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FEDERAL WORKS AGENCY WORK PROJECTS ADMUHSTRATION For Rele~se on De livery 2 PM ( EST ) '.i:'hursday , J1me 5, 1941. 11 EFFFCT S OF TEE NAT IONAL DEF1'NSE PROGRAM ON mrF]-lPLOYME't-J"'T Alm HEED 11 The followin .~ address was deJ.ivered by Howard B. Mrers, Director of the Division 01· Research, Work Projects Administration , at t he National Conference on Socfrl Work ri.t Atlantic City, N.J., at 2 p . m. (EST) 'r hursda.y, June 5 , 19-11: The developments of the past year have brought a. widespread hope and belief that the st11bborn problem of unemployment will soon solve itself under the stimulating influence of the defense program. Last summer and fall, "hen new bil l ions ,,,e:ce be ing appropr iated for defense every few weeks, there were many to predict this fo .ttunat e , if inci dental, r e sult of rearmament. Thus , for example , the Secretary cf La1)or estimated that employment , incl11.ding t he armed. forces, wo uld increase by 6 or 7 millions by t he end of 1 9-11 , and prophesied that ummployment would cease to be a serious problem by that date . Second tho ught has made mos t e stimato rs more cautious, but many pe rso ns sti1.l believe that the r.Gxt year wil l see the end of our numbe r one eco nomi c problem -- at least until the period of post-war readjustment. An a ttempt to arrive a t a reasoned judgment on this question will be aided by a review of the progress made thus far, some analys i s of the pres ent situation, and a discussion of certain factors which will determine the size of t he problem during the next year or two . • Appropriations and authorizations f or defense have now grown to 43 billion do l lars, and it is clear that many more bill ions will soon be added to this already impressive total. Industrial production has reached recor d highs; in Mar ch the Federal Reserve Board I s pr oduct ion ind.ex was 143, 25 per cent above the 1929 peak. Feverish ac tivity is reported from centers of defense activity, and airplanes, gun s and ot he r wnr mater ials will soon be flowing from our factories on a lar ge sc11le, Em:oloyment, too, has risen sharply . Between April 1940 and April 1941 non-agricultural employment increased by 2.7 millions. During t he same period t he armed forces grew by 1.1 millio n men , nearly all of whom came from t he active labor supply . These figures, however , tell only part of the s tory . Total employment in April was still below the peak of 1929 , In t he intervening years population growth has been adding steadily to the labor supply . Since 1929 the tot al l abor force has grown by nearly 7 million workers. Thus, despite the rapid employment ga ins of the pr e ceding 12 months, there were still more than 6.5 millions unemployed in April of this year, In contrast to the marked activity in a few centers of defense production, many sections. of the country report little or no imnr.ovement in employment. D1g1t1zecf ffy Otiginal trom NORTHWESTERN UNIVERSITY NORTHWESTERN UNIVERSITY 4-22-16 - 2 - The overtime schedules and backlogs of unfilled oriers reported for so~e industries are matched by part-time work and reduced pro&1ction schedules in other industrial sectors . l'he consideration of a number of pertinent facts is necessary both for an unQerstanding of the present situation and as a basis for judging prooable future d.evelopments . First, it should be emphasized that the passage of appropriation bills does not of itself provide employment. To give jo1:ls mone:1r must be expended. Of the 43 billions thus far app:,.•opriated or autho1·:i.zed for defense only about 6 billions will be eX'pended during this fiscal year, a:nd official estimates indicate that barely half can be spent before July 1942. Furt!1ermore, the defense stimulus has been very highly concentrated in a few industries and in a few areas. Seven leading industries in the defense field -- iron and steel, shipbuilding, aircraft , mnchine tools , engines, explosives and alumi:i.um manufacturing -- together 1-;ith conetruction, have been r esponsible for a l ar€:e part of the emr•loyment gains to date. Ti.