Causes of Economic Growth (College Board AP® US History)

Timeline:

1944 – The GI Bill is passed

1947 – The first Levittown is built on Long Island, New York

1955 – Minimum wage is raised to $1.00/hour

1956 – Congress passed the Highway Act

Summary

The post-World War II era was a time of great economic growth in the United States. Thousands of veterans took advantage of the GI Bill to help with education and housing expenses. As their salaries increased, so did their expendable income. 

Many people took advantage of the housing boom and moved to the suburbs, then filled their new homes with the latest domestic appliances. Perhaps the biggest sign — and effect — of this prosperity was the baby boom of the 1950s and 1960s, which created a seemingly never-ending demand for goods and services for the biggest generation on record.

Creation & Expansion of Public Programs

G.I. Bill

• One of the greatest causes of economic growth in the United States after World War II was the passage of the Servicemen’s Readjustment Act, which was more commonly known as the GI Bill (1944)

  • It gave World War II veterans money for college, housing, and unemployment insurance

    • Veterans who pursued a college degree received money for tuition and living expenses, books and supplies, equipment, and counseling services

    • Around 8 million veterans took advantage of the bill to go to college or receive technical training

  • The number of college degrees awarded in the United States doubled between 1940 and 1950

  • Those who benefited from the GI Bill contributed to the American economy by getting good jobs and spending money

    • Veterans purchased 20% of all homes built after the end of the war

    • Many veterans received government loans for the purchase of homes, businesses, and/or farms

• The economy also benefited from changes to three existing government programs in the 1950s

  • Social Security benefits were extended to an additional 10 million Americans

  • The minimum wage was raised from $0.75 to $1.00 an hour

  • More public housing was built

Investments in Infrastructure & Technology

Housing boom

• A construction boom following the end of World War II helped the American economy grow

  • The high demand for housing was met by developers who established new communities outside of urban centers

  • Families flocked to suburban areas like Levittown, where the homes were mass-produced and reasonably priced

Source:
https://commons.wikimedia.org/wiki/File:Levittown_houses._LOC_gsc.5a25990.jpg

Highways

• The creation of a robust highway system spurred economic growth in the construction, automotive, fuel, and transportation sectors

  • The Highway Act (1956) authorized the construction of 42,000 miles of highways

    • Tens of thousands of jobs were created in response to the demand for engineering and labor

  • These interstate roads connected all the country’s major cities

Technology

• Technologies created during World War II were adapted for post-war uses

• Some of these technologies were manufacturing-related

  • Factory automations were refined during the war years to speed up the production of weapons, ammunition, and other war supplies

  • After the war, war goods were switched for domestic goods, but the assembly line processes remained the same

    • This made goods cost less to produce than they did before the war

• Some technologies were created for wartime use, then reconfigured for home use

  • Example: the microwave oven was inspired by the cavity magnetron, which was used to improve radar technology

    • The first residential microwave oven went on sale in 1955

  • Consumers who had rationed their money during the war were eager to spend it, post-war, on home appliances

The Baby Boom

• As young couples became financially secure, they began having children

• People were getting married earlier and having more children than before the war

• More than 50 million babies were born between 1945–1960

• As the baby boom generation grew from childhood to adulthood, they too had a big impact on the nation’s economy

  • The baby boomers were the largest generation, population-wise 

  • Because there were so many of them, there was a huge increase in demand for goods and services in every sector