Unemployment Relief Distribution in the Bay Area During the Depression

Charmaine Go, University of California-Berkeley

The 1920s will always be remembered as a decade filled with growth, energy, and prosperity. Families surrounded themselves with modern durable goods such as radios, appliances, and automobiles which made life easier and more convenient. However, a few years later, many of the same Americans found themselves in the opposite position. Instead of spending disposable income on consumer durable goods, families found themselves without enough money to pay for daily necessities such as food and shelter.

During the Depression, the 1920s aura of endless opportunity and wealth quickly dissipated as feelings of uselessness and shame overtook American society. Unemployment grew to an all time high in 1933 and for the first time in American history, the federal government began to expand its role as caretaker of society as it offered relief and aid to those without jobs. As unemployment became a mass phenomenon and relief demand increased, it is necessary to question whether or not the local city welfare systems utilized the best distribution method for allocating scarce relief resources. More specifically, the Bay Area used three different methods of food relief allocation and in light of research it can be concluded that San Francisco county's commissary system was the most effective method for relief allocation.

The intent of this paper is multifaceted. Section one discusses the key highlights of the Depression so that Bay Area statistics can be placed in a frame of reference. Section two looks at the unemployment and relief situation in the Bay Area. It examines the general statistics of unemployment in San Francisco, Oakland, and Berkeley as well as describes the providers and recipients of relief in the Bay Area. Finally, Section three examines the different relief distribution methods used by agencies in the Bay Area and argues that San Francisco's commissary system was more efficient than Berkeley's cash system or Alameda's grocery-order system.

1. America's Great Depression 1929-1940

July 1921 to August 1929 was a period of growth and prosperity for the American economy. Two important economic indicators of the strong economy are the unemployment rate and GNP. From 1923 to 1929 the unemployment rate stayed low at 5% or less. GNP or the Gross National Product was measured at $103.1 billion in 1929.However, by August 1929, a minor decline in economic activity signaled the beginning of a gradual recession. The stock market peaked in September 1929 with 1, 125 million shares sold on the New York Stock Exchange (NYSE) and crashed on October 24, 1929.(1)

According to John Galbraith, "to millions of workers, farmers, sharecroppers, and small merchants the devastation of those October days was more distant news. They could not suppose that they were much affected by what was going on in Wall Street.(2) The 1929 stock market crash itself did not bring about the Depression. However, "it significantly accelerated the mild downturn then underway because of the catastrophic magnitude of the decline and the uncertainty it created about the future course of the economy.(3) In other words, Americans during the time invested more than money in the stock market, they also invested their hopes. Thus when the market crashed so did their confidence in the future.

Due to future uncertainty, Americans spent less money; this uncertainty initiated a series of events. As illustrated in figure 1. 1, Americans' consumption decreased. This led to a decrease in aggregate demand, output, labor, and an increase in unemployment. The increase in unemployment meant decreasing income and disposable income which routed back to decreasing consumption. As a result, even fewer people had the ability to buy goods thanbefore. In macroeconomic terms, if:

Y= output or income generated in the American economy.

C= Consumption by American households of final goods and services.

L= The amount of laborers needed in the economy.

UE= Unemployment in the economy.

AD= Aggregate demand is the total amount of goods demanded by households.

YD= Disposable income is equal to: YD=Y+TR-TA. Note that TR stands for transfers and TA stands for taxes.

The multiplier effect is a "snowball effect" that magnifies and increases the impact of each variable with every round of the linked chain of economic events described above. In 1929, the multiplier effect resulted in a downward spiral of decreasing output, consumption, labor, aggregate demand, and disposable income, and an increasing level of unemployment. Table 1. 1 describes the GNP for 1929 to 1939 in current and constant prices. The current prices will be helpful when measuring later per capita retail sales data while constant prices serve as a better form of comparison when examining changes in output. As seen in the table, the level of output in the country fell from 203.6 billion in 1929 to 141.5 in 1933. In other words when an index of 1929=100 is used, we see that the 1933 GNP fell 30% from its 1929 level.

As described by the multiplier process during the Depression, personal consumption expenditure fell between 1929 to 1933. Examining table 1.2 shows that in 1929 consumption was at $139.6 million but fell to a decade low in 1933 with $112.8million. This means that in 1933, consumption spending was 20% less than in 1929.

