be partly offset b y increasing liberality in other
directions; for example, in the provision of free lunches or other perquisites. It is doubtful, however, whether
such gains will be sufficient to offset the reductions of shift premiums It should be noted that employers'
social-insurance contributions are not regarded as wage income as defined in this article.
8 The Murray Bill represents one proposal intended to assure a high level of employment through leg­
islation.




shift work, and the transfer of workers from war to peacetime pro­
duction may be estimated fairly reliably. Although the postwar
trends of employment and wage rates are uncertain, it is possible, by
making alternative assumptions, to indicate the general range within
which these factors are likely to affect wage-salary income. Un­
questionably these measurable factors will account for most of the
change in aggregate wages and salaries and provide a basis for a series
of meaningful postwar estimates.
METHOD OF ESTIMATION

The methods employed in preparing the following estimates are
relatively simple and may be described briefly. The wage (or salary)
rates assumed for the postwar period are the estimated average straighttime rates9 for the year 1944 or are based directly on such rates.
With respect to most industries it is assumed that the 40-hour stand­
ard week will prevail in the postwar period, yielding an average actual
workweek of 38 hours.1 * In the case of certain other industries, chiefly
0
nonmanufacturing, it is assumed that hours of work will be about the
same as in the prewar period. For each industry (but with modi­
fication in the case of the exceptions just noted) the product of the
average hourly rate times 38 (hours per week) times 52 (weeks per
year) is used as a rough estimate of average annual earnings per
worker.
Aggregate wage-salary payments for each industry were obtained
by multiplying the average annual earnings per worker by the esti­
mated average number of workers employed during the year. Since
the resulting figures represent cash wages only, modest additions have
been made in some industries to represent perquisites.1
1
The employment estimates used have, of course, been of fundamental
importance in arriving at the final estimates, and therefore justify
brief special discussion.1 In addition to the estimates for the base
2
year 1944, three sets of postwar estimates have been prepared, repre­
senting “ full,” “ medium,” and “ low” 1 employment. These esti­
3
mates are designed to represent conditions about 2 years after
VJ-day—perhaps about 1947. The assumptions made regarding
the size of the labor force, the amount of unemployment, and other
conditions related to the respective estimates are given in table 2.
The employment estimates for the postwar period make allowance
for changes in the distribution of employment by industry as well as
for changes in the total volume of employment.1
4
6 For the method used in converting average hourly earnings to average straight-time rates see Elimina­
tion of Overtime Payments From Gross Hourly Earnings, M onthly Labor Review, Novem ber 1942. In
certain nonmanufacturing industries the elimination of overtime payments was accomplished b y arbitrary
adjustment, while in other casc3 no adjustment was deemed to be necessary. Premium payments for lateshift work have been removed on an estimated basis from the wage rates of those war industries in which
late shifts are expected to disappear. The hourly and weekly earnings data issued b y the Bureau’s D i­
vision of Em ploym ent Statistics were used whenever available, but were roughly adjusted in some cases
to take account of salaried workers. Other wage data were obtained from official sources wherever pos­
sible. All wage data represent amounts payable before deductions for income or social-security taxes or
other items. N o account has been taken of wage increases granted since 1944.
i® This assumption is justified on the basis of actual experience; the difference between standard hours and
actual hours is accounted for largely b y various types of absenteeism, labor turn-over, and similar factors.
For special purposes, as noted below, the actual average hours prevailing in 1939 are used instead of a uniform
38-hour week.
u See also footnote 18, which describes adjustments made to reconcile industry group totals with the
official estimates of the Department of Commerce.
1 For these estimates of employment b y industry the authors have relied heavily on the Bureau’s E m ­
®
ploym ent and Occupational Outlook Branch; additional adjustments have been made b y the authors,
nowever, in order to adapt the employment figures to the special purposes of this article.
i* The estimates for “ low” employment assume about the same number employed as in 1939 and conse­
quently do not represent the extreme depths of a serious depression.
. M B y w ay of illustration, it is assumed that to attain full employment will require a particularly large
expansion of the construction industry.




7
T able 2.— A ssum ed S ize o f Labor F orce , Num ber Unem ployed , amf Other Features o f
Postw ar Estim ates 1
[In millions]
Postwar estimates
1944 actual
em ploy­
ment

Item

Total labor force. r _

_

Full em­
ployment

M edium
em ploy­
ment

Low em­
ployment

_____

04.1

60.0

60.0

60.0

Armed forces............................................... ............................
Total civilian labor force
U n em p loy ed ___ _
______________
E m ployed.............................................................. .........
Self-employed (including farmers)_____________
Wage and salaried workers....................................

