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Compensation from World War II through the Great Society

by Richard E. Schumann

Bureau of Labor Statistics

This article was originally printed in the Fall 2001 issue of Compensation and Working Conditions.

Originally Posted: January 30, 2003

The next quarter of a century began with the United States entering a second world war, which required the Federal

government to impose new or expanded controls over the country’s economy. The transition to a peacetime economy, with

its economic and political problems, was followed by the Korean conflict and the relative prosperity of the 1950s and 1960s.

During this later period, there were many shifts in the country’s economy and the growth of a new political awareness of

social and economic problems encountered by its disadvantaged citizens that led to new legislation to shape the American

workforce.

World War II And The Transition To A Peacetime Economy

Following the bombing of Pearl Harbor in December 1941 and the ensuing entry of the United States into World War II, the

Federal Government mobilized its resources and the country’s industrial might. On January 6, 1942, President Roosevelt

announced ambitious wartime production goals. In response, all the country’s economic sectors came under new or

increased Government controls.

The Federal Government created a number of agencies, such as the War Production Board (1942), the Office of War

Mobilization (1943), and the Office of Price Administration (1942), to increase total production, reallocate production to

military uses, and control wages and prices. Increases in military output were obtained, in part, by diverting resources from

the production of consumer goods. Manufacture of consumer itemssuch as automobiles, refrigerators, and housing

materialswas forbidden.

Controlling output proved easier than controlling wages. Inflationary pressures were created by the shortages of both goods

and labor that developed during World War II; the Consumer Price Index (CPI) increased by more than 35 percent at this

time. Several attempts were made to create an effective organization to control wages and limit work stoppages. In 1941,

President Roosevelt created, by executive order, the National Defense Mediation Board. The Board had jurisdiction over

cases referred to it by the Secretary of Labor and was given authority to settle disputes by conciliation, voluntary arbitration,

and public recommendations. However, the Board ceased to be useful when the CIO members withdrew in November 1941.

The National War Labor Board was created by President Roosevelt, by executive order on January 12, 1942. The Board was

established to determine procedures for settling disputes that might affect war production. The Board had the options of

offering mediation, voluntary arbitration, and compulsory arbitration to try to resolve controversies but had no power to

enforce its decisions. It was also authorized to approve all wage increases, where the total annual remuneration was below

$5,000. The Board quickly adopted the so-called Little Steel formula for war time wage changes, i.e., based on a 15-percent

rise in living costs from January 1, 1941, to May 1, 1942. In September 1942, the President was given the authority to

stabilize wages and salaries, based on September 15, 1942 levels.

As a result of wage restrictions, employers who needed to attract labor resorted to providing a growing range of fringe

benefits, such as pensions, medical insurance, and paid holidays and vacations. These benefits were considered noninflationary, as they were not paid in cash and, thus, did not violate the wage ceiling. Additionally, payments for overtime

afforded extra income to workers, without violating the limits on hourly wage payments. During the late 1940s, fringe benefits

became more common as part of settlements reached in collective bargaining.

On June 25, 1943, Congress passed the War Labor Disputes (Smith-Connally) Act that authorized the President to take over

plants needed for the war effort or in which war production had ceased because of a labor dispute. These sanctions were
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effective against management but were not as effective against labor. Although strikes were prohibited during the War, they

did occur.

Year

Number of

Work

stoppages

Days of

idleness

(thousands)

Union

members

(thousands)

1940 2,508 6,700 8,717

1941 4,288 23,000 10,201

1942 2,968 4,180 10,380

1943 3,752 13,500 10,213

1944 4,956 8,720 14,146

1945 4,750 38,000 14,322

1946 4,985 116,000 14,395

1947 3,693 34,600 14,787

1948 3,419 34,100 14,319

1949 3,606 50,500 14,282

Despite efforts of the National War Labor Board, the shortage of labor during World War II caused sharp increases in wages.

Average hourly earnings of production and nonsupervisory workers in manufacturing more than doubled between 1940 and

1949, with the largest increases during the war years, 1940-44. Hours worked also rose during the War, with average weekly

hours for production and nonsupervisory workers rising from 38.1 in 1940 to a high of 45.2 in 1944. After the War, hours

worked declined to 39.1 in 1949, slightly above the average for 1940.

After World War II, the Federal Government continued to directly affect the welfare and economic conditions of the American

workforce. Congress passed the Employment Act of 1946, which committed the Federal government to take all practical

measures to promote maximum employment, production, and purchasing power. In 1949, Congress amended the Fair Labor

Standards Act of 1938 to directly prohibit child labor for the first time. Additionally, two Supreme Court cases (Inland Steel v.

