Effects of Defense Program.
In 1940 the foundation was being laid for a business boom in the United States. Appropriations for national defense, totaling close to $20,000,000,000, as well as increasing purchases of war materials by England, added their influences to the usual forces of business recovery. The result was the beginning of a vast expansion in production and employment. Government contracts for ships, planes, trucks, munitions and the like were let throughout the year, but the magnitude of the defense undertaking was not fully apprehended until later in the year when the plans for the program had been more precisely formulated and the steps taken to expand industrial capacity began to make themselves felt. In the circumstances, the year 1940 should be counted as a transition period between a decade of lagging business and employment and a new epoch of defense or war expansion.
Increased Employment.
Employment, under the influence of defense orders, increased by more than 1,000,000 from October 1939 to October 1940. In the final months of the year (for which complete records at the time of writing were not available) physical production mounted steadily and at the turn of the year exceeded that of 1929 by close to 20 per cent. So powerful was the expansion in industrial activity that experts of the United States Department of Labor were willing to forecast the probable rate of increase in employment in 1941 at 500,000 per month. All types of industry contributed to the expansion. But the most spectacular gains were recorded in industries serving the defense program. By September 1940, blast furnaces, steel works and rolling mills were employing 22 per cent more persons than in the same month the year before. In the last quarter of 1940, this industry was operating at full capacity, in spite of the fact that new plants had been built during the year and total capacity had reached in December 1940 the highest level in the industry's history. Employment in shipbuilding during the same twelve months increased 46 per cent, while employment in the machine tool industry expanded 60 per cent. At the same time the aircraft production industry more than doubled its employment.
Labor Shortages.
This revolution in the labor market brought striking and unexpected consequences. In the metal, machinery and allied industries, shortages of labor, particularly among skilled craftsmen, supervisors, and draftsmen, developed. As a part of its defense program, the government undertook to deal with the problems of labor supply and, in cooperation with industry and educational institutions, made provision for training new labor and retraining the old. Efforts were made to restore apprenticeship systems that had been abandoned or restricted during the 1930's when the existence of a permanent army of unemployed made it seem unnecessary to retain the machinery for recruiting new labor. Negotiations were entered into with the trade unions to persuade them to drop their apprenticeship restrictions and rules setting limits on output. Employers were encouraged, where serious shortages of labor persisted, to simplify and subdivide industrial processes so that larger quotas of semiskilled and unskilled labor could be employed without impairing the quantity and quality of production.
Increased Wages.
Conditions of a tightening labor market and expanding business profits set in motion demands for increased wages and improved working conditions. Before the year was over wages began to rise. While there were few industry-wide raises in wages, increases began, particularly in the last quarter and in the defense industries, to be widespread. It may be estimated that the average hourly earnings of factory employees increased during the year by approximately 7½ per cent. The largest increases were gained in the aircraft industry, where the unions seeking to organize the employees of this industry, sought to raise aircraft wages to the higher levels already effective in the steel and automobile industries. In the several settlements arrived at in the last months of 1940, minimum wages in this industry were increased from 50 to 62.5 cents an hour and substantial increases were no doubt granted to employees falling within the higher wage brackets. Considerable as the wage movement of 1940 was, it will in retrospect be considered the first stage of a marked and universal rise in the wage level that is likely to feature the business history of this country in the next years.
Minimum Wage Orders.
Minimum wage orders issued under the Fair Labor Standards Act contributed also to the increase of wages in 1940. This law established a universal minimum wage of 30 cents an hour in industries engaged in interstate commerce, which is to remain in effect until Oct. 24, 1945, when it will be raised to 40 cents. Meanwhile, however, industry committees may recommend and the Administrator of the Act may order higher minima for particular industries. The first of such orders was issued in September 1939, and there have been a number since.
In addition minimum rates, ranging from 33 to 40 cents, were recommended for the carpet and railroad industries but were not yet ordered by the Administrator. These orders apply to the lowest paid employees, but an increase in the minimum is usually followed by upward adjustments in the rates of the better paid.
Hours.
Hours of work continued to be reduced during the year. The most general reduction was made effective on Oct. 24, 1940, when, by the terms of the Fair Labor Standards Act, the legal maximum was reduced from 42 to 40 hours per week. It was estimated that some 2,000,000 wage-earners were affected by this change, which virtually places the bulk of American industry on the 40-hour week.
No spectacular advances in working conditions were recorded during the year. The unions continued to make gains. Their major preoccupation was in winning more effective recognition and thereby gaining greater control over their members and better dues collections. In this they made some progress.
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