The Depression reached its trough in 1933 with 25.2% of Americans unemployed. This was a drastic rise from the 3.2% unemployment rate in 1929. As a result, there were only 38,052,000 employed Americans in 1933 compared to 46,207,000 in 1929. As unemployment increased, real disposable income fell 25.3% from $150.5 billion in 1929to $112.4 billion in 1933.


Deflation was prevalent during this time period. From 1929 to 1933, prices fell approximately one-quarter of its original amount. Thus the trend of falling income and disposable income during the Depression was somewhat compensated by falling prices of goods.


Section 2. Unemployment and Relief in the Bay Area

"Unemployment is perhaps the most dreaded disease of modem industrial society" and in the 1930s, it was a disease that few could escape.(4) The unemployment trend in California mirrored that of the United States. In 1930 when 8.7% of the U.S. workforce was unemployed, 7.6% of the California workforce was unemployed. Within California, in 1930 San Francisco had a 7.3% unemployment rate, Oakland a 7.4% unemployment rate, and Berkeley had a 4.9% unemployment rate. In 1932 when unemployment in the US was 23.6%, 28% of the California workforce was estimated to be unemployed.(5)

After 1932, census data for unemployment become scarce, in fact, "there are no statistics of unemployment for either San Francisco or Alameda County covering 1932-1934.(6) However, there is a "Special Census of Unemployment" which on January 1931 measured unemployment rates in 19 cities including San Francisco. The number unemployed in San Francisco increased from 24,467 in 1930 to 46,045 in 193 1, a 47% increase in one year.( 7)

Relief Providers

While there are no consistent data for unemployment from 1932-1934 for the Bay Area, we can examine relief aid data to better understand the unemployment effects of the Depression. Since there is a positive correlation between unemployment and the number of family relief cases, it is evident that as unemployment increased, the number of people who sought relief aid also increased.

Until August 1933, unemployment relief in San Francisco was mainly administered by private agencies. The agencies who played a large role in the county were the Associated Charities (later known as the Citizens' Agency), the Eureka Benevolent Society, and the Italian Board on Relief ' On August 1933, the Citizens' Advisory Relief Committee, a public agency, closed all of the private agencies in the county and took the sole responsibility of administering most of the family relief in San Francisco.

As seen in table 2. 1, unemployment did not greatly impact San Francisco until 1931. From 1929 to 1930, expenditure for relief aid only increased by 29.2% while from 1929 to 1931, expenditure increased by 583.3%. Then from 1931 until 1934, relief expenditure increased an average of 1572.7% over 1929. The enormous rise in expenditure from 1931 to 1934 implies that unemployment was rapidly rising in San Francisco during those years.

More precisely, table 2.1 also shows the average number of families per month on relief rolls. Once again, the data show that the number of families on relief did not start to dramatically increase until 1931 which means that unemployment did not become a major problem in the city until 1931. From 1929 to 1930, the average number of families per month only increased by 31.4%. In the following year there was a 148.9% increase over 1929. By 1933, the average number of families per month on unemployment relief reached its peak with a 960.9% increase over 1929. Finally, in 1934, the average number of families on relief began to decline by 14.8% but the number of families was still 818.3% over the number of families on relief in 1929.

The staggering numbers clearly illustrate that the Depression had a major impact on the unemployment rates in San Francisco. As a result, it is evident that unemployment relief aid and the agencies who distributed them were an important part of survival for the citizens of San Francisco.

From 1929 to May 1933, four agencies administered relief aid in Alameda County. There were three private agencies in Berkeley, Oakland, and Hayward, and one city agency in Alameda. To describe their tasks, "these agencies contracted with the county to investigate applicants for relief and to supervise the distribution of county relieffunds."9 However, on May 1, 1933, the Alameda County Charities Commission was created and took the entire responsibility of handling all family relief cases in the county. This paper will focus specifically on the city 'of Oakland whose relief distribution prior to1933 was supervised by the Oakland Associated Charities, and the city of Berkeley, whose county relief funds prior to 1933 were administered by the Berkeley Welfare Society.