·enty industrial areas received 68 percent of all prime defense contracts awarded. by May 1. These 20 areas contain on:1.y 27 percent of the · population of the country and. only 24 nercent of WPA e mp loyment. Alrr.ost half of the cont racts were concentrated in and around 8 large cities -New York, l)hiladel,~'1:i.a , Bo;;ton , Norfolk, JJOS Angeles, Detroit, Seattle, and San Francisco . In many areas where defense contracts have been awarded much of the employ,:nent will be short-live d . The building of a :~·my cantonments or of powder plants involves only temporary work . Employment at army camp s reaci:od its peak in February, when 369,000 1.1,orkers were reported a s employed. By April employment on camp construction had already dropped by 145,000, and it has since continued to decline. ::::ven in the areas where defense work is most highly conc en trA.ted, the effect on unemployment is freq_uently l es s than is commonly believed. In Hampton Road.s, for example , al though er.iployment ha.s increasFJd sha rply during the past year, it is probable that unemployment today is hir;her than a year ago, due to the influx of tens of thousands of workers in search of jobs . The shipbuilding area around Boston has received more than $850 millions in defense contracts, but it is estimated that less than 01:e-third of t he total man hours needed to complete these contrr-i.cts will be required before July 1942. In the Pittsburgh area, al t hough iron and steel plants are working at crl.pacity and production is the hir,hest on record, iron and steel employment is still 8 percent below the 193? peak. Unemployment in the area is locally estimated at about 136,00C . In other parts of the coi.rntry -- the 2,300 counties with no direct defense contracts -- the volu.'Tle of unemployment and need continues a lmost as great as ever. Agricultural employment has not been increased by the defense program. In large areas it has been reduced by mechanization and the loss of export ·,arkets. The vast reservoirs of unskilled labor and the Digitized by Original from NORTHWESTERN UNIVERSITY NORTHWESTERN UNIVERSITY - 3 - basic needs for relief continue neat'ly as great as a year ago in the southern states largely dependent on cotton and tobacco, in the wheat states, the corn and hog states, the former drought ar ea s, the mountain states, and in the fruit growing valleys of California. Employment in rural industries, such as mining , ~as risen only slowly, in part because of technolo 1;ical advances. In the mines of southt>rn Illinois, southwestern Indiana, southeastern Ohio, southern Colorado, and the great coal producing areas of Pennsylvania, the effects of defense activity on employment haYe been negligible. In a number of these countie s as many a s 50 p er cent of the population are still dependent upon public e.ssistance. A similar situation prevails in ot her areas where formerly abundant natural resources have been depleted, such as the iron ore and lumber counties of the Upper Peninsula of Michigan. It is clear that defense spendi ng has not yet broken the back of unemployment. What of the future? Will unem}Jloyment disappear or decline to nominal proportions with5.n the next year or so? Will we face a e;eneral shortage or near-shortage of labor? Will the volume of need shrink to the vanishing point as far as em:riloyablE,s arP concerned? ~ ~ The effec ts of the defense pro gr o.m on un emplo;vme nt will be detet'mined by tht' e e majo r factors: (1) the extent to which total product ion is increas ed , (2) the amount of employment that is provided by this production increa.r.e , ancl ( z,) the changes which occur in the supply of labor. The rate at which total production will incr ea se depends upon the supply of existing facilities, the extent and effectiveness of their use, and the r n.te at which they are expanded. to meet increases in the demand for goods. The period of very rapid production increas e is no 11r nearly a t an end; from here on expansion will occur at an ap-orecia.bly slower rate. The piling of 'billions in armament orders on to-p of existing demancl has resulted in capacity shortages in many cr11cia.l fields of production. Bottlenecks already exist in machine tools, shi-pbuilding, shi9ping facilities, railroad eauipment, certain types of highly skilled labor, plane engines, aluminum, magnesium, steel, nickel, n eoprene , zinc a nd copper . Furthermore, the situation is rapidly growing worse; short ac;es will soon appear in a numb er of other lines, including electric p ower and imports from the Far East . Since pro cl.uction has reached capacity in these important lines, further substantial incr eases in industrial output, and cons equently gains :in emplo;rment, must wait on ad.ditions to plant and upon measures to increase the supply of certAin essenti9.l raw materials. It takes time to build ne 1.,r plants, to deve lop new sources of materials supply, or to train highly skilled. workers. In relatively few lines can new plants b e built and tool e d re9.dy for production in less than a ye,'3.r; in many types of pro duction the process requires t wo or three years. A Jrear ago we faced a choice between an ndequate program of plant expansion a nd ''business as usual. 