6. The President’s High Wage Policy worsened the depression
Herbert Hoover, as noted, was a successful businessman in private life, a self-made wealthy man, well-respected by industry leaders. As more and more Americans lost their jobs, particularly in the manufacturing industries, the President adopted two policies which he believed would bolster consumer spending and restart the economy. One proposed the sharing of jobs, reducing the hours of work of individuals, but retaining the hours of production. The other was an incentive to pay relatively high wages. During the early months of the downturn, which he still believed would be short and mild, he summoned industry leaders to Washington.
General Motors, Ford, the steel industry, DuPont, the railroads, and many other major industries attempted to implement the President’s plan, to no avail. By the end of the summer, 1931, hours logged in factories decreased by 20%, and there were 35% fewer workers. In 2009, a study conducted at UCLA concluded the President’s High Wage Policy and job sharing caused at least two-thirds of the drop in Gross Domestic Product (GDP) during the worst years of the Great Depression. The study’s author claimed Hoover’s policies led to the “recession” being at least three times worse than it otherwise would have been had he done nothing. By mid-1932, nearly all American employers dropped the High Wage Policy and cut payrolls substantially.