Unlike San Francisco, unemployment began to have a major impact on Oakland in 1930. Table 2.2 illustrates that in 1929, unemployment relief expenditure increased only 39.7% while it increased by 228.6% in 1930. For the next two years, expenditure increased by an average of 632. 1% over 1928. These statistics show that as expenditure for relief aid continued to climb, unemployment also continued to grow in Oakland.

Similarly, Table 2.2 also shows that the average number of families on relief per month began to unusually increase in 1930 when there was an 82. 1% rise over 1928. By1932, the average number of families on relief per month reached 8,813 cases, a 586.4%increase over 1928. Unfortunately due to the lack of data, it is not possible to conclusively determine whether 1932 was the peak year for relief expenditure and whether it had the largest average number of families on relief in Oakland. As reported by the Census Bureau, the United States as a whole had the highest unemployment rate(25.2%) in 1933 which leads to the assumption that the 1932 Oakland relief expenditure and number of family cases were approximately the highest during the decade.

As Table 2.3 shows, relief expenditure in Berkeley did not reach abnormal levels of increase until 1931 when expenditure jumped by 291.6% over 1928. During the next year in 1932, expenditure for family relief dramatically rose to 641.8% over 1928. The relief statistics imply that Berkeley was not seriously affected by unemployment until 1931.

Table 2.3 also shows that the average number of families receiving relief aid in Berkeley did not abnormally rise until 193 1. In 1929 there was a 23.3% increase in the number of families receiving aid from the previous year. This number increased to88.7% in 1930 and in 1931 the average number of families receiving aid increased by253. 1% over 1928. The average number of families receiving aid in Berkeley had increased 674.9% over 1928.

In summary, relief agencies were necessary to the Bay Area during the Depression. San Francisco, Oakland, and Berkeley were economically impacted by the negative affects of the Depression through unemployment.

Relief Recipients

Since relief providers in the Bay Area have been discussed and expenditure data examined, the next step is to tell a story about the other side of unemployment, the relief recipients. Stereotypically, people who receive welfare or unemployment aid from the government are perceived to be lazy or burdens to society. However, by examining Bay Area data collected by the Heller Committee for Research in Social Economics from1932 to 1934, it is evident that the stereotype is wrong. This paper will focus on four characteristics of relief recipients: age, family size, foreign/native born, and occupation to prove that unlike popular belief, relief recipients were young, hardworking, and mostly native-whites.

To begin with, table 2.4 describes the ages of male heads of families who applied for unemployment relief in 1929 and 1932 as well as the 1930 census data for San Francisco, Oakland, and Berkeley. Between 1929 and 1932 there was not a significant change in the ages of men who applied for relief aid. Approximately 75% of the men in both 1929 and 1932 were younger than 44. However, when compared to the 1930unemployment census, it was found that only 60% of the people were under 44 years of age. Therefore, the male heads who applied for unemployment relief aid in San Francisco, Oakland, and Berkeley tended to be younger than the population as a whole.

According to the Heller Committee "one might expect to find relatively few families applying for relief in a 'normal' year whereas in the later years of a depression, such families would have exhausted their resources and forced to apply for relief"(10) Table 2.5 supports this statement. For example, in 1929, 64.6% of families who applied for aid had two or less children. Meanwhile in 1932, 86.4% of families receiving relief had two or less children. This illustrates the point that smaller families were more likely not to apply for unemployment relief aid until their resources were exhausted. Another way to view these statistics is to see that in 1929, 35.4% of families had three or more children. In contrast, during 1932 that number dropped to less than half as only 13.6% of families who received relief aid during that year had three or more children. These statistics illustrate the idea that families who received unemployment relief asked for help because they were truly in need of financial assistance. The fact that smaller families did not apply for relief aid until their financial resources were depleted shows that relief recipients were reluctant to ask for federal help.

This reality goes against welfare recipient stereotypes which say that these people are relief recipients because they can be and because it is easier to be getting help from the government than working.