11 After months of precious time had been Digitized by Original from NORTHWESTERN UNIVERSITY NORTHWESTERN UNIVERSITY 4-2246 - 4 - lost in work ing out a policy of amortization which would be satisfactory to business interests, some private capital was invested in plant expansion. The ~o,,-ernment itself finan ced and built plants for the production of powder and certaiP. other types of armaments . In the main , ho;,,ever , we decided to take 0 business as usual" and to attempt to mE-et the ne,,., demands with existing pl~nt facilities . We are now beginning to pay for our earlier mistakes through restrictions on consumer demands, higher pri c es , ree,rmament del ays and a lA.rge volume of unemployment. Contracts for ne:w plant facilities are now being negnti:-1,ter:l, but it is doubtful whetl:er the expar..sion no1._r contemplated will be ad3quate in many lines by the ti~e the faci litiea are compl e ted. Bottlenecks and shortages of crudal materials have given rise to official priorities. The purpose of priorities is to ration materials when demand exceed.s cmpply. The most urgent defense needs get first call; what is left is divi c.ed amon e; c,t:ier d.e f ense uses and civilian constunption . The effect of priori ties is thns to sh .: . ft shorta,r;e s fro m arma.ment to nona rmament production. Priorities already c0ver a c o-risi dt:>l' .·1bl e list of commodities , and it now apyiears probab l e that thi:i r 1·iod ty s;srstem must b e expand.ed rapi dly to cover a. wide list of adaitionaJ. items of wh ic h the supply will be iUFJdequate. Tl:..e recot:rse to priori ties will affect us in m;i,1,y way s. We already underst cmd that r,o aluminum will br available for civilian uses . Automobile prod.uetion has been cut 2C percent for next ye ir, i=i,nd appear s likely to be cut much further in the nf3ar future. The effects of priorities will be serious ev en in th e defense industri es . Planes and ships have higher priori tJ· ratings than tanks; as a consequence tar:.l:s urgently needed by the l:lritish and by our own forces are delayed by inabiJ.Hy to ge t sufficient machine tools . The shortage of steel is already repo rted to b 9 delaying the production of merchar,~ shipping on the West Coast; the s ~eel shortagP. will also seriously dP.lay the manufacture of railroad equipmeHt urf_:,ent l y needed to relieve the bottleneek in transportation. Shortages R:· e acting as a brake even on airplane production . A recent report states t ha.t production of our ereat bombe r s c ease a. entirely early in t✓.ay and c a.1lllot b e re sumed. \lntil sometime in J uly owing to lack of aluminum. ~ The bearing of t hese developments on the r a t~ of r 0employmen t and on the volume of u nempl oyment is dire ct and. immed.iate. In so far as the priorities are substituted for new plant capaci ty , tot a l production fails to expand. Thus, we restrict employment gains and t end to maintain the volume of unemployment . In a ddi tion, prioriti e s t hemselves cr eat e unemployme nt . Employment r eductions in plants no t receivir.~ defense contracts have alr eady been reported from a nu.'lloer of areas, due to shortages of materials. The 20 percent cut in autom~bi le production will mean the loss of 45 ,000 ,jobs in Detroit a.lone , a ccord.ing to expert s in the indus try. It is estimated that the effect of materials rationing already imposed will r educe employment in Pontiac, Michigan, by 4,300 workers during the next 12 months , thus :9ractically offsetting emuloyment gains resulting from defense or ~e rs. Digitized by Original from NORTHWESTERN UNIVERSITY NORTHWESTERN UNIVERSITY 4-2246 - 5 - Now that priorities have been resorted to on a large scale there is the further danger that emphasis will swing from the addition of new plant capacity to shifts in the use made of existing plants. If, instead, of build.ing new plants to meet the incre4sed demc>.nd, plants now engaged in producing civilian goods shift to the manufacture of armaments, the effect will be to freeze total output and employment near existing levels and a large volume of unemployment will persist