Week of March 29 The Economy and Babies Boom

Truman’s administration and most Americans feared the Great Depression returning with the end of World War II. Economists remembered the recession that hit after the troops returned at the end of World War I and many predicted a repeat. It turned out however, the US economy boomed in the aftermath of war. Why?

Wartime rationing led to more saving and less spending. Outside of the basics, consumer goods were few and far between as American industry went all in producing materiel for the war effort (e.g., there were no new cars manufactured in the US from early 1942 until well into 1945). Furthermore, the wartime demand for labor led to more two-income married families than ever before, resulting in even more savings.  With the war’s end, the resumption in the production of consumer goods combined with over 3 ½ years of pent up consumer demand to set off a massive spending spree that spurred the economy like the proverbial rocket. American industry scrambled to hire employees and increase production to keep up with the demand for consumer goods.

What were people buying?  Among other things, cars (increasingly two instead of one) and televisions. Broadcasting moving electronic pictures over the air to television receivers began in 1927 but the screens were only a few inches square and broadcasts few and irregular.  As late as 1947 there were fewer than 50,000 TV sets nationwide (mostly in NY) and fewer than a dozen broadcasting stations.  As screen size increased and the picture quality of the black and white images improved however, over seven million TVs were purchased in 1949 alone. By 1960 TVs were in 90% of American homes.

Below: an Admiral (made in the USA) television set c. 1948, with a ten-inch screen and 32 inches tall

Furthermore, after years of deprivation brought on by the Depression and war, Americans also bought new washing machines, vacuum cleaners, refrigerators, freezers, and any other electric appliance large or small they could get their hands on.

All the spending kept unemployment low and wages high as per-capita real income (that is above the inflation rate) had doubled 1928 standards by 1955.  In addition to higher wages, workers had more time off than ever before. By 1960 the average workweek was down to five eight-hour days with eight paid national holidays (twice that of 1946) and commonly two-week paid vacations. Americans increasingly spent their time on the road as automobiles sent them exploring their country and staying at the new “motor hotels” i.e., motels that were popping up everywhere.

Changes in how Americans worked also accelerated. White collar workers, e.g., people who work in offices, classrooms, and retail stores, as opposed to blue collar workers who labor in factories, increased 61% between 1947-1957.  The number of people working in agriculture continued to decline as farmers decreased from 24 million or 17.5% of the labor force in 1945 to 15.5 million or 8.7% in 1960, to 4.6 ml or 1.8% in 1992.  In 2021 farming employs some 2.6 million people or 1.3% of the workforce.  Why the decline?  Only the most successful and largest farmers can afford the capital outlays necessary to purchase machinery, repairs, fuel, fertilizers, labor costs, global competition, etc., to survive downturns in the business cycle.

Despite former farmers moving to the city and increasing automation there was in effect something of a postwar labor shortage.  The number of women working outside the home decreased in the aftermath of the war to open up jobs for men returning from Europe and the Pacific.  After 1950 however, women began entering or reentering the wage-earning and salaried workforce in record numbers. This especially occurred in service industries, e. g., as waitresses in restaurants, maids in hotels and motels, clerical workers (who used to be called secretaries) in offices, and flight attendants (who used to be called stewardesses) on airliners—air travel was growing due to the appearance of new, large, jet propelled aircraft. There was also employment growth for women in teaching and nursing. The number of women working outside the home doubled between 1940 and 1950.

Statistically women earned 60 cents on the dollar compared to men. In addition to blatant discrimination, which has decreased over time, women were denied access to well-paying professions, e.g., law. Women made up only 3.5% lawyers in 1960 and many law schools wouldn’t accept women. (As of 2018, women make up nearly 40% of the nation’s lawyers)

Another reason women’s wages lagged was that they frequently left the workforce after marriage, and especially after having kids (the stay at home mom was still the American ideal).  Leaving jobs for the home interrupted career paths and consequently lowered incomes if and when moms returned to work after the kids were grown. And did they have kids!!!

The BABY BOOM  began statistically in 1946 with the return of some 16 million servicemen returning home and ended in 1964, when the birthrate dropped below wartime levels. The rate began its steady climb in 1941 and started downward again in 1957.  During the 1950s child-age bearing women could expect to have 3.2 children compared to their 1930s counterparts who averaged 2.1 children, an increase of over 50%.

Initially driven by the end of sexual separation following World War II, the boom was sustained by postwar prosperity. (You could afford ‘em, so had ‘em). Interestingly median marriage-age rates declined only marginally for women from 21.5 years in 1940 to a low of 20.1 in 1956, and for men 24.3  in 1940 to a low of 22.5 also in 1956.  The marriage-age rate for both men and women had been dropping consistently at least since 1890 when it was 26.1 for men and 22.0 for women. Curiously, the median age for men again reached 26.1 in 1990, while women reached 1890 levels ten years earlier hitting 22.0 in 1980.  The marital age for both sexes continues to increase. In 2019 the median age for men hit a record high of 29.8 and women a record 27.8. Curiously, the marital age differential between men and women has remained surprisingly stable at between 2 and 3 years since 1930. Hence, men tend to marry (at least the first time around) women slightly younger and women tend to marry men slightly older than themselves.