11.2
52.9
.9
52.0
9.6
42.4

2.5
57.5
2.0
55.5
10.0
45.5

2.5
57.5
7.5
50.0
10.0
40.0

2.5
57.5
12.5
45.0
10.0
35.0

1 Because of duplications in the counts for the individual industries—representing workers appearing on
two or more pay rolls in the same pay-roll period—the sums of the industry estimates of wage and salaried
workers somewhat exceed the unduplicatcd counts appearing in the last line of this table. The excess for
1944 is 3.0 millions and those for the various postwar estimates are: Full employment, 2.7 millions; medium
employment, 2.3 millions; low employment, 2.1 millions.

AUTOMATIC CHANGES IN W AGE-SALARY INCOME

Before taking up the more complex questions of postwar employ­
ment and wage rates, attention should be called to the three measur­
able factors, already mentioned, that will tend to reduce wage-salary
income at the end of the war even if employment and wage rates
remain unchanged. These are the reduction of hours of work, the
interindustry shift of employment, and the elimination of shift
differentials in certain war industries.
The most important of these factors is the reduction of weekly hours
of work. It has been seen that resumption of the 40-hour week will
reduce working hours in manufacturing by approximately 7 per week,
on the average, and will mean substantial cuts in many nonmanu­
facturing industries and in government. Since much of this overtime
is paid at rates of time and a half, the loss in wage income will be more
than proportional. Assuming that employment and wage rates
remain the same, the reduction of hours alone will reduce wage-salary
income by about 13 billion dollars.1
5
Independent of changes in any other factors, the shift of employ­
ment away from the relatively high-paid war industries back to the
lower-paid “ consumer industries” would mean a loss of about 5.6 billion
dollars in wage-salary income. This is a net figure, for some of the
industries expected to expand in the postwar period (such as building
construction) compare favorably with the ^ar industries with respect
to wages.
Premium pay for late-shift work appears to be firmly established
T
as a feature of the wage structure in the United States and it is
assumed that shift-premium payments in certain peacetime industries
will be continued to about the same extent as at present. In some
important war industries, however, notably the shipyards, aircraft
factories, and the manufacture of machinery and electrical equips
m Compare with Department of Commerce estimate of 12 billion dollars for 1943. (Survey of Current
Business, July 1944, p. 5). The difference between these two estimates is due in part to an actual increase
in overtime payments between 1943 and 1944 and in part to differences in the assumptions regarding the
amount of overtime or the prevalence of premium pay for certain industries. See also O P A release: Effect
of Restoration of 1939 Hours and of Percentage Distribution and Total Volume of Employment on Salaries
and Wages (August 1944).




8
ment, the drastically reduced scale of production will no longer
require any substantial amount of late-shift work. It is estimated
that shift premiums in the industries mentioned in 1944 amounted
to about 450 million dollars and that the total loss of shift-premium
payments in the postwar period will be about 0.5 billion dollars.
These amounts include, of course, some duplication. Most of the
half-billion dollar loss in shift premiums and part of the 13-billion
dollar loss in overtime work is accounted for by the reduction of
employment in the war industries. Consequently, the combined
effect of all three postwar changes— 16.7 billion dollars—is less than
the sum of the various components. The importance of this amount is
emphasized, however, by pointing out that it means an average loss
of nearly $400 per worker per year. The separate and composite
effects of these three automatic postwar changes are shown in table 3
by broad industry division. The substantial reduction of wagesalary income in manufacturing is evident.
T a b le 3.— Estim ated E ffect o f Specified Postw ar Changes on W age-Salary Incom e, by
Broad Industry D ivision
[In billions of dollars]
T yp e of postwar change
Industry division
Undupli­
cated total

Reduction
of hours

Inter­
industry
shift of
employ­
m en t1

Reduction
of extra
shifts in
war
industries
-0 .5

T otal............ ......................... ............................. ...................

-1 6 .7

-1 3 .3

-5 .6

Manufacturing ind u stry......................................................
Nonmanufacturing industry................................................
Government and other nonindustrial................................

