Labor Market Shocks in the Great Depression
The classical model explains the Great Depression with shocks in the labor market. Related to the second problem set, below are a few items that might have been involved in causing unpleasant labor market shocks. The critical questions are 1) Is the timing right? 2) How would it have affected the labor market? 3) Could the effects have been large enough?
Davis-Bacon Act
In 1931, Congress passed the Davis-Bacon Act, requiring that contracts for construction entered into by the Federal Government specify the minimum wages to be paid to persons employed under those contracts.
United States Code, TITLE 40 - PUBLIC BUILDINGS, PROPERTY, AND WORKS, CHAPTER 3 - PUBLIC BUILDINGS AND WORKS GENERALLY.  Sec. 276a. Rate of wages for laborers and mechanics 

 (a) The advertised specifications for every contract in excess of $2,000, to which the United States or the District of Columbia is a party, for construction, alteration, and/or repair, including painting and decorating, of public buildings or public works of the United States or the District of Columbia within the geographical limits of the States of the Union or the District of Columbia, and which requires or involves the employment of mechanics and/or laborers shall contain a provision stating the minimum wages to be paid various classes of laborers and mechanics which shall be based upon the wages that will be determined by the Secretary of Labor to be prevailing for the corresponding classes of laborers and mechanics employed on projects of a character similar to the contract work in the city, town, village, or other civil subdivision of the State in which the work is to be performed, or in the District of Columbia if the work is to be performed there; and every contract based upon these specifications shall contain a stipulation that the contractor or his subcontractor shall pay all mechanics and laborers employed directly upon the site of the work, unconditionally and not less often than once a week, and without subsequent deduction or rebate on any account, the full amounts accrued at time of payment, computed at wage rates not less than those stated in the advertised specifications, regardless of any contractual relationship which may be alleged to exist between the contractor or subcontractor and such laborers and mechanics, and that the scale of wages to be paid shall be posted by the contractor in a prominent and easily accessible place at the site of the work; and the further stipulation that there may be withheld from the contractor so much of accrued payments as may be considered necessary by the contracting officer to pay to laborers and mechanics employed by the contractor or any subcontractor on the work the difference between the rates of wages required by the contract to be paid laborers and mechanics on the work and the rates of wages received by such laborers and mechanics and not refunded to the contractor, subcontractors, or their agents. 
Walsh-Healy Act
Passed in 1936, the Walsh-Healy Act stated that workers must be paid not less than the "prevailing minimum wage" normally paid in a locality; restricted regular working hours to eight hours a day and 40 hours a week, with time-and-a-half pay for additional hours; prohibited the employment of convicts and children under 18; and established sanitation and safety standards.
UNITED STATES CODE TITLE 41--PUBLIC CONTRACTS. CHAPTER 1--GENERAL PROVISIONS. Sec. 35. Contracts for materials, etc., exceeding $10,000; representations and stipulations 

 In any contract made and entered into by any executive department, independent establishment, or other agency or instrumentality of the United States, or by the District of Columbia, or by any corporation all the stock of which is beneficially owned by the United States (all the foregoing being hereinafter designated as agencies of the United States), for the manufacture or furnishing of materials, supplies, articles, and equipment in any amount exceeding $10,000, there shall be included the following representations and stipulations:
 (a) That the contractor is the manufacturer of or a regular dealer in the materials, supplies, articles, or equipment to be manufactured or used in the performance of the contract;
 (b) That all persons employed by the contractor in the manufacture or furnishing of the materials, supplies, articles, or equipment used in the performance of the contract will be paid, without subsequent deduction or rebate on any account, not less than the minimum wages as determined by the Secretary of Labor to be the prevailing minimum wages for persons employed on similar work or in the particular or similar industries or groups of industries currently operating in the locality in which the materials, supplies, articles, or equipment are to be manufactured or furnished under said contract;
 (c) That no person employed by the contractor in the manufacture or furnishing of the materials, supplies, articles, or equipment used in the performance of the contract shall be permitted to work in excess of forty hours in any one week: Provided, That the provisions of this subsection shall not apply to any employer who shall have entered into an agreement with his employees pursuant to the provisions of paragraphs (1) or (2) of subsection (b) of section 207 of title 29;
 (d) That no male person under sixteen years of age and no female person under eighteen years of age and no convict labor will be employed by the contractor in the manufacture or production or furnishing of any of the materials, supplies, articles, or equipment included in such contract, except that this section, or any other law or Executive order containing similar prohibitions against purchase of goods by the Federal Government, shall not apply to convict labor which satisfies the conditions of section 1761(c) of title 18; and
 (e) That no part of such contract will be performed nor will any of the materials, supplies, articles, or equipment to be manufactured or furnished under said contract be manufactured or fabricated in any plants, factories, buildings, or surroundings or under working conditions which are unsanitary or hazardous or dangerous to the health and safety of employees engaged in the performance of said contract. Compliance with the safety, sanitary, and factory inspection laws of the State in which the work or part thereof is to be performed shall be prima-facie evidence of compliance with this subsection.