even at the height of the defense program. The difficulties of redirectine available facilities to produce a rnaximu'!l of arrnamer.ts presents en 0 rrnous technical and organizational problems. To a large extent American industry is being called upon to produce new prod.ucts. In many cases the handling of defense contracts involves only relatively simple conversions. In many other cases, however, the transformations that must take place req_uire the services of a diversified and resourceful engineering staff for long period of time. Eventually machine guns will be produced by companiGs formerly manufacturing refrigerators and spark plugs. But the process t~kes time. Munitions are infinitely more complex t1:ian peace-ti~e machines and few of them lend themselves to the methods of the assembly line. The London Economist reports that it took something like 4 y :;ars of planning hefore the curve of aircraft production really began to rise in Great Britain, and a still longer period for army ordnance. The question of what will happen to employment depends in large part upon the volume of production, but the relationship is not a direct and simple one. Production increases today are accompanied by smaller employment gains than was the case even a few years ago, due to the steady progress of technology. In industry after industry the manpower required per unit of product has been constantly reduced, This means that a thousand tanks, a hundred ships or a million uniforms require fewer workers to produce than were required 10 years ago and many fewer than were required 25 years ago. There is 'a n additional reason why employment may be expected to lag behind production. Increased production is being achieved in part by lengthening the hours worked by those already employed. There has been much discussion of over-time in defense industries, and it is generally realized that over-ti~e cuts down reemployment. It is not widely known, however, that more than 8 million workers were employed part-time in the United States even in April of this :rear. Employera shift existing employees to full-time before hiring additional workers, and it can be expected that a substantial proportion of the man-years of employment provided by defense orders will be absorbed by the full-time employment of persons who already have jobs. Finally, the effects of the defense program on unemployment will depend in part on the supply of labor that is offered in the market. I have already pointed out that the normal increase in the labor supply amounts to about 600,000 workers annually. For this reason alone an increase of 2. 5 million in total employment during the next 12 months would nf . on d n unemployment of less than 2 m0ill.io mean a. redu tit ngina 1 rom 1g1 1ze y NORTHWESTERN UNIVERSITY NORTHWESTERN UNIVERSITY 4-2246 Additional allowanc e ums t be macle for an al,norma.l growth of the labor supply a.~1dng this eme rge ncy p eriod. It s eems certain tha t employment incr ea s e s rfH:u1 ti ng from th e def en se progr am will be accompani ed by a considerabl e ne t increl'l.se in the industrial labor sup-ply; such increa s e s have , in fact, already be en report ed in some cent ers of defense activity. The DerJartment of Agriculture has r e c ently estimated tbat from 2 to 3 million surplus farm workers are r eady to s eek employment in urban industries as soon as jobs e..re availabl e . Better employment opp ortunities and hi.'.;her money wage s should. bring into the mark et a considerable nnmber of youths who b!lv e continued in school because they co 1ld not get jobs. Similarly, many women not normally se eking jobs will be attract ed into the labor market. Non10 of these types of worker s is included in current unemployment estimat E: s and yet they very clearly con stitute immediately available labor. And, as rec ent studies have shown, large numbers of thes e 11 newcomers II will secure jobs at the expense of those already seEking war!~, thus diminishing the effe ct of employment gains upon the supply of work ers now count ed among' the unemployed. 