-1 7 .7
+ 3 .6
-2 .6

- 8 .1
-3 .6
-1 .7

-1 2 .2
+ 7 .9
-1 .3

-.6
(*)
(*)

1 Changes shown for individual divisions reflect shifts to or from other divisions as well as intradivisional
shifts.
* Amount believed to be negligible.

W AGE-SALARY INCOME UNDER FULL EMPLOYMENT

The foregoing estimates indicate roughly the decrease in aggregate
wage-salary income that could be expected to result if the economy
of the United States were to revert to a peacetime basis with no
change in the level of employment or in wage rates. Actually, how­
ever, the number in the civilian labor market will probably exceed the
1944 level by some 4 or 5 millions. Assuming a civilian labor
force of 57.5 millions anS allowing only for “ frictional unemploymen t,” 1 the number gainfully employed in the postwar period will
6
be about 55.5 millions and the number working for wages or salaries
will be about 10 millions less (45.5 millions). Under full employ­
ment, therefore, the number of wage and salary workers will exceed
the 1944 level by about 3 millions. This increase in the number ot
workers will tend to offset the decreases resulting from other causes.
It is indicated by table 4, however, that if wage rates in the postwar
period are about the same as in 1944 even full employment will be
w Temporary unemployment involved in changing from one job to another, absence on vacation, seasonal
lay-offs, etc.




9
insufficient to maintain the 1944 level of wage-salary income.1
7
Aggregate wages and salaries under such circumstances will amount
to approximately 87 billion dollars, or about 11 billion dollars less
than the 1944 total. Average income per worker may be expected
to drop from $2,310 per year to about $1,920.
T ab le 4.— Estim ated A ggregate A nnual W age-Salary Incom e 1 in 1944 and in Postuxir
P eriod , A ssum ing Continuation o f 1944 W age Reties, by M ajor Industry Group
[In millions]
Postwar period3
M ajor industry group

Total wage-salary incom e................................................

1944*

Assuming
full em ­
ployment

Assuming
medium
em ploy­
ment

Assuming
low em­
ployment

$98,131

$87,441

$75,992

$64,574

Manufacturing, total........................................................
Salaried workers, total..............................................
Wage earners, total....................................................
Iron and steel.......................................................
Electrical equipment......... ...............................
Machinery (except electrical)...........................
Transportation equipment (except automobiles)
Automobiles................................. .......................
Nonferrous metals and their products............
Lumber and timber basic products................
Furniture and finished lumber products.......
Stone, clay, and glass products........................
Textile-mill products.........................................
Apparel and other finished textile products..
Leather and leather products...........................
Food and kindred products..............................
Tobacco m anufactures......................................
Paper and allied products.................................
Printing and publishing......... ..........................
Chemicals and allied products.........................
Products of petroleum and coal.......................
Rubber products....... ........................................
Miscellaneous industries...................................

42,448
9.537
32,911
4,595
1,894
3,516
7,112
2,190
1,038
784
667
688
1,801
1,283
553
1,965
132
653
777
1,422
388
527
925

28,029
7,479
20,550
3,282
844
2,013
717
1,455
645
998
726
736
1,905
1,490
669
1,549
136
617
797
752
330
350
538

23,156
6,561
16,595
2,462
713
1,623
605
1,150
411
787
571
556
1,576
1,236
545
1,485
109
522
671
555
264
288
467

19,090
5,092
13,998
1,942
486
1,087
356
879
448
636
507
498
1,510
1,137
514
1,365
118
419
677
516
224
242
438

Nonmanufacturing, total................................................
M ining..........................................................................
Contract construction...............................................
Transportation and public utilities.......................
T ra d e ........................................... .............................. .
Finance, insurance, and real estate.'......................
Service (except domestic) and miscellaneous.......

38,983
2,204
2,615
9,787
12,498
2,948
8,931

46,724
2,011
7,613
8,407
14, 559
3,415
10, 721

39,667
1,575
4,852
7,857
12,243
3,312
9,827

33,329
1,415
3,673
6,069
10,789
2,807
8,576

Domestic service..................................... ........................
Agriculture (hired hands)............................................... .
Government.......................................................................

