 |
| Graph #1: The Labor Force Participation Rate and the 1955 |
The 1955 increase in the Labor Force Participation
Rate was two percentage points in just the one year. That's way more
increase than any single year since that time. The long increase since
the early 1960s? There's no comparison. The rapid growth of the Participation Rate occurred in 1955. It just didn't last very long.
But that makes 1955 all the more interesting: The trend was downhill
consistently for the whole decade, except in 1955. So, what was the
reason for the sudden, sharp increase in that one year?
 |
| Graph #2: Labor Force Participation in the 1950s: It's all downhill, except 1955 |
The reason? I don't know. I don't find anything about Labor Force Participation on the internet except baby boom and women in the workforce.
My gut says it was Korean war veterans coming home and entering or re-entering the workforce. But the timing seems off: The Korean war ended in July 1953. If the big, yearlong increase began late in 1953 or early in 1954, I'd say that's the explanation. But the big increase was a 1955 event, so I'm left hanging.
The timing is wrong for
demobilization after Korea. It would be a better explanation to say
people just wanted to buy the '55 Chevys, and entered the labor force
with that in mind. The biggest ever one-year increase in Labor Force Participation remains unexplained.
 |
 |
|
| 1954 Chevy |
1955 Chevy |
I looked around some more, and finally found something. From History Today: Troop Withdrawals from Korea:
U.S. soldiers in
South Korea
| Year | Number | |
|---|---|---|
| 1950 | 510 | |
| 1951 | 42,069 | |
| 1952 | 326,863 | |
| 1953 | 326,863 | |
| 1954 | 225,590 | |
| 1955 | 75,328 | |
| 1956 | 68,813 | |
| 1957 | 71,045 | |
| 1958 | 46,024 | |
| 1959 | 49,827 | |
| 1960 | 55,864 |
Source: Wikipedia
Two US divisions went home early in 1954, but it was not until a year after the armistice, in August, that the US Defence Department announced the withdrawal of four of the remaining six American divisions.
August of '54? So maybe the timing is not that far off from 1955. The connection is plausible. Let's look at the numbers.
Counting
the 1954 and 1955 reductions both, troop strength dropped from 326,863
in 1953 to 75,328 in 1955: 251,535 troops returned from Korea. Call it
252 thousand.
The civilian labor force increased
from 63,312,000 in December 1954 to 66,445,000 in December 1955, an
increase of 3,133,000 people. But that's based on "seasonally adjusted"
workforce numbers. The "not seasonally adjusted" workforce increased
from 62,999,000 (Dec 1954) to 65,869,000 (Dec 1955). That's an increase
of 2,870,000 people. That's probably the more accurate number.
You know what? Just call it three million: There was a workforce increase of about 3 million people in 1955.
Where
did these three million people come from? 252 thousand of them, at
most, could have been recently returning Korean war veterans. That's a
far cry from three million.
Returning Korean war
veterans alone do not account for the whole 1955 increase in the U.S.
labor force. But maybe it's not just U.S. military personnel returning
from Korea. At History in Pieces,
David Coleman provides totals for military personnel. For 1954 the
number is 3,302,104. For 1955, 2,935,107. The difference is 366,997.
Call it 370 thousand. (That includes the 252 thousand returning from
Korea.) But at 370 thousand we are still far short of the 3 million we
need to account for the increased size of the labor force. Changes in
military personnel alone do not account for the 1955 increase.
Maybe it was unions? From America's Best History, in their U.S. Timeline - The 1950s:
December 5, 1955 - The two largest American labor unions, the American Federation of Labor and the Congress of Industrial Organizations, merge to form the AFL-CIO, boasting membership of fifteen million.
Fifteen million unionized workers. Maybe three million of them were entering the labor force for the first time? But it seems not. At the Hoover Institution, in The Decline of Unions Is Good News, they note "the 35 percent union membership high mark last seen in 1954."
It appears that unions contributed little to the 1955 increase in the labor force.
How many people were born in the US, all told, in 1955? According to InfoPlease,
4.1 million babies. Newborn babies, of course, cannot join the labor
force. But people born, say, in 1935 or 1940 might join the labor force
in 1955. 2.4 million babies in 1935; 2.6 million in 1940. With that
bigger number, we are in the neighborhood of the three million we are
looking for.