United Steelworkers of America and W.W. Cross & Co. v. N.L.R.B.) issued after the war, in effect, required employers to

bargain over retirement and health insurance plans.

Meanwhile, the transition to a peacetime economy was complicated by a number of problems, including providing economic

opportunity for both returning servicemen and the current workforce. One priority was to assist returning servicemen in

getting housing and education; thus, the GI Bill, for example, guaranteed loans for housing and education assistance.

Another priority was to maintain industrial peace while transitioning from a wartime economy to a peacetime economy. This

was difficult; labor unrest ensued, because of pent up frustration and job losses.

During the immediate postwar period, consumer goods, which were not available during the War, became in great demand.

People had worked steadily during the war, often at overtime rates, and had money to spend. Demand for consumer items

such as automobiles was high, so manufacturers had trouble filling orders. At the same time, union members, whose wages

had been restrained during the war, demanded increases in the immediate postwar period. The result was a wave of strikes

precisely when the public was anxious to see more consumer goods in stores and showrooms.

Congress reacted to the wave of strikes in 1946-47 by passing the Labor-Management Relations (Taft-Hartley) Act in 1947.

This act was seen by its sponsors as a way to redress the balance between labor and management that had been altered by

the Wagner Act. Among its major provisions, the Taft-Hartley Act authorized Presidential injunctions against strikes, if the

national interest was involved; banned secondary boycotts and the closed shop; and allowed States to pass right-to-work

laws.

The coming of World War II changed the statistical needs of government, and BLS responded by changing the focus of its

programs.1 A cut in funding in 1947 also forced the Bureau to reexamine its wage program.
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Prior to the war, the primary use of industry wage surveys was to monitor low-wage industries. Data from these surveys were

used to determine minimum and prevailing wages required by such laws as the National Industrial Recovery Act of 1933, the

Walsh-Healey Public Contracts Act of 1936, and the Fair Labor Standards Act of 1938. After the beginning of World War II,

the needs of Federal Government statistical users had shifted to the settlement of labor disputes and stabilization of pay

rates. The types of industries surveyed shifted from low-wage consumer goods industries to heavy manufacturing industries

vital to the war effort. Among the industries surveyed during this period were shipbuilding; aircraft; rubber; nonelectrical

machinery; and the mining, smelting, and refining of nonferrous metals. The National War Labor Board became the most

important user of wage surveys. The Bureau provided data on wage rates and straight-time earnings by occupation, industry,

and area, as well as a general wage rate index, to measure the effectiveness of the wage stabilization program. The Board

used these data for decisions on claims for wage increases on inequity grounds and for the settlement of disputes.

Because of the importance of organized labor in the national economy, the Bureau, in 1948, first published its monthly 

Current Wage Developments (CWD) reports and its wage chronology series.2 The CWD reported on the wage adjustments

that occurred in collective bargaining situations. Besides identifying the company, union, and location of the bargaining unit,

the report listed the amount of the adjustment; the effective date of the adjustment; the number of workers covered by the

adjustment; and other related terms, such as information on vacations, paid holidays, and company payments to health and

welfare funds. Wage chronologies were a series of reports on the negotiated changes in wages and benefits for individual,

key bargaining situations, such as General Motors, United States Steel, The Boeing Company, and the bituminous coal mine

operators. Although a wage chronology for any one bargaining situation was published only periodically, it would summarize

the bargaining history between the company and the union, detailing the wage and benefit changes coming from the parties’

various rounds of negotiations.

The Korean War To Beyond The Great Society

The 1950s and 1960s saw the Korean War, the Cold War, the race for space between the United States and the Soviet

Union, the Vietnam War, the New Frontier, and the Great Society. Television became a mainstay of family entertainment,

there was a movement to the suburbs, college education and home ownership became common, and the civil rights’ and

women’s rights’ movements became powerful forces in society.

The decades of the 1950s and 1960s were generally periods of relative economic prosperity, with growth in employment and

real wages, although three recessions occurred (1954, 1958, and 1961). This period saw many shifts in the economy, as the

service sector grew relative to manufacturing; and employment shifted among occupations. The percentage of employed

persons who worked in white-collar and service occupations increased during the period, while the percentage employed in

manual occupations and as farm workers declined.

Another shift was that women became a more important factor in the workforce than during the postwar years. Women

represented about 29 percent of individuals in the labor force in 1950 but had grown to more than 36 percent by 1969.

