Updated 1930s public works program might help U.S.

April 7, 2010
WPA

The Works Progress Administration was established 75 years ago on April 8, 1935. The U.S. job-creation program left many happy memories among fans of big government, as well as some physical reminders of its accomplishments, from post office murals to 650,000 miles of roads. Over the last year long-term unemployment in the United States has doubled, to 6.5 million people. Is it time for WPA II?

The first WPA absorbed 2.1 percent of the nation’s GDP from 1935 to 1941. The money went to pay workers who had been unemployed for years to work on a wide variety of projects. Nearly half was spent on infrastructure of long-term value, including unglamorous sewers as well as Connecticut’s elegant Merritt Parkway.

The program scratched more or less where the United States itched. Not only was the unemployment rate 20 percent, much higher than today, but the federal government could borrow responsibly. The deficit during the WPA’s life averaged 3.2 percent of GDP, hardly alarming by current standards. Besides, bank failures meant that private investment funding was scarce.

But the WPA had serious design flaws. It was too attractive an alternative to the private sector, because it was obliged to pay comparable hourly wages for a short work week. Along with legally favored unionization, the WPA helped keep average wages above the minimum level that would have created new jobs. So it may in some ways have exacerbated the unemployment problem.

Even so, the United States could use a program that spent $150-200 billion annually on genuinely useful public works and that employed and trained the long-term unemployed. But the government is in much worse shape now than then. So every dollar that goes into a new WPA should come out of some other federal spending.

Also, while WPA II should be more generous than the welfare system, it should not be so generous as to be the employer of first resort. To prevent that, it would have to pay less than comparable private sector work for more hours on the job. That would help get workers off the government payroll, and make a new WPA the stuff of memories as soon as possible.

Post Your Comment

We welcome comments that advance the story through relevant opinion, anecdotes, links and data. If you see a comment that you believe is irrelevant or inappropriate, you can flag it to our editors by using the report abuse links. Views expressed in the comments do not represent those of Reuters. For more information on our comment policy, see http://blogs.reuters.com/fulldisclosure/2010/09/27/toward-a-more-thoughtful-conversation-on-stories/