1,758
1,631
13,311

1,964
2,038
8,685

2,357
2,127
8,685

2,160
2,216
7,779

i Excludes payments to members of the armed forces.
* The 1944 classification of establishments, like that for the postwar period, is based on peacetime produc­
tion; e. g., wages and salaries shown for the automobile industry are those paid b y establishments that
were manufacturing automobiles in 1939.
3 See table 2 for an indication of the characteristics of “ full,” “ m edium,” and “ low ” employment. Under
full and medium employment it is assumed that the 40-hour week prevails, with actual hours of work averag­
ing 38. Under low employment actual hours of work are assumed to be the same as the averages in 1939.
1 In preparing the distributions of wage-salary income presented in table 4 independent estimates were
7
made in the Bureau of Labor Statistics, based on Bureau estimates of employment, wage rates, and average
hours worked; the data presented for nonmanufacturing are summaries of more detailed figures appearing on
the original work sheets. The estimates arrived at for 1944, however, differed somewhat from the official
estimates of the Department of Commerce, in most cases being lower. In order to increase the usefulness of
the material and to avoid confusion, therefore, the original estimates were adjusted so that the major division
totals would equal those issued b y the Department of Commerce. No attempt was made to reconcile the
totals for manufacturing industry groups or for individual nonmanufacturing industries (not shown in table).
In manufacturing and in most of the other major divisions the amount of the adjustment was small and,
for purposes of the present rough estimates, of no importance. In the case of contract construction and the
service trades, however, the Department of Commerce estimates were considerably higher than estimates
based on BLS figures, and substantial upward adjustments were necessary to tie in with the official
estimates.
In order to maintain comparability, all adjustments applied to the data for 1944 have also been made in the
estimates for the postwar period.




10
Further study reveals that different segments of the working force
would be affected very differently under these conditions. Manu­
facturing industry would pay out about 14 billion dollars less in
wages and salaries than in 1944, with the greater relative cut coming
in wages. As would be expected, the greatest decrease is found in the
metalworking industries, especially the manufacture of transporta­
tion equipment. Several of the industries manufacturing consumer
goods, for example, textiles or apparel, would show modest increases.
Government wages and salaries would drop substantially. Payments
by nonmanufacturing industry, however, would increase by about
8 billion dollars, with most of this increase in the construction
industry.
These estimates, as has been noted, are based on the assumption of
a continuation of 1944 wage rates. Wage rates are already somewhat
higher than in 1944, however, and it is possible that Federal policy
may permit and economic factors bring about a continued rise in the
future. Under such circumstances full employment would result in
higher wage-salary income than is indicated in table 4. By way of
illustration, wage rates 10 percent higher1 than those prevailing in
8
1944 would yield an annual wage-salary income of about 96 billion
dollars; a somewhat greater increase in wage rates would be necessary
to maintain the 1944 level of wage-salary payments.
MEDIUM OR LOW EMPLOYMENT

Failure to achieve full employment will seriously reduce the aggre­
gate payments for wages and salaries. Certain conservative esti­
mates have set the probable level of postwar employment at about
50 million workers, which would mean about 40 million persons work­
ing for wages and salaries. Employment at this level, howrever,
would yield wage-salary payments of only about 76 billion dollars, or
22 billion dollars less than the 1944 level. Both manufacturing and
nonmanufacturing industries would pay out less than under full
employment, construction being particularly affected. Total wagesalary payments in nonmanufacturing would still be at about the
same level as in 1944, however, while payments by manufacturing and
government would be much lower. Even a 10-percent general in­
crease in wage rates under medium employment would yield aggre­
gate wages and salaries totaling only 84 billion dollars.
“ Low employment,” as has been mentioned, is here defined to mean
about the level of employment that prevailed in 1939. The distribu­
tion of employees by industry is also patterned largely on 1939 em­
ployment, and 1939 average hours of work have been used. Under
conditions of low employment about 12.5 million people would be out
of work and looking for jobs. With low employment and 1944 wage
rates, every industry group could be expected to pay out less in wages
and salaries than in 1944, with the exception of construction, domestic
service, and agriculture. These occupations, of course, were abnor­
mally depressed in 1944 because of shortages of materials or labor.
Total wage-salary income would amount to only 65 billion dollars,
or about 34 billion dollars less than the comparable amount for 1944.
m This means, of course, a net increase of 10 percent in the level of wage rates and assumes that any dow n­
grading or hidden decreases would be offset b y additional wT
age increases. The example used is intended
solely to illustrate the influence of wage-rate changes on the volume of wage-salary payments and is not
intended to recommend any particular postwar wage policy.




