March 19, 2025
War and the American Worker
Ilyana Kuziemko
Professor of Economics at Princeton University
War and the American Worker
Ilyana Kuziemko
Professor of Economics at Princeton University
Ilyana Kuziemko and Micky Weyeneth, introducer
Minutes of the 23th Meeting of the 83rd Year
President George Bustin presided. Two guests attended: Damon Missouri, guest of Anders Boss, and Henry Farber, guest of Micky Weyeneth. Total attendance was 130. Frances Slade led the invocation, and Madelaine Shellaby read the minutes of the preceding meeting. Micky Weyeneth introduced Professor Ilyana Kuziemko, who earned her BA and PhD in economics from Harvard and an MA in mathematics from Oxtord as a Rhodes Scholar. She has been a professor at Princeton since 2014.
Professor Kuziemko’s illustrated talk, “War and the American Worker,” reflected her current research on the nexus between labor unions and income distribution from the 1930s to the 1990s. Her slides came from her work with many co-authors, including Henry Farber.
During WW II and for several decades thereafter, U.S. workers were the envy of the world. In the late 1930s union membership had been low. This contrasted with Europe, where workers were unionized and had many rights. A graph tracing income inequality in the early 20th century shows a decline in European Income inequality, particularly in the U.K., whereas in the U.S. one sees the opposite trend. After WW II, significant gains in the U.S. came from three factors: the rise in union membership, Cold War procurements of munitions that were never used, and the draft, which solved the problem of youth unemployment and led to a tight labor market. In politics, a blue collar coalition sustained government spending and the full employment created by defense spending. Was this good? What are the lessons for today? Professor Kuzmienko left these questions to the end.
The gains for the U.S. labor force began in 1937, when the Wagner Act affirmed the right to organize. The UAW organized GM after the Flint sit-down strike, but most big companies put down organizing drives. Henry Ford, for example, put down leafleting in Dearborn, Michigan. The “Roosevelt recession” of 1937-8 had decimated the unions. From November 1937 to January 1938 the UAW lost 25% of its workers. By May 1939, only 6% of GM workers were paying union dues, and average unemployment was at 17%.
Did WW II save the labor movement? In June, 1940 France surrendered and a massive U.S. defense production effort began: the U.S. became the “arsenal of democracy.” FDR and labor leaders agreed to a “no strike pledge” that green-lighted organizing defense contractors. By June 1941 even Henry Ford recognized the UAW to avoid losing billions in defense contracts.
The contracts awarded by the Department of War produced “winner states” such as Michigan. These states saw a growth in unions and union gains compared to “loser states." Even after 1950, many states remained heavily organized as in Europe, and economic inequality declined the most in states that had the highest defense spending per capita. In the 1950s and ‘60s, workers, union members, and Democrats supported military spending - a contrast with Europe.
1947 saw an effort to cut defense spending back. The war was over and the U.S had no tradition of standing armies. In wartime, defense was 40% of the GDP. This fell precipitously by the late 1940s. But by 1950, even before the Korean War, defense spending was up again. The stated policy was to “develop a level of military readiness which can be maintained as long as necessary as a deterrent to Soviet aggression.”
From 1947 to 1990, there were moments when the Cold War turned hot or weapons systems shifted to generate winner and loser states. The switch after the Korean War to the “missile era” (the focus today) made the western states blue-collar winners. The Gulf of Tonkin and Vietnam escalation were followed by the end of detente and the Carter-Reagan buildup. In each case, winner states had increased employment, higher wages, and less inequality. Good jobs, primarily blue-collar, appeared wherever procurement contracts went, because very little went to R &D. “Covered” employment - jobs with federal benefits - increased substantially. In the 1950s and ‘60s, workers, union members and Democrats supported military spending, the opposite of Europe.
The draft (1940 to 1973) had considerable impact on labor. Millions of young men were pulled out of the labor pool, and those left behind had a tight labor market in which they could get jobs. After 1972 unemployment rose considerably.
The working class benefited from the Cold War generally, and those states that got war procurements for Korea and Vietnam became winners. Support for war rose when money started coming in.
Was war good for the working class? The federal government had supported unions during WWII, but the anti-union Taft-Hartley Act became law in 1947, and during the Cold War and the Red Scare, unions became synonymous with communist leanings. The Vietnam War divided the labor movement: George Meany called protesters “dirty-necked and dirty-mouthed kooks.”
Today there is renewed discussion of a new Cold War, with China on the table, plus Russia and Iran. Clearly jobs are a good method of creating consent for military spending. The wasteful jobs programs period, producing munitions never used (“digging holes in the ground”), was a boom time. Perhaps the government should engineer a labor situation to help production. This should include social programs such as subsidized child care and so forth. In the words of Walter Reuther, “If we can have full employment for war, why not a job for everyone in pursuit of peace?”
Numerous questions followed. Professor Kuziemko’s answers are in parentheses. (1) Does Professor Kuziemko’s definition of labor include women? (No - little work has been done, although we included office workers); (2) What was the effect of taxation levels? (The top marginal tax rate was 90%, which perhaps kept inflation low); (3) Were unused munitions needed in the event of an attack really superfluous? (Preferring missiles to private sector investment is socially impoverishing but it was seen as better and coincided with prosperity); (4) What effect will tariffs have on the idea of building it yourself? (Jobs going to China are very damaging to workers but not clear you can rebuild the industrial base via tariffs); (5) How do you value service jobs and health care? (Keynes and leftists said you can get full employment out of peace as well as war, but no one was listening!) (6) How about the growth of the prison population? (It starts right when the draft ends - coincidence?) (7) What surprised you in your data? (The role of WWII in promoting unions).
