Employment Act of 1946

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Employment Act of 1946

Louis Fisher

Excerpt from the Employment Act of 1946

The Congress hereby declares that it is the continuing policy and responsibility of the Federal Government to use all practicable means consistent with its needs and obligations and other essential considerations of national policy, with the assistance and cooperation of industry, agriculture, labor, and State and local governments, ... for the purpose of creating and maintaining, in a manner calculated to foster and promote free competitive enterprise and the general welfare, conditions under which there will be afforded useful employment opportunities, including self-employment, for those able, willing, and seeking to work, and to promote maximum employment, production, and purchasing power.

During the last year of World War II (19391945), Congress worked on legislation to avert what many feared would be a post-war depression. It was widely believed that heavy military spending had been the main cure for the economic collapse of the 1930s, and that without stimulus from the federal government millions of American soldiers would be returning home to a country without jobs or opportunities. The Employment Act of 1946 (P.L. 79-304) declared it to be the continuing policy and responsibility of the federal government to use all practicable means "to promote maximum employment, production, and purchasing power." The statute required the president to submit an annual economic report, created the Council of Economic Advisers to assist the president with that task, and established the Joint Economic Committee in Congress to study the means needed to further the policy of the statute.

Historians credit Senator James E. Murray (D-Mont.) for supplying the "spark of will" that transformed an idea into the Employment Act. Yet the statute reflected leadership and initiative at many levels, public and private. In his annual message to Congress in January 1944, President Franklin D. Roosevelt spoke of a new Economic Bill of Rights, including the "right to a useful and remunerative job." Economists such as John Maynard Keynes and William H. Beveridge influenced Roosevelt. Keynes, rejecting the traditional assumption that the capitalist system was self-adjusting, advocated government intervention to preserve existing economic forms and individual initiative. Beveridge, in his 1945 book, Full Employment in a Free Society, regarded the greatest evil of unemployment as "not physical but moral, not the want which it may bring but the hatred and fear which it breeds." He urged that public spending be directed toward social priorities and the satisfaction of human needs. Also key to passage of the statute were private organizations such as the National Planning Association and the legislative staff who worked in concert with executive agencies, interest groups, and individuals.


As introduced in the Senate, the Full Employment Bill of 1945 reiterated Roosevelt's principle by declaring that "all Americans able to work and seeking work have the right to useful, remunerative, regular, and full-time employment." The bill centered major powers and responsibilities in the presidency. In cases where the private sector failed to provide full employment, the bill directed the president to prepare a program of federal investment and expenditures to close the gap. The president would review federal programs on a quarterly basis and alter their rate as he considered necessary to assure full employment. The Senate passed this bill in September 1945 by an overwhelming vote of 71 to 10.

Critics in the House charged that the bill contained within it the seeds of paternalism, socialism, and even communism. They claimed that the bill jeopardized the existence of free enterprise, individual initiative, and business confidence by vesting of power in the federal government and the president. It was predicted that the Full Employment Act would lead to excessive government spending, a dangerous concentration of power in the presidency, and crippling inflation.

This criticism led the House to remove or dilute several substantive and forceful passages in the Senate bill. For example, the basic commitment to employment as a human right was taken out, two sections on presidential discretionary powers were deleted, the original goal of full employment was whittled down to "maximum employment," and, instead of the federal government assuring government, it would only "promote" it. Moreover, the specific reliance on public works and federal loans as instruments of economic recovery was replaced by the noncommittal phrase "all practicable means."

The resulting declaration of policy in the Employment Act of 1946 stated that the federal government, assisted by industry, labor, and state and local governments, was responsible for coordinating plans, functions, and resources for the purpose of creating and maintaining conditionsconsistent with the free enterprise systemthat would offer "useful employment opportunities, including self-employment, for those able, willing, and seeking to work, and to promote maximum employment, production, and purchasing power."


During the latter half of the 1970s, the U.S. economy encountered sluggish growth, heavy unemployment, and high inflation. Responding to those problems, Senator Hubert Humphrey and Rep. Augustus Hawkins called for a massive federal jobs and economic planning bill, placing the federal government in the position as the "last resort" for the unemployed. Instead, Congress enacted the Full Employment and Balanced Growth Act of 1978, known as the Humphrey-Hawkins Act, to redefine national goals and targets without providing explicit federal assistance. The statute determined that the nation had suffered from substantial unemployment and underemployment, idleness of productive resources, high rates of inflation, and inadequate economic growth.

