Sunday, January 6, 2013

Why was there no Mass Unemployment Problem amongst returned G.I.s after 1945?

This question is closely related to the reasons why there were no serious economic problems after 1945 that some economists and the general public expected.

Of course, the boom in private investment after 1945 employed many men. But that is by no means the only reason.

Before 1945, about 14 million men served in the US armed forces, but by summer 1946 that number had been reduced to just over 2 million, although this decreased further in the course of the 1940s (Adams 1967: 161).

So, first, it can be seen that the creation of a standing army employed some 2 million men.

What about the other 12 million? Were they all just suddenly dropped into the labour market? The answer is no.

What happened is that – because of the G.I. Bill – many G.I.s undertook education and training programs after 1945 and did not seek full-time employment:
“While World War II was still being fought, the Department of Labor estimated that, after the war, 15 million men and women who had been serving in the armed services would be unemployed. To reduce the possibility of postwar depression brought on by widespread unemployment, the National Resources Planning Board, a White House agency, studied postwar manpower needs as early as 1942 and in June 1943 recommended a series of programs for education and training. The American Legion designed the main features of what became the Serviceman’s Readjustment Act and pushed it through Congress. The bill unanimously passed both chambers of Congress in the spring of 1944. President Franklin D. Roosevelt signed it into law on June 22, 1944, just days after the D-day invasion of Normandy.

American Legion publicist Jack Cejnar called it ‘the GI Bill of Rights,’ as it offered Federal aid to help veterans adjust to civilian life in the areas of hospitalization, purchase of homes and businesses, and especially, education. This act provided tuition, subsistence, books and supplies, equipment, and counseling services for veterans to continue their education in school or college. Within the following 7 years, approximately 8 million veterans received educational benefits. Under the act, approximately 2,300,000 attended colleges and universities, 3,500,000 received school training, and 3,400,000 received on-the-job training. The number of degrees awarded by U.S. colleges and universities more than doubled between 1940 and 1950, and the percentage of Americans with bachelor degrees, or advanced degrees, rose from 4.6 percent in 1945 to 25 percent a half-century later.”
So nearly 6 million returned G.I.s, in the 7 years following the passing of the G.I. Bill, received education in colleges, universities or schools, and this prevented a major supply shock in the labour market. And that means nearly half of returned servicemen (of course, it also inaugurated the era of mass, higher education).

Instead of some 12 million men looking for work, the figure was reduced to about 6 million, and the investment boom after 1945 was capable of absorbing this level of labour. But would the private economy after 1945 have been able to employ some 12 million men? I doubt it. I suspect there would have been an unemployment problem in the absence of the G.I. Bill.

Furthermore, the welfare provisions of the G.I. Bill had a significant effect on economic activity, not only in terms of placing a floor on the income of returned men, but also by maintaining demand for goods and services while they were undertaking education programs.


Adams, D. K. 1967. America in the Twentieth Century: A Study of the United States Since 1917. Cambridge U.P, London.


  1. Very interesting. And a very different time.

  2. Yeah, a fun factoid - I think from Robert Lekachman's excellent 1966 Age of Keynes - which has some interesting prophetic points besides - and which Galbraith merrily acknowledged pilfering in a history he wrote - haruummmph. The factoid: The GI Bill added up to more spending in constant dollars than all the New Deal programs put together. Of course the New Deal had more effect, because it was a smaller transfusion, but to a much sicker patient.

  3. Interesting point, something I never thought about it! I did wonder why there was no massive recession after WWII, always figured it was a combo of men taking back jobs they had as women left the workforce, and the general boom absorbing the wave of new labor.

    This makes a lot of sense though! Also perhaps it helped boost the economy years down the road as a wave of new people had college degrees?
    Good point about the era of mass higher education.

    I wonder if its safe to assume that constantly increasing demand is part of why costs have become outrageous.