1 fJ The pot ential l a bor supply of the nation obviously runs into millions. The ava:i.labl e evidence indicat 0s that an abnormal incr ease of more than 3 million workers occurred <luring the first World War. Professor Alvin F.ansen of Harvard has r e c ently estimated that if the same proportion of the p opulation of t\/orking age is availabl e for work as existed in 1918 and in 1929, the total labor supply, actual and pot ential, would b e more than 60 million persons. This would give a surplus over present employment of some 12 million workers. In vi ew of the fact that unemployment r emains at more than 6.5 millions, with a r e s erve of several a dditional millions of potential workers available, and in the light of t he various ob s tacles to incr eas e s in total output which op erate as drags on the rate of re employment, it is obvious that nothi ng approaching a genera l shortage of labor is in prospect for the near future. What rat e of re employment can reasonably be anticipated for t he next year or two, and what may b e exp ected to happ en to the volume of un employment and need? The best analysis of the prosp ects for r eemployment has been provided by Professor Eansen. Aft ,:•r carClful study Hans en concluded that not more ttan 2 . 5 million workers can be r eemployed in each of t he next two years . This r P.pr e s en ts roughly t he r E·emplo yment rate of t he be st years of the 1 20 1 s and 1 30 1 s in the Unit e d St9.t e s; it also approximates the rate in Germany during the period of maximum rearmamcmt in tha t country, An incr ease in employment of 2.5 millions for the next 12 months, even if the labor supply increa ses only mode r at ely, means that in the neighborhood of 5 million workers will be unemployed in the summer of 1942, Even in the summer of 1943 unemployment will total sev eral millions . Digitized by Original from NORTHWESTERN UNIVERSITY NORTHWESTERN UNIVERSITY 4-2246 It follows that t he num"'uer of employable workers in nee d of public assistance will continue large for a v ery co ns iderable period in future. Many of the ne e dy 1111 0mployed will, of cours e , get jobs during the next few years. Somt, 600 ,000 workers left WPA for private employment during 1940, and substantial numbers of employr1b les from loc a l relief rolls undoubtedly went back to work during the same period. At t he sri,me time it is clei:i.r that the vigorous young workers now beginnins to s ,.?ek jobs in lar,~~ numbers are pr e ferred. b:,T many employers A Yer y sizeabL, g., oup among the pr e sent ne e dy unemployed , al though quite able to do a good day 1 s wo:ck, are seriously handicapped by age, sex, race, occupational background or r e sidence in the keen competition prevailing in the labor mar}7 .;t. i9 The extreme sel e ctivity of present demands for labor is not generally reali7 ed . The damand i s not only concentrate d in r e l a tive ly few areas of the country, it is also re'.-; trict 8d largely to young ,,,hi te males, particulo.rly those with exp er ience in c0r~a.it1. slcilled or semiskilled. occupat.ions. Age is be corning an increa s ingl;· serious handicap to re employment. The a.verage a.ge of all employees i r. one large aviation company is 24 y0.ars; the e:nphasis on youth is on ly slightly less pronounced in the shipyar tls ancl in ma.ny t;y-nes of construction work . Defense industries n eed onlJ' nm~1ll proportions of unskill ed wol'lce rs. Nearly 50 percent of the adclitionfll workers r eq_uired in shiribu.ilding will be skilled, 40 percent o:' those in aircraft assembly, ancL 70 percent of those in building construction. Negroes are apparently almost entirely barred from many lines of defense production. The d£rn~nd for women and for white collar workers has also 'be en relatively small. Restrictive hiring practices naturally affect both the composition of the unemployed population as a whole and that portion of the jobless group which is in ne e d. The average age of the nee dy unemployed is rising steadily, the proportions of Negroes, womer, and unskilled. workers also appear to be incr easing. As reemployment proc ee ds and employers have less opportunity to pick and choose amc;:ig l a rge numbers ··of work seekers, employment standards necessarily must b e lowe r ed. When this time comes, many of the present needy unemployen. will ge t their chance at reemployment. In the mea.ntime it would appear to be economy to utilize the services of these workers to the full to further the national defens e pro gram and also to provide essential faciliti e s and services for the civilian population. The time has long since pass ed when we can afford the luxury of 11 business as usual. 11 It has c.lso long passed when we can afford the waste of involunt a ry idleness. -OoO- Digitized by Original from NORTHWESTERN UNIVERSITY NORTHWESTERN UNIVERSITY
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