Labor Market Politics and the Great War

The Department of Labor, the States, and the First U.S. Employment Service

William J. Breen

• Publisher: The Kent State University Press
• Year: 2011
• eBook ISBN: 9781612771304
• Topic: History
• Subtopic: World History
• Index: History

The Department of Labor seized the opportunity provided by the chaotic labor market conditions during World War I to expand the US Employment Service (USES) and to establish control of the national labor market. That attempt provoked a reaction on the part of states that had created their own employment services and were suspicious of the administrative capacity of the USDES. A prolonged administrative and political struggle ensued, involving not only the Department of Labor and the states but a number of government departments and agencies and the major interest groups involved in the labor market.

William J. Breen's Labor Market Politics and the Great War is the first detailed study of the way in which federalism influenced the development of government labor market policy in the early twentieth century. For those interested in the continuing debate over the unique development of the American state, it suggests one reason why that development diverged from the European model. It also suggests the crucial role of Washington bureaucrats in promoting a powerful centralized state.

CHAPTER ONE

State Initiatives and
National Ambitions

Origins of the U.S. Employment Service

Unemployment was a chronic, although curiously neglected, aspect of American industrial society in the late nineteenth and early twentieth centuries. However, by the end of the first decade of the twentieth century, traditional explanations of the causes of unemployment, which had stressed the moral failings of individuals, were being seriously questioned. For the first time, both the full extent of unemployment in the community and the impersonal nature of the forces causing it began to be clarified.¹ A detailed analysis of the 1900 census figures on unemployment, published in 1915, showed that six and a half million working people, or nearly 25 percent of the work force, were unemployed for some part of the year: 50 percent of that group were unemployed for between one and three months, almost 40 percent for between four and six months, and over 10 percent for between seven and twelve months. More detailed surveys reinforced these findings.² This increased awareness of the alarming extent of unemployment, coupled with a growing perception that most of it was caused by structural rather than personal deficiencies, began to focus attention on the issue.

From the turn of the century on, a number of legislators, reform groups, and social scientists had begun to probe the phenomenon of unemployment and to suggest remedies that might, at least, alleviate the sufferings of the unemployed. An increasing number of articles about unemployment began to appear in journals and magazines. In the more industrialized states, legislatures began to pass workers’ compensation laws and minimum hours legislation and to establish widows’ pensions. In 1906, the creation of the American Association for Labor Legislation (AALL) in New York, composed of government officials, journalists, academics, and a few businessmen and labor leaders, was another indication of changing public attitudes. Although the formal purpose of the AALL was to encourage the study of labor conditions, it soon became the leading pressure group advocating social legislation, particulary measures relating to unemployment. In December 1914, in response to the economic downturn of that year, the AALL issued a pamphlet entitled A Practical Program for the Prevention of Unemployment in America, which specifically attributed the evil of unemployment to “our present method of industrial organization.”³

The pamphlet provided a useful summary of reformist thought on the problem of unemployment in the immediate prewar era. It proposed four different approaches to the problem: (1) the use of public works to alleviate unemployment; (2) the regularization of industry; (3) unemployment insurance; and (4) the development of public employment exchanges. The idea of using public works as a means of minimizing the extent of unemployment during economic downturns had been advocated since the mid–nineteenth century, although with very little practical application prior to World War I. The regularization of industry referred to proposals for encouraging private enterprise to smooth out the ups and downs of the business cycle by consciously spreading the total work load more evenly over the twelve months of the year. This solution depended on employer initiative, but, although popular with reformers in the prewar era, it had only minimal support among employers. The idea of unemployment insurance had been imported from Europe shortly before the turn of the century and received a great fillip when, in 1911, Great Britain established a state-operated system of unemployment insurance featuring contributions from employers, employees, and the state. Despite this concrete example, the concept gathered little political support in the United States. The most popular of the prewar solutions to unemployment was the public employment exchange.⁴

Two key publicists for the public employment office in the prewar era were Frances Kellor and William Morris Leiserson. Frances Kellor attended graduate school in sociology at the University of Chicago. She then moved to New York in 1902 to do research on that city’s employment offices. The project expanded to cover Boston, Philadelphia, and Chicago as well. In November 1904 she published Out of Work, one of the first studies to analyze unemployment as a social problem. The book was very critical of existing private employment agencies and “advanced a program of change that relied primarily on scientific knowledge, state intervention, and government centralization.” She wanted the state to establish agencies that would assist individuals to find respectable employment. In a revised and expanded edition of the work, issued in 1914, Kellor emphasized the need for greater state intervention and regulation of the economy in order to do something about chronic unemployment. It was a plea for a state-supervised labor market.⁵

