The GI Bill and Reconversion.

Unemployment Before and After the War.

Figure 1

Much of the boom feeling of the war came from the fact that unemployment was as low as the unemployment rate had ever been (or ever would be).  Obviously much of the cause of this was because over the course of the war some 16 million men (and women) would be inducted into the army and large numbers of civilian we hired by the government in support roles.  However, many women, older men and younger men entered the workforce which offset to an extent some the decline in "typical" workers.  Figure 1 shows the change in labor force participation as a percent of the total population.

Figure 2

There was some concern that after the war these returning soldiers would come home to a retrenchment of the depression and swell the ranks of the post war unemployed.  The call for a Serviceman's Readjustment act of 1944 (The GI Bill)was in large part put together in an attempt to soften the return of soldiers both for the sake of the economy and for the soldiers themselves.

There are three main aspects of the GI Bill. First, unemployment benefits of $20 for the first year after a solider was decommissioned.  Second, there were provisions in the GI Bill that allowed returning soldiers to buy homes with no down payment, this will be dealt with in more detail in a later lecture.  Third, and most relevant here, was the education benefit/stipend that paid up to $500 in tuition costs and after an amendment to the law in 1945 also paid a living allowance of $65 dollars a month for unmarried veterans and $90 a month with an additional allowance for dependents.  They were raised once more in 1948 to $75 for a single veteran and $105 for married veterans with children.  For comparison, a factory worker could make about $200 a month in 1947.

The red line in figures 1 and 2 offer a fairly crude idea of the impact of these education benefits on the post war employment situation.  They suggest that the educational benefits reduced the labor force/population ratio by up to around 2.5% and reduced the unemployment rate by upwards of 4%.  While these numbers should be taken with a cup of salt they do offer some evidence about the impact of educational benefits, it helped soften the impact of the returning soldiers on the job market.  As well, from a Keynesian perspective they remained consumers and were the conduit for the government to funnel money into education institutions of all types.  The magnitude of the effect is obviously not clear, especially since the unemployment benefits of the GI Bill probably artificially increased unemployment (though there is still the Keynesian aspect of the unemployment payments).

GI Bill education outcomes for African-Americans and whites.


Turner and Bound offer a pretty good picture of the role that WWII and the GI Bill played in the educational attainment for both blacks and whites.  The picture they paint is pretty straight forward and perhaps not unexpected.  It is important to approach the regression results cautiously because the confidence intervals around the estimates are fairly high though the results are still worth thinking about.  At any rate, the summary tables offer us some insights.

TB Table 2

First, lets look at Table 2 from Turner and Bound.  These numbers are taken from a different survey than the regression results.  These numbers come from (as noted) the 1979 Survey of Veterans.  About 1.9 million african-americans served in the military during the war out of a total of 16.3 million total.  That works out to about 11% of the military.  Given that, african-americans are slightly underrepresented in this survey, making up less than 7%).

It should be right away obvious that african-americans are less educated going into the war.  As well, a slightly higher share of african-americans used GI benefits but they have far far lower college graduate rates.  In fact, 5 out of the 165 african-american men in the survey received bachelors degrees.  Years completed are also clearly lower.

TB Table 3

Table 3 summarizes data from the 1970 census, the pool from which Turner and Bound get their sample. Here the disparity is also clear.  More whites than blacks were high school graduates and ultimately far more whites, both veterans and nonveterans went to college.  However, white veterans were about twice as likely to to go to college than white nonveterans and black veterans were three times as likely to go to college if they had served in the military.  That number demands a little nuance, though.  First, while 6% is three times as large as 2% it remains dismal even compared to college graduate rates of nonveteran whites.  Secondly, and this goes for the difference between both white and black veteran and nonveterans is that many of those called up for the draft were declared unfit for service (IV-F) becuase they failed basic literacy tests.  African-Americans were rejected more often than whites on these grounds, as Turner and Bound point out in 1944 a third of african-americans were rejected becuase of basic literacy issues and less than ten percent of white draftees were.  So, one would expect those serving in the military, both black and white to be more educated on average than their general postulation and you would expect black soldiers to be even more educated on average, table 3 seems to support this.

TB Table 4 

Finally, table 4 from Turner and Bound divides up the african-american sample by region.  I should note here that the south is defined to include seven southern states with the most stringent segregation laws (the uses a broader definition of south in the appendix).  here the difference between veterans and nonveterans within each region  do not seem that different.  However, across the board education attainment is lower in the south than the north.

The regression results.

TB Table 5

Table 5 offers the simple regression results of Turner and Bound.  The regressions suggest two things.  1.  Serving in WWII and having access to GI Benefits increased the probability that a veteran would graduate college, it also meant he would stay in college longer than otherwise.  2.  This is true of all groups except black men born in the south.  It is important to bear in mind that these are mean effects.  That means that the increase in the probability of 3.5 percentage points is significantly "water down" by the fact that only around 2 million soldiers (or 1/8th of all WWII vets) went to college.  A little playing with the weights suggests that in fact the probability of finishing college if you start was increased by around 30%.  There are of course a number of things to unpack from that but it does suggest that the stipend had a pretty significant effect.  That should be evidence from the Atlshculer and Blumin reading which details a lot of the supply side responses to in the influx of veterans.

The effect is even more pronounced in the case of african-americans, atleast in the north.  They show a higher mean effect, while at the same time a smaller share of african-american veterans attended college after the war.  Again, though, that needs to be unpacked because higher education did not respond as flexibly for the benefit of african-americans as they did for white veterans and so far more african-americans were denied even entry into higher education for lack of supply.  This brings me to the big takeaway from these readings.  Segregation is essentially a constraint on supply..  We will see this phenomenon in spades when we talk about housing.  In terms of housing, "ghettos" were not exactly natural phenomenon, they were basically created as clearly delineated spaces where african-americans were tolerated.  African-americans were then crammed into these spaces with the perverse result that housing in run down ghettos (because of a lack of access to credit to make improvements) was more expensive than in comparable (though nicer) white areas of cities.      

They effect on college educational outcomes for blacks is similar.  The pool of colleges available to african-americans was very small and not very well funded and so there was an inelastic supply response (though enrollments at black colleges more than doubled with assistance from the federal government) to what could have been a very significant increase in demand.   

Non-collegiate education under the GI Bill.

As Turner and Bound point out, college education is only a small part of the GI Bill education story.  While around 2 million verterans went to college using the GI BIll about 5.6 enrolled in noncollege education programs.  Altchuler and Blumin list the other programs: "3.5 million [attended] public and for-profit schhol; 1.4 million in nonagricultural on-the-job training; and 700,000 in on-the-farm training--5.6 million veterans in all..." (page 151).  This spawned a boom in subcollege schooling, much of it fraudulent or of little clear value.  However, while there were plenty of scams such as the "National Chicken Sexing School" the GI Bill also gave birth to what would become the Cullinary Institute of America.  There was also perhaps a misallocation of training for the jobs that were avalible and important to the post war economy.  Altchuler and Blumin point out that there were 30,000 students enrolled in tv and radio repair course in 1949.  However, this seeming over supply also seems to suggest that man verterans were able to get training for jobs that kept them out of factories and got them into skilled jobs.  All in all, though, the legacy of subcollege for-profit education after the war has not been given serious enough attention.  The tone of Altchuler and blumin, however, makes on think of the contemporary for-profit college industry and their relationship to veterans.