Congress established as a national goal "the fulfillment of the right to full opportunities for useful paid employment at fair rates of compensation of all individuals able, willing, and seeking to work." That statute required the president to establish and to submit to Congress five-year numerical goals for employment, unemployment, production, real income, productivity, and prices in each economic report. The statute also set a goal of reducing unemployment to 4 percent by 1983 (compared to the 6.1 percent rate in 1978). Congress specified that the inflation rate be reduced to a level of no more than 3 percent by 1983 (in contrast to the 9 percent level in 1978). Finally, the Humphrey-Hawkins Act required the Federal Reserve Board to report to Congress twice a year on its monetary policies and to relate them to the goals of the act. Setting statutory goals, of course, is not the same as achieving them. There are no penalties, sanctions or remedies in the statute if the nation fails to meet the identified goals and targets.


Bailey, Stephen Kemp. Congress Makes a Law: The Story Behind the Employment Act of 1946. New York: Columbia University Press, 1950.

Beveridge, William H. Full Employment in a Free Society. New York: W.W. Norton, 1945.

Norton, Hugh S. The Employment Act and the Council of Economic Advisers, 1946-76. Columbia: University of South Carolina Press, 1977.

Stein, Herbert. The Fiscal Revolution in America. Chicago: University of Chicago Press, 1969.

Employment Act of 1946

views updated May 23 2018


EMPLOYMENT ACT OF 1946 was rooted in the dismal experience of the Great Depression and the fear that remained alive during World War II that the United States might emerge victorious from the war only to confront the return of massive unemployment. Liberals especially sought to harness the newly emergent Keynesian economics and the administrative capacity built up under the New Deal to guide the economy successfully into the postwar world.

In January 1945 Senator James Murray (a Democrat from Montana) introduced the Full Employment Bill of 1945. The bill consisted of three main elements. First, it proclaimed the right of all Americans "able to work and seeking work" to regular, full-time employment. Second, it provided a Keynesian planning mechanism, the National Production and Employment Budget, to identify any pending deficiencies in expenditures and investment that might stand in the way of full employment. Third, the bill directed the federal government to address such shortfalls by encouraging private investment and if necessary by federal spending as a last resort.

Congressional consideration of the Full Employment Bill of 1945 occasioned a fierce battle between liberals and conservatives and among a variety of interest groups. The bill's backers viewed the proposed legislation as a lever of liberal reform rather than a mere technocratic tool, and its conservative opponents agreed with that assessment. The bill's supporters included Democratic staffers in Congress and the executive departments, the Union for Democratic Action, the National Planning Association, the National Farmers Union, and important segments of organized labor. The National Association of Manufacturers, the national Chamber of Commerce, and the American Farm Bureau Federation led the charge against the bill.

The final legislation, renamed the Employment Act of 1946 and signed into law by President Harry S. Truman in February 1946, was a compromise measure weighted on the conservative side. Instead of guaranteeing full employment, the Employment Act of 1946 committed the government to pursue "maximum employment, production, and purchasing power." The act dropped the explicit planning mechanism of the National Budget, replacing it with a much weaker requirement for a yearly Economic Report of the President. It also created new entities to help increase the sophistication of economic policymaking, the Council of Economic Advisers in the White House and the Joint Committee on the Economic Report (later renamed the Joint Economic Committee) in Congress.

The final product was much diluted from the initial version, but the Employment Act of 1946 was nevertheless significant. It formally recognized the federal government's new, postdepression role as the manager of national prosperity, and its organizational innovations, the Council of Economic Advisers and the Joint Economic Committee, played important roles in national economic policymaking throughout the postwar era.


Bailey, Stephen Kemp. Congress Makes a Law: The Story behind the Employment Act of 1946. New York: Columbia University Press, 1950.

Collins, Robert M. The Business Response to Keynes, 1929–1964. New York: Columbia University Press, 1981.

Robert M.Collins

See alsoGreat Depression ; Keynesianism .

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