I point all of this out to show that how people live changes over time. A society in which a woman typically marries at 21 and has her first child at 22 is going to view things very differently than one in which a woman typically marries at 28 and has her first child at 30.  Another change is the increase in the out-of-marriage birthrate which was just over 5 percent in 1960 but was barely under 40% in 2019. This would explain why the average age of an American woman to have her first child was 26.8 in 2017 but her median first marriage was 27.4  So, in the case of marriage and childbirth, the United States is for better or worse, very much not the same American society today that it was 60 years ago.  People and places change overtime.  Americans (or anyone else for that matter) are, to take the following quote out of context, not “the same yesterday, and today, and forever.”

What did a lot of kids mean? A lot more consumer spending, for example on toys, diapers, food, medicine, and clothing. They also meant more government spending, especially at the local level, for example, new schools.  And all those kids needed some place to live. That meant newly built housing, especially in the growing suburbs. The federal government helped out here with the Servicemen’s Readjustment Act (better known as the GI Bill ) signed by FDR on 22 June 1944 which provided low-interest loans for returning veterans to purchase homes. Through the GI Bill the federal government financed one in every five homes in the 1950s. Home ownership jumped from 43% of Americans in 1940 to 61% by 1960.

The GI Bill also provided tuition grants and stipends to returning vets making college free, or if not, at least affordable. It also kept many returning soldiers out of labor force, thus helping to drive up wages while they learned the skills necessary for higher paying occupations upon graduation. In 1948 nearly 2.5 million or 1/2 of all college males received federal aid as part of their veterans’ benefits.

The GI Bill fueled a housing boom (and employment in the housing sector) that led to planned suburban communities by real estate developers, and brothers William and Alfred Levitt (and shortly thereafter a host of other developers and contractors) who applied mass production techniques to home construction. Levittowns popped-up in New York, New Jersey, and Pennsylvania where the Levitts built tens of thousands of homes.

Such houses typically consisted of two bedrooms, a living room, a kitchen (with modern electric appliances), a bathroom, and an attic that could be easily converted into two extra bedrooms (for the kids). The typical price for such a home was around $10,000 ($110,000 in 2021 adjusted for inflation) with a $500 down payment ($5,400 in 2021).  BUT through the GI Bill a veteran could get into such a house for 1$ down ($11.00 in 2021)

The  Federal Housing Administration (a holdover from the New Deal) insured private low cost mortgages with 5-10% down and just 2-3% interest over a 30 year mortgage. (Previously banks typically required 50% down with just ten years to pay off the remaining loan).  The booming economy guaranteed that banks and the federal government got paid off.

There were naysayers who decried the new housing as tacky, conformist, sterile, etc., and complained that the new suburbs hurt cities with the loss of their tax base. But the Levittowns and their imitators offered people a chance of owning property instead of renting crowded, noisy, and often decrepit apartments.

Below: advertisement for Levittown homes

Suburban expansion was also fueled by federal highway policy.  Between 1947-1956 the federal government constructed nearly 80,000 miles of highway.  Then in 1956 Congress passed the National Interstate and Defense Highway Act creating the INTERSTATE SYSTEM (think I-10 and I-12) leading to further highway construction and suburbanization.

Indeed, government spending on highways, the GI Bill, defense, etc., along with consumer spending, helped propel America’s dramatic postwar economic expansion that created a level of prosperity Americans had never known before, not even during the 1920s. The federal government in 1960 spent ten times what it had in 1940, although unlike 1940, the government in 1960 had a small budget surplus instead of a deficit. The booming economy was flooding the federal government with tax revenue and the feds were spending it almost as fast as it came in. (From 1946-1960, the federal government ran a surplus eight of those years. The last time the US government had an annual budget surplus was 2001)

Helping to fuel this prosperity as well, was the fact that US global competitors had been devastated both in Europe and Asia by the Second World War, whereas the US —except for Pearl Harbor–had escaped unscathed. The industrial power of Japan and Germany had been crushed by bombing (and in the case of the latter, much of what was left taken by the Russians). The Germans had pillaged France and everywhere else they occupied. Japan had done the same with China. Great Britain’s economy struggled under its crushing wartime debt, loss of export markets (not a little to the United States) and mismanagement by a postwar Labour Party government which continued rationing most goods until 1950 and some as late as 1954! (Churchill had been trusted to win the war, but not manage the peace and his Conservative-led coalition government lost the elections of 1945. He returned as Prime Minister however, in 1951). The Soviet Union had been devastated by the war that for three years had been fought within its borders. Furthermore, its state-planned communist economy could not compete with not only the dynamic capitalist economy of the US, but neither the lagging but nonetheless recovering capitalist economies of western Europe. Eventually Europe and Japan would economically recover—with help from the US—but in the meantime, the United States was the world’s major economic power and the American public benefitted from this circumstance for over two decades.

Yet a shadow lurked over this prosperity.  The possibility that it could all end quite quickly in the form of mushroom clouds.  The Cold War continued and took a frightening turn for Americans when the Soviet Union successfully tested its own atom bomb in 1949.

Next time:  The Cold War Continues