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African Americans in the Twentieth Century

Thomas N. Maloney, University of Utah

The nineteenth century was a time of radical transformation in the political and legal status of African Americans. Blacks were freed from slavery and began to enjoy greater rights as citizens (though full recognition of their rights remained a long way off). Despite these dramatic developments, many economic and demographic characteristics of African Americans at the end of the nineteenth century were not that different from what they had been in the mid-1800s. Tables 1 and 2 present characteristics of black and white Americans in 1900, as recorded in the Census for that year. (The 1900 Census did not record information on years of schooling or on income, so these important variables are left out of these tables, though they will be examined below.) According to the Census, ninety percent of African Americans still lived in the Southern US in 1900 — roughly the same percentage as lived in the South in 1870. Three-quarters of black households were located in rural places. Only about one-fifth of African American household heads owned their own homes (less than half the percentage among whites). About half of black men and about thirty-five percent of black women who reported an occupation to the Census said that they worked as a farmer or a farm laborer, as opposed to about one-third of white men and about eight percent of white women. Outside of farm work, African American men and women were greatly concentrated in unskilled labor and service jobs. Most black children had not attended school in the year before the Census, and white children were much more likely to have attended. So the members of a typical African American family at the start of the twentieth century lived and worked on a farm in the South and did not own their home. Children in these families were unlikely to be in school even at very young ages.

By 1990 (the most recent Census for which such statistics are available at the time of this writing), the economic conditions of African Americans had changed dramatically (see Tables 1 and 2). They had become much less concentrated in the South, in rural places, and in farming jobs and had entered better blue-collar jobs and the white-collar sector. They were nearly twice as likely to own their own homes at the end of the century as in 1900, and their rates of school attendance at all ages had risen sharply. Even after this century of change, though, African Americans were still relatively disadvantaged in terms of education, labor market success, and home ownership.

Table 1: Characteristics of Households in 1900 and 1990

1900 1990
Black White Black White
A. Region of Residence
South 90.1% 23.5% 53.0% 32.9%
Northeast 3.6% 31.8% 18.9% 20.9%
Midwest 5.8% 38.5% 18.9% 25.3%
West 0.5% 6.2% 9.2% 21.0%
B. Share Rural
75.8% 56.1% 11.9% 25.7%
C. Share of Homes Owner-Occupied
22.1% 49.2% 43.4% 67.3%

Based on household heads in Integrated Public Use Microdata Series Census samples for 1900 and 1990.

Table 2: Characteristics of Individuals in 1900 and 1990

1900 1990
Male Female Male Female
Black White Black White Black White Black White
A. Occupational Distribution
Professional/Technical 1.3% 3.8% 1.6% 10.7% 9.9% 17.2% 16.6% 21.9%
Proprietor/Manager/Official 0.8 6.9 0.2 2.6 6.5 14.7 5.4 10.0
Clerical 0.2 4.0 0.2 5.6 10.7 7.2 29.7 31.9
Sales 0.3 4.2 0.2 4.1 2.9 6.7 4.1 7.3
Craft 4.2 15.9 0 3.1 17.4 20.7 2.3 2.1
Operative 7.3 13.4 1.8 24.5 20.7 14.9 12.4 8.0
Laborer 25.5 14.0 6.5 1.5 12.2 7.2 2.0 1.5
Private Service 2.2 0.4 33.0 33.2 0.1 0 2.0 0.8
Other Service 4.8 2.4 20.6 6.6 18.5 9.0 25.3 15.8
Farmer 30.8 23.9 6.7 6.1 0.2 1.4 0.1 0.4
Farm Laborer 22.7 11.0 29.4 2.0 1.0 1.0 0.4 0.5
B. Percent Attending School by Age
Ages 6 to 13 37.8% 72.2% 41.9% 71.9% 94.5% 95.3% 94.2% 95.5
Ages 14 to 17 26.7 47.9 36.2 51.5 91.1 93.4 92.6 93.5
Ages 18 to 21 6.8 10.4 5.9 8.6 47.7 54.3 52.9 57.1

Based on Integrated Public Use Microdata Series Census samples for 1900 and 1990. Occupational distributions based on individuals aged 18 to 64 with recorded occupation. School attendance in 1900 refers to attendance at any time in the previous year. School attendance in 1990 refers to attendance since February 1 of that year.

These changes in the lives of African Americans did not occur continuously and steadily throughout the twentieth century. Rather, we can divide the century into three distinct eras: (1) the years from 1900 to 1915, prior to large-scale movement out of the South; (2) the years from 1916 to 1964, marked by migration and urbanization, but prior to the most important government efforts to reduce racial inequality; and (3) the years since 1965, characterized by government antidiscrimination efforts but also by economic shifts which have had a great impact on racial inequality and African American economic status.