11
With 12.5 million unemployed, however, it is probably not realistic
to assume that 1944 wage rates would be maintained. A drop of 10
percent in the level of wage rates would cut total wage-salary income to
58 billion dollars.
Table 5 summarizes, by broad economic division, the increase or
decrease in postwar wage-salary income, as compared with 1944 in­
come, that results from various assumptions regarding the level of
employment and of wage rates.
T a ble 5.— A lternative Estim ates o f Change in Postw ar W age-Salary Incom e as Compared
W ith 1944 Level, by B road D ivision 1
Assumptions on which postwar estimates are based *

Standard
hours of work

Increase or decrease compared with 1944
(in billions of dollars)
Government
M anufac­ Nonmanu­ and other
turing facturing nonindus­
trial

Level of em ploy­
ment

Level of wage rates

Full.....................
Full.....................

As in 1944....................................
1ft parent, above 1944

4ft
4ft

—10.7
—1.9

—14.4
—11.6

+ 7 .7
+12.4

—4.0
—2.7

Medium .
M edium . _

As in 1944
1ft percent, above 1944 .. _

4ft
4ft

-2 2 .1
-1 4 .5

-1 9 .3
—17.0

+ .7
+ 4 .7

-3 .5
—2.2

As in 1939._. -3 3 .6
As in 1939— -4 0 .0

—23.4
-2 5 .2

—5.7
-9 .0

- 4 .5
- 5 .8

___
____
Low
As in 1944
LOW..................... 10 percent below 1944................

Total

» All estimates exclude payments to members of the armed forces.
* Postwar estimates also assume a distribution of employment b y industry consistent with peacetime
production, and'the termination of extra shifts at premium pay in certain war industries.

,

,

W ages9 W elfare M arkets and National Incom e

It seems clear from these estimates that the current (1944) volume
of wage and salary income can be maintained after the war only under
conditions of full employment and a substantial increase in the level of
wage rates. With anything less than full employment, the volume of
wage-salary payments will decline; a level of employment comparable
to that of the prewar year 1939 might result in a drop of roughly
40 billion dollars, or about 40 percent.
The achievement of full employment, however, will require a level
of production far beyond any level previously attained in peacetime.1
9
A continuing advance of wage rates in the early postwar period will
also, as has been seen, face serious obstacles. The maintenance of
wage-salary income at 1944 levels, therefore, cannot be lightly taken
for granted. With a national effort less determined or less skillfully
directed than that of wartime, the actual volume of such income may
fall considerably short of current levels.
W AGE-SALARY INCOME AND LEVELS OF LIVING

Even with a substantial decrease in total wage-salary income, to
be sure, the level of living of many American workers may improve
in the postwar period.* Shorter hours of work will add to the workers'
well-being and will eliminate many sacrifices and hidden costs that
are associated with wartime living. Consumer goods will become more
i* This is the conclusion of Hagen and Kirkpatrick in The National Output at Full Employment, in
American Econom ic Review, September 1944. See also National Budgets for Full Employment (National
Planning Association Pamphlets Nos. 43-44), and John H . Q. Pierson: Fiscal Policy For Full Employment
(N . P. A . Pamphlet N o. 45).




12
plentiful, and these goods will be of better quality. Moreover,
reduction of income taxes, discontinuance of bond deductions and,
perhaps, liquidation of accumulated savings will enable the worker to
spend considerably more at a given level of personal income.2 It is
0
sobering to reflect, however, that such gains imply dwindling savings
and a consequent narrowing of security margins. If full employment
is not attained, moreover, the improved lot of the “ average person”
will bring little comfort to the unemployed worker.
AGGREGATE PURCHASES OF CONSUMER GOODS