Married women, in particular, remained in the labor force in record numbers. By 1969, almost 40 percent were in the labor

force, up from less than 25 percent 20 years earlier. While these rates were lower than for single women, the difference in

labor force participation rates for married and single woman narrowed during this period.

Unemployment was relatively stable during the 1950s and 1960s, usually between 3 and 4.5 percent. The rate did exceed 5

percent during the recession years 1954, 1958, and 1961 and during the years of recovery immediately following the

downturns. Conversely, unemployment was particularly low between 1951-53 and 1966-69. These periods coincided with

undeclared wars in Korea and Vietnam and saw large increases in defense spending and significant segments of the civilian

labor force drawn into military service.

During this time, Federal legislation continued to shape the American workplace: the Social Security Act was amended to

include Medicare in 1965 and the FLSA was amended in 1961 and 1966 to extend coverage to millions of additional workers.

In addition, the Welfare and Pension Plans Disclosure Act of 1958, the Labor-Management Reporting and Disclosure

(Landrum-Griffin) Act of 1959, the Manpower Development and Training Act of 1962, the Equal Employment Act of 1963, the
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Civil Rights Act of 1964, and the Age Discrimination Act of 1968 were passed by Congress. (See box on Legislative and

Regulatory Timeline, p. 37.)

More than 20 years of internecine labor strife ended in 1955, with the merger of the American Federation of Labor and the

Congress of Industrial Organizations to become the AFL-CIO. Unions in this merged organization agreed to honor existing

agreements of other member unions and to refrain from stealing members from one another. The new organization claimed

about 15 million members.

In the 1950s and 1960s, the Bureau of Labor Statistics continued to gear its compensation surveys to the informational needs

of the Federal Government, including the administration of prevailing wage and minimum wage laws. an interest in comparing

Federal and non-Federal compensation also developed during this period. This administrative need for data would shape

many of the Bureau’s compensation programs throughout the remainder of the 20th century. In conjunction with the need for

data to administer Federal pay programs, the Bureau began to expand its compensation studies to include fringe or

supplementary benefits. These new surveys would lay the groundwork for the Bureau’s future benefit studies.3

The Bureau continued to publish its wage chronologies and Current Wage Developments. As an outgrowth of the wage

development program, beginning in 1954, BLS published quarterly and annual summaries of newly negotiated wage rate

changesmedians and means, for the first year and over the lifeof contracts for production workers in manufacturing and

non-supervisory workers in service industries.

By the mid-1960s, the Bureau developed procedures for costing supplementary benefits. This enabled the publication of data

for the total change in compensation for units of 10,000 workers or more; and, in 1966, the publication of such data on

settlements covering 5,000 or more workers. In 1968, the Bureau developed its effective serieswage changes in effect from

settlements, cost-of-living adjustments, and deferred wage increases.

In the early 1950s, the Bureau also began publishing salary trends for selected groups of government employees. The first

report was for white-collar workers for 1939-50, followed by city public school teachers for 1925-49 and firemen and

policemen for 1924-50. These studies would provide BLS with the experience and foundation for conducting future, more

comprehensive white-collar pay studies.

Also in the early 1950s, the Wage Stabilization Board (WSB) once again sought to control wage increases during the Korean

War. WSB budgetary support allowed BLS to conduct a large number of labor market community wage studies for use in the

Board’s decisions, with occupational coverage extended to jobs particular to major industries in each area surveyed. Coupled

with other BLS data, these studies provided the basis for a series of analyses of inter-area differences in wage levels,

occupational wage differentials, fringe benefits, union density, and wage structure.

By the end of the 1950s, in response to demands for a cross-industry survey, BLS began to expand the community wage

surveys to 80 metropolitan statistical areas that had been selected to represent all such labor markets. This program

expansion would allow the Bureau to make estimates of the level and distribution of wages for a large number of white-collar

and manual jobs in all metropolitan areas. It also provided the basis for national estimates of scheduled hours of work,

holiday and vacation provisions, the incidence of private pension and insurance plans, and collective bargaining coverage.

One reason for this expansion was the Federal Government’s need for national data on white-collar salaries in private

industry to implement a comparative pay policy for Federal white-collar and postal employees.

In response to the enactment of the Service Contract Act (SCA) in 1965, area wage surveys were expanded in 1967 to

include areas requested by the Employment Standards Administration (ESA) for their administration of the act. (The SCA

requires employers to pay prevailing wages and benefits to employees performing work on Federal service contracts.)