1900-1915: Continuation of Nineteenth-Century Patterns

As was the case in the 1800s, African American economic life in the early 1900s centered on Southern cotton agriculture. African Americans grew cotton under a variety of contracts and institutional arrangements. Some were laborers hired for a short period for specific tasks. Many were tenant farmers, renting a piece of land and some of their tools and supplies, and paying the rent at the end of the growing season with a portion of their harvest. Records from Southern farms indicate that white and black farm laborers were paid similar wages, and that white and black tenant farmers worked under similar contracts for similar rental rates. Whites in general, however, were much more likely to own land. A similar pattern is found in Southern manufacturing in these years. Among the fairly small number of individuals employed in manufacturing in the South, white and black workers were often paid comparable wages if they worked at the same job for the same company. However, blacks were much less likely to hold better-paying skilled jobs, and they were more likely to work for lower-paying companies.

While the concentration of African Americans in cotton agriculture persisted, Southern black life changed in other ways in the early 1900s. Limitations on the legal rights of African Americans grew more severe in the South in this era. The 1896 Supreme Court decision in the case of Plessy v. Ferguson provided a legal basis for greater explicit segregation in American society. This decision allowed for the provision of separate facilities and services to blacks and whites as long as the facilities and services were equal. Through the early 1900s, many new laws, known as Jim Crow laws, were passed in Southern states creating legally segregated schools, transportation systems, and lodging. The requirement of equality was not generally enforced, however. Perhaps the most important and best-known example of separate and unequal facilities in the South was the system of public education. Through the first decades of the twentieth century, resources were funneled to white schools, raising teacher salaries and per-pupil funding while reducing class size. Black schools experienced no real improvements of this type. The result was a sharp decline in the relative quality of schooling available to African-American children.

1916-1964: Migration and Urbanization

The mid-1910s witnessed the first large-scale movement of African Americans out of the South. The share of African Americans living in the South fell by about four percentage points between 1910 and 1920 (with nearly all of this movement after 1915) and another six points between 1920 and 1930 (see Table 3). What caused this tremendous relocation of African Americans? The worsening political and social conditions in the South, noted above, certainly played a role. But the specific timing of the migration appears to be connected to economic factors. Northern employers in many industries faced strong demand for their products and so had a great need for labor. Their traditional source of cheap labor, European immigrants, dried up in the late 1910s as the coming of World War I interrupted international migration. After the end of the war, new laws limiting immigration to the US would keep the flow of European labor at a low level. Northern employers thus needed a new source of cheap labor, and they turned to Southern blacks. In some cases, employers would send recruiters to the South to find workers and to pay their way North. In addition to this pull from the North, economic events in the South served to push out many African Americans. Destruction of the cotton crop by the boll weevil, an insect that feeds on cotton plants, and poor weather in some places during these years made new opportunities in the North even more attractive.

Table 3: Share of African Americans Residing in the South

Year Share Living in South
1890 90%
1900 90%
1910 89%
1920 85%
1930 79%
1940 77%
1950 68%
1960 60%
1970 53%
1980 53%
1990 53%

Sources: 1890 to 1960: Historical Statistics of the United States, volume 1, pp. 22-23; 1970: Statistical Abstract of the United States, 1973, p. 27; 1980: Statistical Abstract of the United States, 1985, p. 31; 1990: Statistical Abstract of the United States, 1996, p. 31.

Pay was certainly better, and opportunities were wider, in the North. Nonetheless, the region was not entirely welcoming to these migrants. As the black population in the North grew in the 1910s and 1920s, residential segregation grew more pronounced, as did school segregation. In some cases, racial tensions boiled over into deadly violence. The late 1910s were scarred by severe race riots in a number of cities, including East St. Louis (1917) and Chicago (1919).

Access to Jobs in the North

Within the context of this broader turmoil, black migrants did gain entry to new jobs in Northern manufacturing. As in Southern manufacturing, pay differences between blacks and whites working the same job at the same plant were generally small. However, black workers had access to a limited set of jobs and remained heavily concentrated in unskilled laborer positions. Black workers gained admittance to only a limited set of firms, as well. For instance, in the auto industry, the Ford Motor Company hired a tremendous number of black workers, while other auto makers in Detroit typically excluded these workers. Because their alternatives were limited, black workers could be worked very intensely and could also be used in particularly unpleasant and dangerous settings, such as the killing and cutting areas of meat packing plants, foundry departments in auto plants, and blast furnaces in steel plants.