Wages and salaries are not, of course, the only source of consumer
purchases, but they are by far the major source. Ordinarily a drop in
wage and salary income would have an adverse effect on the postwar
market for goods and services. The offsetting factors mentioned above
as influencing the expenditures of individuals, however, will also be
important with respect to the aggregate expenditures of all workers.
A constant or lower level of wage-salary income in the postwar period,
therefore, will not be inconsistent with an increase in aggregate con­
sumer outlays.
The relationship between wage-salary income and consumer ex­
penditures is somewhat more complicated with respect to the economy
as a whole than it is in the experience of an individual, and justifies
brief elaboration. On the one hand, the decrease in wage-salary in­
come will be aggravated by a simultaneous drop in payments to the
armed forces. Reduction of these forces from 11.2 million in 1944 to
2.5 million would reduce these payments by more than 11 billion dol­
lars annually. The full effect of this reduction would not fall directly
on our domestic economy, since part of these funds during wartime
have been spent abroad. It seems safe to estimate, however, that the
income of the armed forces available for expenditure at home will
decrease by at least 7 billion dollars. Contributions to dependents
of military personnel will also fall, but this change will be partly offset
by an increase in pensions and similar items, and has not been
evaluated.
Tax deductions, however, absorbed about 11 billion dollars of
wage-salary income in 1944. Some reduction in tax payments will
occur as the annual incomes of workers' families decline, and even
greater reductions may be anticipated if tax rates and exemptions are
iberalized. Perhaps 3 or 4 billion dollars of income per year can
thus be made available for consumer expenditures during the postwar
period.
Savings out of wage-salary income probably exceeded 15 billion
dollars in 1944. It seems clear that no such annual sum will be saved
in the early postwar period. Decreases in per capita income, increases
in the supplies of civilian goods for sale, and the cessation of war-bond
drives all will operate to reduce the savings made out of income.
Although the effect of these factors on aggregate annual savings is
very uncertain, it is not unlikely that they will be cut by somewhat
more than half, thereby making available for current expenditure an
additional 8 billion dollars or more.
Allowing for a reduction of 8 billion dollars in (wage-salary) savings
and taking account of the additional factors mentioned above, it

f

*° See N . Arnold Tolies: Spendable Earnings of Factory Workers, 1941-43, in M on th ly Labor Review,
March 1944.




13
seems probable that full employment and a 10-percent increase in
wage rates should permit a modest increase in the volume of consumer
expenditures.2 If net savings were reduced to zero, expenditures
1
could increase substantially, even if wage-salary payments declined
somewhat. Heavy liquidation of war bonds could conceivably result
in negative savings of 10 billion dollars or more 2 per year and a further
2
increase in the volume of consumer expenditures.
W AGES AND NATIONAL INCOME

The relationship between wage-salary payments and total national
income is by no means direct, but is influenced by a great variety of
social, psychological, economic, and political forces. A detailed
discussion of such forces in this article would be inappropriate and
fruitless, and will not be attempted. Historically, however, the share
of national income going to wages and salaries has been rather stable,
making it possible to estimate within broad limits the level of national
income that will be associated with a given volume of wage-salary
payments.
Except for the abnormal years of deep depression and war, wages
and salaries during the past quarter century have ranged around 60
percent of total national income. It may be that a somewhat larger
share— say 65 percent—will be necessary to facilitate maintenance of
full employment in the future.2 Both of these ratios are subject to a
3
considerable margin of error but they should be of value in indicating
the general range of our national income under various assumptions as
to the level of wage-salary payments.
Using these two percentages and assuming a wage-salary income of
96 billion dollars— the amount that might be achieved under full
employment and with a 10-percent increase in wage rates— it is
suggested that national income would be in the neighborhood of
150 to 160 billion dollars, still somewhat below the 1944 level of 160.7
billion dollars.2 Increased productivity of labor, lower profit margins,
4
or other factors, however, may permit a greater increase in wage rates
in the postwar period, consistent with a higher national income at
current price levels.
It has been pointed out that with any considerable amount of unem­
ployment the volume of wage-salary payments would decline; under
such circumstances, and assuming no change in price levels, a lower
national income should also be expected. With the wage-salary
aggregate that would be realized* under conditions of “ medium”
employment and 1944 wage rates national income might approximate
115 to 125 billion dollars, while with low employment and 1944 wage
rates national income, might fall to 100 billion dollars or slightly more.
A national income in this range, caused in part by wartime price rises,
would exceed the level of any earlier peacetime year; it would fall far
short of our actual accomplishment in 1944, however, and seems
unacceptable as a goal for the American people.
« This discussion has taken account only of wages and salaries and closely related items. Obviously
entrepreneurial income, social-security benefits, and other income or savings of individuals will also affect
the volume of consumer purchases.
M Such liquidation, however, would be unlikely except under conditions of serious unemployment.
« Historically, the share of national income going to wages and salaries has tended to rise during depres­
sions and decline during prosperity, but it seems unrealistic to assume that a lasting prosperity can be
achieved With a smaller percentage of the national income going to labor.
m Department of Commerce preliminary estimate for 1944.




U . S . G O V E R N M E N T P R IN T IN G O F F I C E : 194 5


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