960 ★ CHAPTER 24 An Affluent Society
multibillion-dollar project. But automobile manufacturers, oil companies,
suburban builders, and construction unions had very practical reasons for
supporting highway construction regardless of any Soviet threat. When the
Soviets launched Sputnik, the first artificial earth satellite, in 1957, the admin-
istration responded with the National Defense Education Act, which for the
first time offered direct federal funding to higher education.
All in all, rather than dismantling the New Deal, Eisenhower’s Modern
Republicanism consolidated and legitimized it. By accepting its basic premises,
he ensured that its continuation no longer depended on Democratic control of
the presidency.
The Social Contract
The 1950s also witnessed an easing of the labor conflict of the two previous
decades. The passage of the Taft-Hartley Act in 1947 (discussed in the previous
chapter) had reduced labor militancy. In 1955, the AFL and CIO merged to form
a single organization representing 35 percent of all nonagricultural workers. In
leading industries, labor and management hammered out what has been called
a new social contract. Unions signed long-term agreements that left decisions
regarding capital investment, plant location, and output in management’s
hands, and agreed to try to prevent unauthorized “wildcat” strikes. Employers
stopped trying to eliminate existing unions and granted wage increases and
fringe benefits such as private pension plans, health insurance, and automatic
adjustments to pay to reflect rises in the cost of living.
Unionized workers shared fully in 1950s prosperity. Although the social
contract did not apply to the majority of workers, who did not belong to unions,
it did bring benefits to those who labored in nonunion jobs. For example, trade
unions in the 1950s and 1960s were able to use their political power to win
a steady increase in the minimum wage, which was earned mostly by non-
union workers at the bottom of the employment pyramid. But these “spillover
effects” were limited. The majority of workers did not enjoy anything close to
the wages, benefits, and job security of unionized workers in such industries as
automobiles and steel.
Indeed, nonunion employers continued to fight vehemently against labor
organization, and groups like the National Association of Manufacturers still
viewed unions as an unacceptable infringement on the power of employers.
Some firms continued to shift jobs to the less-unionized suburbs and South. By
the end of the 1950s, the social contract was weakening. In 1959, the steel indus-
try sought to tighten work rules and limit wage increases in an attempt to boost
profits battered by a recession that hit two years earlier. The plan sparked a strike
of 500,000 steelworkers, which successfully beat back the proposed changes.