Often when resources (relief money) are scarce people are more likely to blame outsiders for exhausting their resources. Table 2.6 compares the head of families' ethnicity from the Bay Area in 1932 to that of the 1930 Census. The difference between native-white recipients in the Bay Area (67.7%) and the 1930 Census (65%) is insignificant. Thus the white population in the Bay Area was similar to the nation. The Heller study also reported that "foreign-born whites" and "other races" in the Bay Area was less than the general United States. On the other hand, there were more Blacks receiving unemployment relief in the Bay Area than in the 1930 Census. These statistics prove that the foreign-born population was not "contributing more than its fair share to the burden." (11)

Relief recipients are also stereotyped as unskilled workers. While it is true that there is a higher proportion of unskilled workers in the Bay Area in both 1929 and 1932than in the 1930 Census, the fact that all categories are represented shows that not all relief recipients are unskilled. In fact, many unskilled workers are receiving aid because their jobs end to be temporary and they also tend to fluctuate with business cycles. For instance, many unskilled workers are employed in the construction industry. As a result, when the economy is in a depression or a recession, there is a decrease in the demand of new buildings and construction workers are no longer needed. Since their jobs are temporary, it is harder for unskilled workers to save money in case of financial emergencies. Thus when the economy declines, it is more likely to find unskilled workers needing relief aid at the beginning of an economic crisis such as in 1929. Table 2.7 also shows that the number of relief recipients working as clerks and skilled workers increased from 1929 to 1932. One reason for the increase could be due to the fact that clerks and other types of skilled workers are more likely able to save money for future use. As a result, when the Depression hit the Bay Area, this category of workers lived by dipping into their savings until it was depleted. As a result there was no need for them to apply for relief aid until later into the Depression.

To conclude, a majority of relief recipients were not unskilled workers, most of them were skilled, semi-skilled, managers, or professional persons. The workers who are unskilled find themselves in need of relief aid because of the temporary types of jobs available to them since they possess fewer skills.

In summary, relief recipients in San Francisco, Oakland, and Berkeley were not lazy immigrants who were in the margins of society prior to the Depression. They were mostly young, native-whites, a majority of whom were skilled or semi-skilled, and who were reluctant to ask for government help until their own savings were depleted. These descriptions do not fit the stereotypical relief recipient.

Section 3. Comparison of Bay Area Relief Allocation Systems

During the Depression, different cities and counties in the Bay Area used different methods for distributing relief aid. More specifically, three methods were predominantly used, the grocery-order system (Alameda city), commissary system (San Francisco County), and cash relief system (Berkeley and Oakland). By comparing these three methods of distribution in terms of cost and effectiveness it will be evident which system was most optimal during the Depression.

Before costs are compared, it is first necessary to give a brief description of each kind of allocation method. Under a grocery system, a family is given an order every two weeks to the grocery of their choice. The order is a limited list of set items that they can buy at set prices. These prices are set regularly by grocers' associations and chain stores. The goods are priced at wholesale plus an additional 10% off. In a commissary system, families have the choice of having boxes of food sent to them or they can come to the groceteria to choose their own food. Milk is delivered to their homes and a supplement check is given to families for fresh meat and bread, which they buy at regular retail groceries. In a commissary system, there is the least amount of individual choice of food. Finally, in a cash relief system, families are given more freedom to choose their provisions. Families in Berkeley were given "orders for specified amounts which were redeemable in groceries for these amounts," but it did specify which goods.(12)

In order to compare the costs of the different systems, we will turn to a study conducted by the Heller Committee for Research in Social Economics. In December 1933, Alameda County approached the Committee and asked them to calculate the cities' current relief costs under the current grocery-order system and to project relief costs if Alameda used the commissary or cash relief systems.

As seen in table 3. 1, the smaller "total food cost" for the commissary system more than compensated for the higher "breakage and spoilage" and "overhead cost" of the San Francisco County method. One way to compare the different costs is to look at total costs when it is calculated as a percentage of Alameda's present cost. It is clearly evident that the commissary method is the least expensive of the three methods, followed by the grocery-order method, and then the cash relief method.

Another way to determine which distribution method is more effective would be to examine families of different relief systems and see which of them are attaining the necessary dosage of vitamins and minerals to maintain healthy lives. Unfortunately, there is a lack of data to do a complete comparison of all three cities. However in 1932,the Berkeley Welfare Society (utilized the cash-relief system) approached the Heller Committee for Research in Social Economics and asked them to conduct a study to determine whether Berkeley residents were attaining proper nutrition. Thus from this study, it will be possible to determine whether the cash relief system, makes up for being the most expensive by being the most nutritionally full.

