Economic impacts
However, this image of the 1920s that everyone was doing well was not entirely true.
The income of the upper class and lower class was becoming more and more unequal The rich were becoming richer much faster than the poor, so much so that 0.1% of the families at the top received as much money as 42% of families at the bottom. The dissatisfaction of the lower class was seen in several union strikes, but unions were losing participation and power. Union membership declined from 5 million to 3 million and the Supreme Court overturned minimum wage and child labor laws.
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Despite what seemed to be the increased availability of new inventions, not all families had access to them. For example, a clear disparity can be seen in the families that had access to electricity. The lower class, many of which were farm dwellers, did not have as much access to electricity in comparison to all dwellings. This shows that not everyone was getting richer; in comparison to the upper class, the lower class was not benefiting from new consumer items and material goods.
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Rural farmers especially suffered during this time period. Agricultural prices were falling, causing the foreclosures of farms. With farms foreclosing, the labor force in cities increased as farmers moved to the cities to look for work. However in the city, all the work they had available was factory work which proved to be meaningless and boring.
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A study from the University of California Historical Labor Statistics Project, made available by Harvard University, examines Homeownership rates and personal income in America's history. The boxed area in the table above shows:
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Comparing IRS statistics from 1920 to those from 1928, it shows:
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The introduction of the automobile industry accelerated the American culture of debt. In 1919, General Motors began to lend extra money to their customers for them to be able to buy a car. GM created a financing arm called the General Motors Acceptance Corporation (GMAC). They required a 35% down payment and the rest of the money to be paid over the course of a year. By the end of the decade, a majority of cars were sold on credits. Following this example, many other companies created their own loan subsidiaries for products such as cars and grocery items so that consumers wouldn't have to go to the bank to get loans. Consumerism grew through credits, but it did not come without consequences.
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In the 1920's, most middle and lower class workers relied on easy credits and installment plans for large amounts of material goods to make them look rich. This graph shows how people were deeply in debt in the 1920's. The installment plans and easy credits were first proposed to discipline and encourage workers. Although indebtedness did discipline workers, however, it did not benefit the society in any other aspects. Because farmers were unable to pay their long-term debts for their luxurious life, they started losing their farm throughout the 1920's. This decline in farm income stopped rural customers from purchasing more goods. During the 1920's, thousands of banks failed due to the farmers' defaulted debt. This banking crisis also impacted a large number of small business people. First of all, they could not secure loans. Second, they had no working assets. Many of them went bankrupt.
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