Hawley-Smoot Tariff Act
The conventional wisdom: Hawley-Smoot Tariff Act, 1930, passed by the U.S. Congress; it brought the U.S. tariff to the highest protective level yet in the history of the United States. President Hoover desired a limited upward revision of tariff rates with general increases on farm products and adjustment of a few industrial rates. A congressional joint committee, however, in compromising the differences between a high Senate tariff bill and a higher House tariff bill, arrived at new high rates by generally adopting the increased rates of the Senate on farm products and those of the House on manufactures. Despite wide protest, the tariff act, called the Hawley-Smoot Tariff Act because of its joint sponsorship by Representative Willis C. Hawley and Senator Reed Smoot, both Republicans, was signed (June, 1930) by President Hoover. The act brought retaliatory tariff acts from foreign countries, U.S. foreign trade suffered a sharp decline, and the depression intensified.
http://www.infoplease.com/ce6/history/A0823033.html
Alternative wisdom: 
WHAT ROLE DID THE SMOOT-HAWLEY TARIFF PLAY? by Steve Kangas
For conservatives, the greatest economic disaster in history needs a villain, and not just any villain. Only a rapscallion the size of Big Government will suffice, and in this respect, the Smoot-Hawley Tariff of 1930 suits their needs perfectly.
According to this story, the Smoot-Hawley Tariff raised taxes on imported goods as high as 60 percent. Not only did this burden American consumers with another tax, but it effectively killed international trade. Soon all nations were raising tariffs and rushing behind the walls of protectionism. The subsequent collapse of international trade caused the Great Depression.
For a complete myth, it is astounding how much this one gets repeated. Sharp observers have probably already noticed there is a problem with dates. The stock market crashed in October, 1929, but Hoover did not sign the tariff into law until June 17, 1930. So more sophisticated conservatives have refined the story: the tariff turned an otherwise ordinary recession into a full-blown depression. 
But even this is a gross exaggeration, and top economists reject it out of hand. Peter Temin, an economic historian at MIT, told The Wall Street Journal on February 22, 1996 that this historical revisionism is "wrong," according to the consensus of the nation's most respected economists. Paul Krugman, one of the world's top international trade economists, and one who is expected to win a Nobel Prize for his revolutionary theories in favor of free trade, calls the Smoot-Hawley theory "incredible."
The Smoot-Hawley Tariff only slightly worsened the depression, which was already gaining considerable momentum. Here are the reasons why:  
Imports formed only 6 percent of the GNP. With average tariffs ranging from 40 to 60 percent (sources vary), this represents an effective tax of merely 2.4 to 3.6 percent. Yet the Great Depression resulted in a 31 percent drop in GNP and 25 percent unemployment. The idea that such a small tax could cause so much economic devastation is too far-fetched to be believed.
By no stretch of the imagination could Americans of the time be called heavily taxed. In 1930, 80 percent of all workers paid no federal taxes at all. The rich paid a record low 25 percent. By contrast, after the war, the top tax rate zoomed up to 91 percent, and the middle class started paying taxes as well. What followed was the boom times of the 50s. Seen in this light, blaming the Great Depression on a tariff tax of only a few percentage points is absurd. 
Even an effective tax of 2.4 to 3.6 percent is overstating the effects of the tariff. The tariff rates were already high to begin with. One source reveals that Smoot-Hawley raised rates from 26 to 50 percent; another source from 44 to 60 percent. In that case, we are talking about an effective tax increase of 1.4 percent at most.
The trade war following Smoot-Hawley did not entirely shut down trade. For the U.S., it fell from 6 to 2 percent of the GNP between 1930 and 1932. This does not mean, of course, that Americans necessarily "lost" that 4 percent. It merely means that they had 4 percent more to spend on their own domestic products.
The Smoot-Hawley tariff was partially offset by a $160 million tax cut in the same year, which went entirely to the rich.
The tariff was also partially offset by the money saved by Americans no longer investing in or loaning to Europe. In 1928, investments alone amounted to $119 million. The Europeans heavily depended on this financial aid, and its loss was considered disastrous. But for Americans it represented increased savings.
As you can see, the drag of the Smoot-Hawley Tariff on the U.S. economy was minor. One could even argue that if the tariff had not been passed at all, the Depression would have hit with the same intensity anyway. Why? Because the Great Depression was a chain reaction. Just one example was the public run on banks; when one bank failed, panicked investors rushed to withdraw their deposits from the next. The process started in the United States, but it eventually spread to Europe. The central bank of Austria was the first domino to fall.
The Smoot-Hawley Tariff may have hastened this process, but it is doubtful it added to its severity. In the mid-20s, Americans stopped investing in Europe to take advantage of the raging Bull Market on Wall Street. Between 1924 and 1928, investments in Europe fell 78 percent, from $530 million to $119 million. Loans to Germany collapsed from $277 million in 1928 to $30 million in 1929. Thus, long before the tariff even passed, a credit squeeze, bank failures, and deflation were already working to contract European economies.
In sum, the Smoot-Hawley Tariff's impact on the U.S. economy was small, and probably did not result in more damage to Europe than was inevitable anyway.