Negative Effects on the U.S. Economy Caused by World War II

The U. S. engaged in World War II from 1941 until 1945. All the Allied and Axis nations were affected by this war, in both positive and negative ways. Americans recovered from World War I only to face another devastating and costly war with Germany during World War II. The war specifically impacted American society in multiple ways: social, political and economical.

The U.S. government, despite being run primarily by progressive Democrats, suspended most economic and social reforms in favor of increasing defense expenditures. Antitrust legislation was virtually ignored during this period. Factories lengthened the typical work day to increase production, ignoring labor laws to do so. Businesses throughout the nation suffered from labor shortages due to men leaving to serve in the military. Women entered the labor force in large numbers, and child labor laws were relaxed or even ignored to boost the dwindling workforce. The number of teenagers in the workforce rose from one to three million during the war, about one million of whom dropped out of high school.

Congress took the opportunity provided by the war to cut funding to several New Deal agencies. Among the effected organizations were: the CCC (Civilian Conservation Corps), the WPA (Works Progress Administration) and the NYA (National Youth Administration). These organizations were intended to help disadvantaged groups who were typically discriminated against in the job market, including women and minorities. Therefore, these groups were most affected by the reductions in funding to these associations.

The U.S. federal deficit increased as war spending continued to increase. U.S. federal government spending increased from $9 to $98.5 billion during this time. Despite the abundance of employment opportunities during the war, wages were so low that 20 million Americans were living at the poverty level. Twenty-five percent of all workers made below 64 cents per hour. With the reduction in the New Deal programs, these poverty-stricken Americans had little hope of government assistance. Despite harsh economic conditions, the U. S. government encouraged Americans to grow gardens and consume what was needed. In efforts to conserve and save money, food and fuel rations took place during war times.

During the war, the U.S. government spent an average of $250 million dollars each day on government contracts. Two-thirds of these government contracts were awarded to the hundred largest corporations in the U.S. This act of favoring big business crippled many small businesses, causing a large majority of them to dissolve due to lack of trade. This, coupled with the slackening of antitrust law enforcement, succeeded in growing big businesses and enmeshing their interests with those of big government.

World War II was the beginning of the U.S. personal income tax. In 1940 the personal income tax was extended to all working Americans, and the method of deduction from paychecks was instituted. This taxation was necessitated by the increase in government spending for the war effort. Hence, Americans felt the severity of the war. The income tax for much of the working American class increase from 1.5 percent to 15 percent, increasing the cost of living for many families.

During the war, civilian industry was largely converted to military production. After the war, businesses began the process of reconverting to civilian operations. This change was accompanied by the termination of the women and children who had been employed in these same factories during the war. The termination of these individuals, while necessary for the returning soldiers to enter the workforce, was a huge blow economically to the women and children involved.