The food standard used was "drawn up in November 1931 by Ruth Okey and Emily H. Huntington as a basis for relief to families of children receiving aid and similar cases." (13) In their food standard Okey and Huntington use five different minerals (calories, protein, calcium, phosphorous, iron) to determine whether a persons diet is "adequate."

As seen in Table 3.2, a majority of families were below the "adequate" food standard in all mineral categories except for calcium. This means that under a more liberal distribution system (cash relief system) where relief recipients were given the ability to choose their own provisions, they were unable to choose the best combinations of food which would give them the greatest nutritional value per federal dollar. According to Ruth Okey, "As might be expected, these relatively unrestricted food purchases tended primarily towards a choice of those foods which appeal to the taste rather than towards ones which contain the needed nutritive qualities at low Cost." (14)

In summary, when the grocery-order, commissary, and cash relief systems were compared in terms of cost and nutritional effectiveness, it was found that the cash relief system was most expensive and it did not provide the needed adequate nutrients to relief families.

Section 4. Conclusion

In light of the data examined, it can be concluded that the cash relief system (or a system where individuals are given free reign to pick their own provisions) is the least effective allocation method. This is especially the case when financial resources are scarce as they were during the Depression. While it cannot be concretely concluded that the commissary system is the best method for food distribution in terms of nutrient content, it is the least costly. In fact, it seems "more or less obvious that better values for the money can be attained if relief funds are expended accordingly to some plan which provides for wholesale purchase of food and its allotment to individual families according to nutritional requirements, in other words, a central commissary." However, while it might seem that a commissary system might be more effective, it is also important to keep in mind that a commissary method takes away any individual choice in the type of food consumed. Therefore, another question emerges, should the government have the ability to prescribe the types of food that people consume? The answer to this question is left to the individual.

Studies regarding distribution methods have important current and future public policy implications. For instance, everyday thousands of Americans are without food and shelter, this study shows that government aid in terms of set nutritionally filled food is the most effective way to feed more hungry Americans. In fact, these conclusions can be applied in situations and countries outside of the United States. They are especially applicable in third world countries where resources are scarce.

Endnotes

1 Galbraith, John K. The Great Crash, Boston: Houghton Mifflin Company, 1979.
2Ibid. p. 1.
3Gary Walton and Hugh Rockoff, History of the American Economy (Fort Worth: Dryden Press, 1998) 520.
4 Huntington, Emily H. Unemployment Relief and the Unemployed in the San Francisco Bay..., p.5.
5 Ibid., p.6.
6 Ibid., p.7.
7 Ibid., p.6.
8 Huntington, Emily H. Unemployment Relief and the Unemployed ..., p. 10.
9 Huntington, Emily H. Unemployment Relief and the Unemployed ... p.11.
10 Huntington, Emily H., Une!RpIpMent Relief and the Unemployed.... p. 19.
11 Huntington, Emily H. Unemplwnent Relief and the UneLnployed.... p.24.
12 Note: Description of different relief distribution systems were found in Heller Committee for Research in Social Economics, Report on the Probable Costs of... pp.4-6.
13 Okey, Ruth, The Foods Chosen By Dependent Families, p.32.
14 Ibid., p.35.
15 Okey, Ruth, The Foods Chosen By Dependent Families, P.i.

References

Galbraith, John K. The Great Crash, Boston: Houghton Mifflin Company, 1979

Gary Walton and Hugh Rockoff, History of the American Economy, Fort Worth: Dryden Press, 1998.

Heller Committee for Research in Social Economics, Report on the Probable Costs of Adninistering Food Relief in Alameda County by the Grocery Order, Commissary, and Cash Systems December 1933. University of California, Berkeley: 1934.

Huntington, Emily H. Unemployment Relief and the Unemployed in San Francisco Bay Region 1929-1934, Heller Committee for Research in Social Economics,Berkeley, CA: UC Press, 1939.

Okey, Ruth, The Foods Chosen By Dependent Families, Heller Committee for Researchin Social Economics, University of California, Berkeley: 1933.

U. S. Bureau of the Census. Historical Statistics of the United States: Colonial Times to 1970. 2 vols. Washington, D.C.: Government Printing Office, 1975.