William M. Leiserson, a former student of John R. Commons at the University of Wisconsin, became one of the pioneer students of the labor market when, in 1909, he was invited to become the special investigator on unemployment for the Wainwright Commission investigating unemployment in New York State. As part of his duties, he traveled to Europe in 1910 to study the methods being used to deal with unemployment in England, Belgium, Switzerland, France, and Germany. Like most others interested in the unemployment problem, Leiserson was much influenced by the work of the Englishman William H. Beveridge, who had published his famous work Unemployment: A Problem of Industry the previous year. Beveridge was an advocate of the employment exchange and became the first director of the new British national system of government-supported employment exchanges established in Britain in 1909.⁶ The report of the Wainwright Commission in 1911 reflected the influence of Beveridge on Leiserson: unemployment was seen primarily as a structural problem related to the malfunctioning of the labor market that could be remedied by the establishment of a statewide system of free, public employment offices. This landmark study brought recognition to Leiserson and formed the basis of his Ph.D. in political economy from Columbia University.

Although the New York State legislature showed little interest in the recommendations of the Wainwright Commission, Leiserson was invited to put his ideas into practice in Wisconsin and there established a model network of public employment offices.⁷ He received a further opportunity to publicize his ideas after being appointed an investigator for the Commission on Industrial Relations, which was created in 1912.⁸ By the outbreak of the First World War the idea was gaining ground among reformers and government adminstrators that an efficiently operating labor market could dramatically reduce unemployment through its ability to connect “the jobless man and the manless job.”

The problem of connecting workers and work in this period was exacerbated by the enormous labor turnover that was common throughout industry. Workers, particularly the unskilled, were badly treated and poorly paid. As a consequence, they felt no loyalty to their employers and could be induced to change jobs for very small advances in wages or betterment of conditions. A contemporary student of the labor market remarked that “fully half of our labor passes through our industries rather than into them.”⁹ One careful survey of labor turnover concluded that, on average, labor turnover in large factories was approximately 100 percent per annum in the immediate prewar period.¹⁰ Although coping with this turnover was a problem for industry before the war, large-scale immigration nevertheless produced a surplus of labor, which meant that replacements could usually be hired at the factory gate. Once America was involved in the war, however, the constant labor turnover became a much more serious matter. One Bureau of Labor Statistics investigation of twelve plants in the San Francisco area, for example, revealed a turnover of 224 percent in 1917 and 1918.¹¹ This constant labor turnover made it virtually impossible for the USES to estimate with any precision the real extent of the emerging labor shortage confronting the nation.

The problem of labor turnover was further compounded by the multitude of private employment offices operating in the labor market. Private offices constituted the major distributing mechanism for labor. The Commission on Industrial Relations, which was established by Congress in 1912, estimated that there were between 3,000 and 5,000 private, fee-charging employment agencies operating in the United States in the immediate prewar period. Although some were operated honestly, many were not. The most frequent complaints registered related to fees that were out of all proportion to the services rendered, to discrimination in the charges made for the same jobs, to men being sent to places where there were no jobs, and to collusion with foremen to maintain artifically high turnover rates. The most frequent abuse was misrepresentation of the terms and conditions of employment. Although thirty-one states had made some effort to regulate the activities of private employment agencies operating within their borders, these efforts had “with few exceptions … proved futile.” The final report of the Commission on Industrial Relations asserted that the private employment business “as a whole reeks with fraud, extortion, and flagrant abuses of every kind.”¹² Apart from the obvious injustices involved, the dominance of private employment offices made the possibility of greater efficiency in conecting workers and jobs a virtual impossibility. The situation seemed to demand some kind of state intervention in the labor market.

Both state and federal governments had begun to take an interest in the operation of the labor market in the period immediately prior to World War I and both had begun to experiment with publicly funded employment offices. Some of the states had even begun experimenting with free employment exchanges before the turn of the century. In 1890, the Ohio state legislature established state-funded employment agencies in the five largest cities in that state. Other states gradually followed the Ohio example until, by early 1917, twenty states were operating one or more free employment offices. However, most of those states funded only one or two such offices, which were usually located in the major industrial city. These offices had little or no impact on the overall labor market, which continued to be dominated by the private agencies. New York City alone, for example, had over 600 private agencies.