Respectfully submitted,
Priscilla Roosevelt
Professor Kuziemko’s illustrated talk, “War and the American Worker,” reflected her current research on the nexus between labor unions and income distribution from the 1930s to the 1990s. Her slides came from her work with many co-authors, including Henry Farber.
During WW II and for several decades thereafter, U.S. workers were the envy of the world. In the late 1930s union membership had been low. This contrasted with Europe, where workers were unionized and had many rights. A graph tracing income inequality in the early 20th century shows a decline in European Income inequality, particularly in the U.K., whereas in the U.S. one sees the opposite trend. After WW II, significant gains in the U.S. came from three factors: the rise in union membership, Cold War procurements of munitions that were never used, and the draft, which solved the problem of youth unemployment and led to a tight labor market. In politics, a blue collar coalition sustained government spending and the full employment created by defense spending. Was this good? What are the lessons for today? Professor Kuzmienko left these questions to the end.
The gains for the U.S. labor force began in 1937, when the Wagner Act affirmed the right to organize. The UAW organized GM after the Flint sit-down strike, but most big companies put down organizing drives. Henry Ford, for example, put down leafleting in Dearborn, Michigan. The “Roosevelt recession” of 1937-8 had decimated the unions. From November 1937 to January 1938 the UAW lost 25% of its workers. By May 1939, only 6% of GM workers were paying union dues, and average unemployment was at 17%.
Did WW II save the labor movement? In June, 1940 France surrendered and a massive U.S. defense production effort began: the U.S. became the “arsenal of democracy.” FDR and labor leaders agreed to a “no strike pledge” that green-lighted organizing defense contractors. By June 1941 even Henry Ford recognized the UAW to avoid losing billions in defense contracts.
The contracts awarded by the Department of War produced “winner states” such as Michigan. These states saw a growth in unions and union gains compared to “loser states." Even after 1950, many states remained heavily organized as in Europe, and economic inequality declined the most in states that had the highest defense spending per capita. In the 1950s and ‘60s, workers, union members, and Democrats supported military spending - a contrast with Europe.
1947 saw an effort to cut defense spending back. The war was over and the U.S had no tradition of standing armies. In wartime, defense was 40% of the GDP. This fell precipitously by the late 1940s. But by 1950, even before the Korean War, defense spending was up again. The stated policy was to “develop a level of military readiness which can be maintained as long as necessary as a deterrent to Soviet aggression.”
From 1947 to 1990, there were moments when the Cold War turned hot or weapons systems shifted to generate winner and loser states. The switch after the Korean War to the “missile era” (the focus today) made the western states blue-collar winners. The Gulf of Tonkin and Vietnam escalation were followed by the end of detente and the Carter-Reagan buildup. In each case, winner states had increased employment, higher wages, and less inequality. Good jobs, primarily blue-collar, appeared wherever procurement contracts went, because very little went to R &D. “Covered” employment - jobs with federal benefits - increased substantially. In the 1950s and ‘60s, workers, union members and Democrats supported military spending, the opposite of Europe.
The draft (1940 to 1973) had considerable impact on labor. Millions of young men were pulled out of the labor pool, and those left behind had a tight labor market in which they could get jobs. After 1972 unemployment rose considerably.
The working class benefited from the Cold War generally, and those states that got war procurements for Korea and Vietnam became winners. Support for war rose when money started coming in.
Was war good for the working class? The federal government had supported unions during WWII, but the anti-union Taft-Hartley Act became law in 1947, and during the Cold War and the Red Scare, unions became synonymous with communist leanings. The Vietnam War divided the labor movement: George Meany called protesters “dirty-necked and dirty-mouthed kooks.”
Today there is renewed discussion of a new Cold War, with China on the table, plus Russia and Iran. Clearly jobs are a good method of creating consent for military spending. The wasteful jobs programs period, producing munitions never used (“digging holes in the ground”), was a boom time. Perhaps the government should engineer a labor situation to help production. This should include social programs such as subsidized child care and so forth. In the words of Walter Reuther, “If we can have full employment for war, why not a job for everyone in pursuit of peace?”
Numerous questions followed. Professor Kuziemko’s answers are in parentheses. (1) Does Professor Kuziemko’s definition of labor include women? (No - little work has been done, although we included office workers); (2) What was the effect of taxation levels? (The top marginal tax rate was 90%, which perhaps kept inflation low); (3) Were unused munitions needed in the event of an attack really superfluous? (Preferring missiles to private sector investment is socially impoverishing but it was seen as better and coincided with prosperity); (4) What effect will tariffs have on the idea of building it yourself? (Jobs going to China are very damaging to workers but not clear you can rebuild the industrial base via tariffs); (5) How do you value service jobs and health care? (Keynes and leftists said you can get full employment out of peace as well as war, but no one was listening!) (6) How about the growth of the prison population? (It starts right when the draft ends - coincidence?) (7) What surprised you in your data? (The role of WWII in promoting unions).
Respectfully submitted,
Priscilla Roosevelt