BLS also continued to produce occupational wage studies on an industry basis but shifted the emphasis away from industrywide surveys to surveys of major areas of industrial concentration. These annual studies covered wages and related benefits

in 25 manufacturing and non-manufacturing industries.
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During the 1950s, BLS conducted several wage surveys for ESA for use in the agency’s appraisal of minimum wage action

under the Fair Labor Standards Act, and for a basis of decisions on minimum wage policy. The studies continued into the

1960s, with minimum wage coverage being extended to several new industries, including retail trade and service industries.

The major changes in the composition of compensation that began in the 1940s forced BLS to collect and analyze

supplementary wage benefits to make Bureau compensation data more meaningful. After limited studies in the early and

mid-1950s, BLS began a program to measure these benefits. In 1951, for the first time, BLS captured the costs of

supplementary wage benefits in a wage study in the basic iron and steel industry. Data included direct benefits, such as pay

for overtime and work on holidays and late shifts, pay for holidays not worked, and vacations, sick leave, severance pay, and

non-production bonuses; and indirect benefits, including legally required ones and voluntary insurance and retirement

pension plans. Survey results were for production workers only and were expressed in terms of cents-per-man-hour.

In 1953, BLS conducted a feasibility study of collecting employer expenditures on selected supplementary employee

remuneration in the manufacturing industries. The Bureau collected data on seven itemspaid vacations; paid holidays; paid

sick leave; premium pay for overtime; pension plans; insurance, health, and welfare plans; and legally required payments.

Three basic measures of the cost of employee expenditures were usedpercent of payroll, cents per hour paid, and cents

per hour worked.

In 1955, BLS began regularly publishing two new reportsthe "Digest of Selected Pension Plans" and the "Digest of Selected

Health and Insurance Plans." Some of the plan features discussed in the pension plan digest included benefit formulas,

normal retirement requirements, early retirement requirements and reductions, and disability benefits. Some of the plan

features in the health digest included life insurance, accidental death and dismemberment benefits, sick leave, hospital

benefits, maternity benefits, surgical and medical benefits, and major medical benefits.

In 1959, BLS published the Employer Expenditure for Selected Supplementary Remuneration Practices for Production

Workers in Manufacturing Industries, 1959. This publication ushered in a full scale, continous program of compensation

studies. Expenditures for production workers in manufacturing were published for a select list of itemsincluding some new

or growing practices, such as supplementary unemployment benefits and civic and personal leaveand were measured as

cents-per-hour paid for and per plant man-hour, as well as one new measurestraight-time payroll. In 1960, a similar study

was conducted in the mining industry; in 1961, finance, insurance, and real estate were surveyed; and in 1962, there was a

study in manufacturing.

In 1963, another expansion of the program came, when a special study was conducted at the behest of the Federal

government on supplementary remuneration in private industry for Federal white-collar and postal employees’ pay

comparability purposes. The survey marked a broadening of industry coverage to include manufacturing; transportation and

utilities; trade; finance, real estate, and insurance; and a limited number of service industries. Employee coverage was limited

to clerical, professional, administrative, and technical employees.

Sparked by Federal pay comparability questions, BLS conducted an initial survey of compensation expenditures for the entire

private nonfarm economy in 1966. This was the first of surveys designed to study the entire private nonfarm sector, selecting

manufacturing and non-manufacturing industries in alternate years. Surveys for the entire private nonfarm economy were

produced in 1968, 1970, 1972, 1974, and 1977. This program was dropped after 1977, when the Bureau began collecting

benefit cost data in the Employment Index.

Richard E. Schumann

Senior Economist, Division of Data Analysis and Planning, Office of Compensation Levels and Trends.

Telephone: 202-691-6277 E-mail: Schumann_R@bls.gov

End Notes

1 H. M. Douty, "A Century of Wage Statistics: the BLS Contribution," Monthly Labor Review, November 1984, pages 16-28; Alvin Bauman,

"Measuring Employee Compensation in U.S. Industry," Monthly Labor Review, October 1970, pages 17-24.

2 Section 211 of the Taft-Hartley Act authorizes the Bureau to collect various collective bargaining data, including union contract data. The

CWD is the predecessor to Compensation and Working Conditions.
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3 See Douty, pp. 22-23; Bauman, pp. 17-24; and Allan P. Blostin, "An Overview of the EBS and the NCS," Compensation and Working

Conditions, spring 1999, pp. 2-5.

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