The big ideaOne person's spending is another person's wages, so when spending shrinks, jobs shrink too.
How it works
In Millbrook, a made-up town, one person's spending is another person's wages: families spend at shops, shops pay helpers, and helpers spend again.
In 1929 a huge crash in the share market worried people, so families saved every coin. Shops sold less and needed fewer helpers, and the spiral turned down.
This happened around the world in the 1930s and is called the Great Depression. In some countries about one worker in every four had no job, and it lasted for years.
Neighbors shared and swapped. Slowly, governments paid people to build roads, bridges and schools, so wages meant spending and spending meant jobs again.
👪families spend wages🛒at the shops💰shops pay helpers🔄helpers spend again
How a town's money goes round.In some countries about one worker in every four had no job.From the crash to the way out. The spacing is even, not to scale.
Example 1: Why one baker's sales matter
Cy sells fewer loaves.
He cannot pay everyone, so he lets 2 helpers go.
With no wages, the helpers spend less too.
Other shops sell less, and the spiral turns.
Example 2: One in four
In some countries about 1 worker in every 4 had no job.
That leaves 3 workers in every 4 with a job: 4 − 1 = 3.
It lasted for years, and it was hard on many families.
Example 3: The way out
Governments paid people to build roads, bridges and schools.
Wages meant spending, and spending meant jobs.
Shops sold and hired more, so the spiral turned the right way up.
Example 4: Saving all at once
Each family saving every coin was sensible.
But if everyone does it at once, shops sell less.
So one town could not fix it alone by saving harder.
Words to know
wages
Money people earn for their work.
spiral
Less spending, fewer jobs and even less spending, round and round.
savings
Coins kept safe for later.
Great Depression
The hard years of the 1930s, around the world.
Watch out
It lasted for years, not weeks.
Not every family lost savings. Some did, and it was very hard.
Spending is a shop's income, so it is tied to jobs.
If everyone saves more at once, shops sell less. Saving harder did not fix it.
Try it
Complete it: one person's spending is another person's ___.
Shops sell less. What may happen to the helpers' jobs?
About how many workers in every four had no job in some countries?
How did paying people to build roads help?
Answers: 1. wages · 2. Shops may need fewer helpers · 3. One · 4. It gave them wages to spend, so shops sold more
Try at homeWith a grown-up, ask if your family has stories of hard times long ago. How did people help each other?
For grown-upsThis is a hard time in history, told gently. You might ask whether your family has stories of hard times long ago, and how people helped each other.
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