But every last one of them would have to join the
labor force in 1955. That's not realistic. Labor force participation
varies, but you never have everyone entering the labor market. And why would they wait until 1955 and then all decide to look for jobs at once?
There is no way. Forget it.
How about immigration, 1954-55? Wikipedia shows an average of about 250 thousand immigrants per year for the decade 1950-59.
They show 249,187 in 1950 and 265,398 in 1960 -- suggesting gradual increase, which we might expect to see. But they also show only 237,790 for 1955. The number was low in 1955. Less than average. So there would be no way that 1955 immigration provided enough workers to swell the ranks of the labor force by almost 3 million workers.
So far we've
got 370 thousand returning veterans, and say 240 thousand immigrants.
Total, 610 thousand possible new entrants into the labor force -- at
most -- of the 3 million we must find.
I have not discovered much of an explanation for the massive 1955 increase in the labor force. Demobilization after the Korean war contributed at most 8% of that increase. Or perhaps 12%, if we include not just Korean war vets but all returning veterans, and if all of them enter the workforce.
There
was no baby boom in the late 1930s that could account for the unusual
1955 increase in the labor force. Nor was there any great burst of
immigration that could account for it. What immigration there was in
1955 boosts our 12% to perhaps 20% of the three million we're looking
for. And don't forget, we're using numbers that are on the high side,
and we assume everyone we count joins the labor force.
There
is no explanation that I can find, to account for the 1955 increase. We
can, however, look at components of the labor force, by age group, by
sex, by race, to see what happened there.
By age, the biggest age group, 25-to-54 years old, provided the biggest part of the 1955 increase: 1262 thousand people. The next largest part, 783 thousand new workers, came from the smallest group, age 16-to-19 years. Taking each increase as a percent of the age group's 1954 size shows an increase of more than 21% for the 16-to-19-year-olds:
 |
| Labor Force by Age Group |
This increase appears to be the first of three large increases for the 16-to-19 age group, the last of which is surely an effect of the baby boom. But the next older group, 20-to-25 years, shows three large increases at the same times; and I'm not sure that is a baby-boom effect. So I still have no explanation.
Broken down by sex, women added more to the labor force than men in 1955: 1918 thousand versus 1215 thousand. The increase, shown as a percent of the group's 1954 size, is even more impressive:
 |
| Labor Force by Sex |
For women, almost a 10% increase!
If you look at all the years,
the count of women in the workforce was growing faster than that of men
almost continuously from start-of-data to the 1990s; then off and on
since the '90s.
By race, I can't say. The data starts in 1954
for "White", in 1972 for "Black or African American", and in 1973 for
"Hispanic or Latino". I'm looking at 1954-55.
So where did people come from, to make the 1955 labor force increase possible? Out of the woodwork, apparently. It's not like there were "extra" people, as in the baby boom. Women, I guess, were "extra" in the sense that they were transitioning to "working" from "not working". I can check that.
Women in the workforce, December 1954: 17,973,000
Women in the workforce, December 1955: 19,460,000
That's an increase of 1,487,000: A million and a half women joined the workforce in 1955. Holy shit. That doesn't account for all of the 1955 increase, but it is half of the 3 million we're looking for.
So now perhaps we have some idea of the source of the 1955 increase in the labor force, some idea where those three million people came from: They came mostly from the "not in the labor force" population and, apparently, they were mostly women.
Now I know why people talk about "women in the workforce" all the time.
But a question remains: What happened to cause the 1955 increase? No idea. Was there some widely popular movie that changed the culture, or a popular book that changed our thinking?
I dunno. Maybe it was just that everyone wanted a '55 Chevy.
13 comments:
After WWII factories went back to producing vacuum cleaners, washing machines which greatly increased the number of homes with household labor saving devices.
Women entering the workforce was due to cultural changes in the “breadwinner” norm and a significant fraction of work that is not counted in GDP statistics (household production) was automated allowing women to participate in work that was counted in GDP.
If you look at nominal GDP following the rise in women’s employment there is a boost along with a rise in aggregate income and PCE.
One other thing in regard to this, I have come to the conclusion that women entering the workforce caused a general economic boom that increased output and prices. The high inflation of the 20th century begins in the late 1960’s peaks in the 70s and fades away in the 90s precisely where the employment population ratio for women becomes correlated with men.
