Job Programs and Stimulus II: What We Can Learn from New Deal Programs

I’m pleased to have a guest post today from Frank Stricker, author of Why America Lost the War on Poverty — And How to Win It, which we published in 2007. That book focused on the second half of the twentieth century. In his current work, Stricker’s looking more closely at unemployment and job creation, and looking further back in time, to the New Deal, to explore what works and what doesn’t. In this post, he offers five important lessons we can learn from New Deal job programs and policies and he urges citizen involvement in helping shape the legislative response to the current economic crisis so that we can actually experience a real recovery. — ellen

An underlying theme of my book Why America Lost the War on Poverty was that the widening gap between job seekers and good jobs was a major cause of poverty. As I finished the book, I thought about the need for a deeper analysis of unemployment and underemployment. I joined the National Jobs for All Coalition and began writing “Everybody’s Guide to Jobs and Unemployment in America: Yesterday, Today, and Tomorrow.”

In Why America Lost, I proposed that the federal government directly create good jobs — some of them government jobs — to cut unemployment and lift wages. But there were no examples in the period since 1950 that such a project could be done well. In the new book I examine job programs of the New Deal to extract useable lessons.

The first requirement of studying the 1930s is a balanced view of the New Deal. Conservatives Tyler Cowan and Amity Shlaes claim that the New Deal did not bring full recovery. True enough; despite eight years of federal programs, employment and output had not fully recovered by 1941. But the New Deal was a vast improvement over Hoover’s fanatical refusal to use the central government to fix things. During his presidency (1929-1933), output and employment fell by 30%. From Roosevelt’s inauguration in 1933, private investment began to recover and millions of jobs were created in government programs. In 1937 real output was 44% over the 1933 level. That was not enough to employ everyone who needed job, but it was also not an utter failure. Overall, government promoted recovery, but its timidity, fueled by conservatism inside and outside the administration, limited its effectiveness.

Recently, the Bush administration spent eight years proving that government cannot work efficiently and humanely, but history shows that it does not have to be that way. After four years of Hoover-and-Mellon-do-nothingism in the face of soaring unemployment, the New Deal offered cash and jobs to destitute Americans. And quickly, too. Roosevelt created the Civil Works Administration on November 9 and Harry Hopkins paid a million workers on November 23. Over the winter of 1933-1934, four million CWA employees built or improved 500,000 miles of roads, 40,000 schools, and 3500 playgrounds. They restored every park in New York City, compiled accurate lists of historic American buildings, and engaged in a hundred other useful tasks, from teaching to archeological work.

Beginning in 1935, the Works Progress Administration employed 2 to 3 million people a month. Workers constructed or repaired roads and bridges. Some served as nursery and adult school teachers; librarians delivered books to the backwoods by boat and horse. Thousands of artists decorated public buildings. Two hundred thousand WPA workers were mobilized to help victims of a massive flood in the Ohio Valley.

Some of the credit for the success of New Deal job programs rests on the fact that the depression was so dire that people wanted radical programs. Some credit belongs to Roosevelt who, despite a preference for balanced budgets, was willing to borrow to keep people from starving. Credit goes also to Hopkins, a one-time social worker, and the officials who worked with him. They came from business, social work, and engineering; some were Republicans. They all had the ability to get the job done. Roosevelt could have said to Hopkins, “Heck of a job, Harry,” and he would have been right about Hopkins and the whole WPA staff.

But if the New Deal was often successful, its flaws hold lessons too. Here are five of them. First, we need real federal jobs (RFJ) as a large part of our recovery program. We should use government employment for two major tasks: to offset the private sector’s thirty-year policy of shifting more jobs toward lower pay, fewer benefits, and less security; and to begin to make up for the neglect of public facilities and services. The CWA, for all its benefits, was temporary. WPA jobs were meant to be short-term; employees had to accept comparable jobs in the private sector and in 1939, the tenure of a WPA position was limited to 18 months. Also, due to budget realities and in hopes that workers would be attracted by higher-paying private sector jobs, neither the WPA nor the CWA paid very well. Employees earned about half the poverty line. The knowledge that the job was temporary and had lousy pay even undercut the morale-boosting effects of CWA and WPA jobs. Federal job programs today should include a large share of quality jobs. Job holders should have the chance for career advancement and training and receive decent benefits. They must face the possibility of being removed for incompetence, but they should have the right to unionize and, in contrast Roosevelt’s declaration for the WPA, the right to strike. Above all, they should be paid adequately, reaching fairly soon an annual income well above the family poverty line of $21,000 a year. I suggest $35,000 after a probationary period.

Second, parts of the New Deal (notably the Civilian Conservation Corps) included “green” jobs — but today we face the larger challenge of developing alternatives to fossil fuels. Some solutions to global warming may require a permanent corps of environmental workers to renovate buildings and develop solar, wind, and other clean fuels. Obama wants to battle global warming, but he has not planned a big strike force to do the jobs that cannot be done by tax breaks and regulation.

Third, for the sake of equality and prosperity, job programs must be wide in their reach and inviting to women, minorities, and low-income Americans. In thirty-five years we have not been able to push the poverty rate below the 11% level we reached in the 1970s; one way to do it is to let robust demand for workers raise average incomes. That should be paired with a substantial increase in the federal minimum wage. However, we should avoid limiting RFJs to the very poor, those who in the 1960s were called the “hardcore unemployed.” In this case a program limited to the very poor would be vulnerable to attack as a form of welfare. The WPA was fiercely attacked by conservatives, but it had a broad constituency that helped sustain it for a long time.

Fourth, job tasks need to reach beyond physical infrastructure. Not everyone can succeed in the construction field. We need, for example, to lift the care industry with higher pay, more workers, and better conditions. Whether through direct employment by government or increased subsidies, the feds can improve the quality of jobs in the care business, jobs that are bound to continue growing and providing imortant social services.

Fifth, job programs must be part of a strategy to cure the long-term unemployment that our public statistics and our national policy ignore. For years we have created too few good jobs for those who want to work. And if people had had higher incomes, fewer would have needed sub-prime mortgages.

Even if the current depression is reversed, high levels of hidden unemployment and underemployment will continue. Many who want to work are never counted. The National Jobs for All Coalition ( estimates that there are twice as many people really unemployed as the highly publicized official figures show. The Bureau of Labor Statistics claimed that unemployment in February was 8.1% (12.5 million people looked for jobs and could not find them). But if we include those who had a part-time job but wanted full-time work and those who wanted a job but had not looked recently, we get an unemployment rate of 16.7% (26.7 million jobless). The WPA typically employed about 2 million people, one fourth of the unemployed (and even less if we include the hidden unemployed). Obama’s first stimulus package may create 2 million jobs over two years; that is less than 1/10 of the total number of truly unemployed.

We face four job challenges: first, population growth that increases the potential labor force; second, higher unemployment from this recession — already 4.4 million jobs lost in 14 months; third, one of the worst job recoveries ever from a recession (2001-2007); and fourth, the chronic unemployment of millions who are willing to work but are not counted in the official monthly unemployment number. It is up to people who want to fix the recession in a humane way and reverse the thirty-year shortage of jobs and rising levels of inequality to pressure Obama and the Democrats to do the right thing. We need a job-rich Stimulus Package II. Otherwise, in the future, we will have to depend once again on a financial or real estate or dot-com bubble to push economic growth — and suffer the accompanying low average incomes and soaring debt.

Frank Stricker
California State University, Dominguez Hills