178 MASS. EXPERIMENT STATION BULLETIN 25G 



The Effect of the War 



The war has been responsible for the increase in expenditures in two ways. 

 During the war, public expenditures for local purposes were kept to a mini- 

 mum due to demands for economy. There were definite restrictions on municipal 

 expenditures, particularly from bond issues. Consequently, State expenses alone 

 show a significant increase during the war years, and the largest single war 

 cost, the soldiers' bonus, was a post-war expense. 



At the close of the war most cities and towns were several years behind 

 in their building program. This deficiency had to be met together with current 

 needs, at a level of prices at least 50 per cent higher than the pre-war level. 

 Therefore the war was partly responsible for the increase in expenditures 

 through the postponement of necessary building during the war, and indirectly 

 through inflated prices. 



The significance of post-war expenditures may be illustrated by comparing 

 the average annual increase for pre-war and post-war periods. 



Average Annual Increase in 

 Total Massachusetts Expenditures 



1910-1918 $ 8,086,000 



1919-1924 21.,103,000 



During the six years following the war, the average annual increase was ap- 

 proximately three times as much as before and during the war. 



Increase in Population 



The normal increase of population has been responsible for part of the 

 increased cost of government. The population of Massachusetts increased 23 

 per cent between 1910 and 1925. Most of this increase has taken place in the 

 cities and large towns. According to the population census of 1925, 110 of the 

 smaller towns show a net loss in population since 1900. Obviously the in- 

 crease in tlie cost of government in these towns must be accounted for on some 

 other basis than increasing numbers of people. However, for the state as a 

 unit, population has tended to increase at an annual rate of from 1 to 2 per 

 cent. This has certainly been one cause of increasing public expenditures. 



The Rise in Prices 



The general rise in prices has been one of the most important causes of 

 increased expenditures. During the five-year period, 1922-1926, wholesale prices 

 averaged more than 50 per cent above 1913, according to the all-commodity 

 index of the United States Bureau of Labor. The cost of government is de- 

 termined largely by the price of materials and by the cost of labor services. 

 Wages and salaries normally increase in about the same proportion as prices 

 but slightly later, and it is to be expected that government costs should in- 

 crease with prices. On this basis, government costs in 1926 would be 50 per 

 cent higher than in 1910 for exactly the same amount of service; or, to state it 

 another way, the tax dollar in 1926 would buy only two-thirds as much service 

 as in 1910. 



However, wages and salaries follow retail prices more closely than whole- 

 sale prices, and during the past five years retail prices have averaged from 60 

 to 70 per cent above pre-war figures, according to the Bureau of Labor. Wages 

 of factory workers in New York have averaged more than double the pre-war 