In the main, the state employment offices were poorly funded, staffed by untrained personnel, badly administered, and served relatively few workers or employers. Most of their clients were casual and unskilled laborers, and the majority of positions they had to offer were short-term.¹³ Positions in the state employment offices were regarded as patronage jobs and there was a high turnover in personnel. Union men were suspicious of state employment offices, fearing they might be used “as strike-breaking agencies, or to lower wage rates.” Employers, for their part, worried that such offices might be used “to fill their shops with union men and labor agitators.”¹⁴ Prior to World War I, state intervention in the area of employment exchange work in the United States seemed to be a failure.¹⁵

However, there were indications of change in a number of states. Massachusetts pioneered the development of an adequate record-keeping system that other states began to adopt. Wisconsin developed the idea of advisory committees attached to each office to be composed of employers and employees “to advise in the management as well as to insure impartiality in labor disputes.” In 1914, in Cleveland, Ohio, the state-city labor exchange established specialized vocational guidance and protection bureaus for children and immigrants. In the same year, the Ohio Industrial Commission began an extensive reorganization of the state employment offices in an effort to improve their performance.¹⁶ In the period 1914–17, a number of important northern states had begun to give some attention to improving the efficiency of their fledgling public employment offices.

If the states were first in the field of public employment offices in the prewar era, the national government, through the Department of Labor, had also begun to respond to the need. The Department of Labor had been formally established by Congress in March 1913, its purpose, spelled out in the organic act, being “to foster, promote, and develop the welfare of the wage earners of the United States, to improve their working conditions, and to advance their opportunities for profitable employment.” The American Federation of Labor had agitated for more than a decade to establish such an independent, cabinet-level Department of Labor and was delighted by President Woodrow Wilson’s choice of William B. Wilson, a former official of the United Mine Workers, as the first secretary of labor.¹⁷

As initially constituted, the new department was a heterogeneous collection of four bureaus drawn from other departments: the Bureau of Immigration, the Bureau of Naturalization, the Bureau of Labor Statistics, and the Children’s Bureau. Two of these bureaus—Immigration and Labor Statistics—were of long standing and were semi-independent because their heads were appointed by and responsible to the President. The Bureau of Immigration dwarfed the other bureaus in the department: in the early years it absorbed 70 percent of the department’s funds and 80 percent of its personnel. However, none of the four original bureaus was directly involved in the labor problems facing industrial workers. During his administration as secretary, William B. Wilson attempted to remedy this situation by creating three new agencies: the Women’s Bureau, the Division of Conciliation, and the U.S. Employment Service. This expansion of functions took place in spite of the critical and often hostile attitude of Congress which refused to grant departmental requests for funds to support such expansion.¹⁸ This parsimonious attitude on the part of Congress reflected the department’s lack of political influence and the low esteem in which it was held.

In 1907, Congress had taken a first, halting step to promote the role of the national government in public employment work by establishing a Division of Information within the Bureau of Immigration and Naturalization. At that time, the bureau was located in the Department of Commerce and Labor. The purpose of the new division was to relieve the concentration of immigrants in the large port cities by publicizing information on employment opportunities in other parts of the country. Both private employment agencies and organized labor were very suspicious of the new agency. The division relied on the mails to solicit employment information throughout the United States and was unable to monitor local placements. In 1908, it unwittingly aided some employers to obtain strikebreakers, and this reinforced union suspicions. In 1913, when the Bureau of Immigration was incorporated in the newly established Department of Labor, the secretary of labor tried to mollify the unions by emphasizing that the division would neither direct “cheap alien labor” to areas that already had sufficient labor nor supply workers to any factories where strikes were in process.¹⁹

The outbreak of war in Europe in 1914 gave the Department of Labor an unexpected opportunity to enlarge its limited employment functions. The Division of Information responded to the crisis by expanding its employment office role to cater not only to immigrants but to all workers. In order to do this, it reassigned officers from the Bureau of Immigration, who had little to do because of the drop in immigration caused by the war, to employment duties. There was no formal congressional authorization for this change of function. William B. Wilson simply chose to interpret the statute establishing his department as providing a sufficiently broad mandate to authorize the establishment of a national employment service.

The first secretary of labor was very sympathetic to union complaints. Born in Scotland in 1862, William Bauchop Wilson had migrated to the United States with his parents in 1870 and began working in the Pennsylvania coal mines at age...

Table of contents

• Cover Page
• Halftitle Page
• Title Page
• Copyright Page
• Contents
• Dedication
• Acknowledgments
• Introduction
• The Prewar Labor Market
• 1. State Initiatives and National Ambitions:
• 1917: Labor Market Politics in Wartime
• 2. Federalist Aspirations in the States
• 3. Nationalist Initiatives in the Department of Labor
• 4. The Seattle Labor Market Experiment
• 1918: Victory and Defeat
• 5. The Role of the War Labor Policies Board
• 6. A Federalist U.S. Employment Service
• The U.S. Employment Service at War
• 7. The Industrial Northeast: Connecticut
• 8. The Midwest and South
• Armistice and Aftermath
• 9. Reconstruction and Political Misjudgment, 1918–1919
• 10. Postwar Reckoning
• Epilogue: Keeping the Federalist Faith, 1920–1933
• Notes
• Essay on Sources
• Index