Inflation and growth follow changes in the rate of labor force participation, which are mostly dictated by cultural norms and institutions.
Shocks to the monetary base in the US follows inflation, caused by economic growth by labor force expansion; inflation causes more money to enter the economy not the other way around.
Inflation expectations are backward looking, what you expect in inflation you just experienced.
OT: "Inflation expectations are backward looking, what you expect in inflation you just experienced. "
Well said, Oilfield Trash! One of my favorite quotes from Keynes is: "In practice we have tacitly agreed, as a rule, to fall back on what is, in truth, a convention [by] assuming that the existing state of affairs will continue indefinitely, except in so far as we have specific reasons to expect a change."
https://www.marxists.org/reference/subject/economics/keynes/general-theory/ch12.htm#iv
I have three more related posts scheduled for the next three days. On Wednesday I get to the rapid growth of "business capital spending" in 1955 & 56. I figure if they are buying a lot of capital equipment they will also need to hire a lot of workers to run it. This opens the door to rapid labor force growth.
As you know, I always think in terms of aggregated data. I don't think I ever looked at labor force by age/sex/race until the post above, when nothing else I looked at seemed to provide any answer.
So then I found myself saying: "Now I know why people talk about "women in the workforce" all the time."
Your remarks this morning cover a lot of ground and make a good "big picture". Thanks! Inside my head, this topic was all blanks.
OT: "Inflation and growth follow changes in the rate of labor force participation, which are mostly dictated by cultural norms and institutions."
I have some trouble with the idea that changes in the labor force lead to changes in growth. Maybe it works like "pull on a string": Cut the workforce in half, and we have to produce less.
But not "push on a string": Double the workforce and the number of jobs double?? I don't see it. Maybe over the long term, if the excess supply of labor drives real wages down, employment would increase some.
Last point increases in private sector debt adds more money to the private sector less the transfers and rent extraction to the finacial sector. 401 K contributions would be a transfer and interest rates rent extraction.
Art women entering the work force did drive real wages down. The cost per hour to hire a women was at one time 40% less than the cost to hire a man for the same work. Secretaries are dominanted by women because they accepted less to do the work.
"As you know, I always think in terms of aggregated data. I don't think I ever looked at labor force by age/sex/race until the post above, when nothing else I looked at seemed to provide any answer."
The effects of data aggregation, can create blind spot in analysis. Cross-level fallacies can occur when one makes inferences from one subpopulation to another at the same level of analysis.
Women did not enter the workforce as new labor for GDP Stats at the same pay as men, and they just switch from indirect monetization of their work to a direct one with a paycheck.
Had it happened slower over time I doubt the inflation of the 70s occurs. JMO
"Had it happened slower over time I doubt the inflation of the 70s occurs."
... and Milton Friedman turns in his grave. But yeah, could be. Steve Waldman says the economy "was simply unprepared for the firehose of new workers."
I have migrated back to an abandoned branch of economics centered around the labor theory of value. The general idea is that the value, and therefore the price, of a good is largely determined by the amount of labor that goes into producing it.
It does not mean I am dismissive of marginalism, but I find it lacking as an emergent property at the scale of the macroeconomy.
Labor theory is not worth much for individual goods, but questions of “which good” and “whose labor” become irrelevant at the marco scale that sees a basket of goods the “socially necessary one” as developed by the goods a society buys produced by an aggregated labor force.
The price of that basket of goods (price level) increases with the number of aggregate labor hours, which follows closely to the number of people in the labor force.
Think of it in the context of temperature in the physical sciences as applied to inflation. Temperature does not exist at the micro scale. Temperature is the motion of all the atoms and molecules in a medium. If all these particles move quickly, then the system has more heat, and is in a higher temperature. I believe inflation works the same way, the higher the labor participation rate in an economy the more inflation. The faster this growth happens the higher rate of growth you will see in inflation.
April 2020 CIVPART was sitting at 60.2% May 2021 it is at 61.6% and everyone all of a sudden wonders why inflation is back.
Contrary to Milton “inflation is a monetary phenomenon” it seems to me that inflation is the temperature of economic growth caused by setting in motion workers in the workforce medium(economy).
I like your analogy, prices are like temperature. It's not just a thought. It is a multi-faceted view. And it builds on old descriptions of the economy "running hot" in inflationary times.
OT: "I have migrated back to an abandoned branch of economics centered around the labor theory of value."
Adam Smith opens Book 1 Chapter 6 of The Wealth of Nations with these words:
In that early and rude state of society which precedes both the accumulation of stock and the appropriation of land, the proportion between the quantities of labour necessary for acquiring different objects seems to be the only circumstance which can afford any rule for exchanging them for one another. If among a nation of hunters, for example, it usually costs twice the labour to kill a beaver which it does to kill a deer, one beaver should naturally exchange for or be worth two deer.
If I know what LTV is, I got it from Adam Smith. I love that chapter & reference it probably more than any other.
Investopedia says:
"In economics, the labor theory of value became dominant over the subjective theory of value during the 18th to 19th centuries but was then replaced by it during the Subjectivist Revolution."
The what?
Wikipedia says:
"The subjective theory of value is a theory of value which advances the idea that the value of a good is not determined by any inherent property of the good, nor by the amount of labor necessary to produce the good, but instead value is determined by the importance an acting individual places on a good for the achievement of his desired ends."
I can't be the only person who thinks this, but I think the "labor theory of value" establishes the minimum economically viable price, and the "subjective theory of value" provides the excuse when prices vary from the viable minimum.
"Contrary to Milton “inflation is a monetary phenomenon” it seems to me that inflation is the temperature of economic growth..."
To think that real (non-monetary) factors have nothing to do with the price level, is to generalize far too much. I think both monetary and non-monetary factors contribute to the price level.
I find myself less concerned by how prices are set.
Subjective theory of value where prices are based on its utility at the margin so you can draw supply and demand curves. Basically, saying no matter how much labor went into producing something no on wants, you could not give it away.
Or LTV where price of goods is largely determined by the amount of labor that goes into producing it or Marx’s modified LTV which focus on socially necessary labor (or labor-time). In essence economies should only produce goods that it uses. I guess China did not read Marx very well.
I am not really too concerned with inequality since firms and labor operate in the same medium.
What I see in the data is the price level, regardless of how it is set, seems to be directly related to the number of people in the labor force.
Increase rate of labor force participation is followed by an increase in economic growth as well as increases in the price level (inflation)
I do not think that any single good has it price determined by the LTV, but for macro analysis of inflation I do not think which good and whose labor are important.
What is important to me is the price level seems to increase with the number of aggregate labor hours which follows closely to the number of people in the labor force.
Inflation at the Macro level is not a bad thing, one can make arguments that if labor share of nominal GDP does not increase at the same rate that it will slow the rate of growth in labor participation, but that is why we have credit cards.
OT: "What I see in the data is the price level, regardless of how it is set, seems to be directly related to the number of people in the labor force."
I will keep that in mind. Sometimes I don't see things unless I specifically look for them.
But I do see a cause-and-effect relation between the 1955 increase in labor force participation and the 1955-57 inflation.
You do good work with your data anaylsis. Maybe it will be a post in the future, heand up I use "core" PCE price index to trend inflation growth.
"(PCE) prices excluding food and energy prices. The core PCE price index measures the prices paid by consumers for goods and services without the volatility caused by movements in food and energy prices to reveal underlying inflation trends."
In the article above I conclude that the 1955 increase in labor force participation is explained by a sudden, sharp year-long increase of women in the workforce. But then I ask a question:
What happened to cause the 1955 increase?
Maybe I have an answer now. It wasn't the 1955 Chevy. In my Terms of the Times (3a): Before the Great Inflation I quoted this from The Eisenhower Encyclopedia:
"Ike ended the Korean War in July 1953. The war’s end caused the government to decrease its armament purchases. Unemployment rose from 2.6% to 6.1% by September 1954."
It wasn't just troops coming home from Korea. It was also the decrease in armament purchases. There was also the 1953-54 recession just then.
The September 1954 peak in unemployment is perfect timing to explain the start of the 1955 increase in Labor Force.
Consumers had been borrowing like crazy since the end of WWII, and by 1955 were paying close to 3% of their Disposable Personal Income just to pay interest on their debt. A lot of men, presumably, were out of work due to the recession. This would have put pressure on women to enter the labor force. And the timing was right for it, too: The recession ended in mid-1954. By 1955, unemployment was falling -- and this was like an invitation to join the labor force!
Post a Comment