Unions

Through the 1910s and 1920s, relations between black workers and Northern labor unions were often antagonistic. Many unions in the North had explicit rules barring membership by black workers. When faced with a strike (or the threat of a strike), employers often hired in black workers, knowing that these workers were unlikely to become members of the union or to be sympathetic to its goals. Indeed, there is evidence that black workers were used as strike breakers in a great number of labor disputes in the North in the 1910s and 1920s. Beginning in the mid-1930s, African Americans gained greater inclusion in the union movement. By that point, it was clear that black workers were entrenched in manufacturing, and that any broad-based organizing effort would have to include them.

Conditions around 1940

As is apparent in Table 3, black migration slowed in the 1930s, due to the onset of the Great Depression and the resulting high level of unemployment in the North in the 1930s. Beginning in about 1940, preparations for war again created tight labor markets in Northern cities, though, and, as in the late 1910s, African Americans journeyed north to take advantage of new opportunities. In some ways, moving to the North in the 1940s may have appeared less risky than it had during the World War I era. By 1940, there were large black communities in a number of Northern cities. Newspapers produced by these communities circulated in the South, providing information about housing, jobs, and social conditions. Many Southern African Americans now had friends and relatives in the North to help with the transition.

In other ways, though, labor market conditions were less auspicious for black workers in 1940 than they had been during the World War I years. Unemployment remained high in 1940, with about fourteen percent of white workers either unemployed or participating in government work relief programs. Employers hired these unemployed whites before turning to African American labor. Even as labor markets tightened, black workers gained little access to war-related employment. The President issued orders in 1941 that companies doing war-related work had to hire in a non-discriminatory way, and the Fair Employment Practice Committee was created to monitor the hiring practices of these companies. Initially, few resources were devoted to this effort, but in 1943 the government began to enforce fair employment policies more aggressively. These efforts appear to have aided black employment, at least for the duration of the war.

Gains during the 1940s and 1950s

In 1940, the Census Bureau began to collect data on individual incomes, so we can track changes in black income levels and in black/white income ratios in more detail from this date forward. Table 4 provides annual earnings figures for black and white men and women from 1939 (recorded in the 1940 Census) to 1989 (recorded in the 1990 Census). The big gains of the 1940s, both in level of earnings and in the black/white income ratio, are very obvious. Often, we focus on the role of education in producing higher earnings, but the gap between average schooling levels for blacks and whites did not change much in the 1940s (particularly for men), so schooling levels could not have contributed too much to the relative income gains for blacks in the 1940s (see Table 5). Rather, much of the improvement in the black/white pay ratio in this decade simply reflects ongoing migration: blacks were leaving the South, a low-wage region, and entering the North, a high-wage region. Some of the improvement reflects access to new jobs and industries for black workers, due to the tight labor markets and antidiscrimination efforts of the war years.

Table 4: Mean Annual Earnings of Wage and Salary Workers

Aged 20 and Over

Male

Female

Black White Ratio Black White Ratio
1939 $537.45 $1234.41 .44 $331.32 $771.69 .43
1949 1761.06 2984.96 .59 992.35 1781.96 .56
1959 2848.67 5157.65 .55 1412.16 2371.80 .59
1969 5341.64 8442.37 .63 3205.12 3786.45 .85
1979 11404.46 16703.67 .68 7810.66 7893.76 .99
1989 19417.03 28894.69 .67 15319.29 16135.65 .95

Source: Integrated Public Use Microdata Series Census samples for 1940, 1950, 1960, 1970, 1980, and 1990. Includes only those with non-zero earnings who were not in school. All figures are in current (nominal) dollars.

Table 5: Years of School Attended for Individuals 20 and Over

Male

Female

Black White Difference Black White Difference
1940 5.9 9.1 3.2 6.9 10.5 3.6
1950 6.8 9.8 3 7.8 10.8 3
1960 7.9 10.5 2.6 8.8 11.0 2.2
1970 9.4 11.4 2.0 10.3 11.7 1.4
1980 11.2 12.5 1.3 11.8 12.4 0.6

Source: Integrated Public Use Microdata Series Census samples for 1940, 1950, 1960, 1970, and 1980. Based on highest grade attended by wage and salary workers aged 20 and over who had non-zero earnings in the previous year and who were not in school at the time of the census. Comparable figures are not available in the 1990 Census.

Black workers relative incomes were also increased by some general changes in labor demand and supply and in labor market policy in the 1940s. During the war, demand for labor was particularly strong in the blue-collar manufacturing sector. Workers were needed to build tanks, jeeps, and planes, and these jobs did not require a great deal of formal education or skill. In addition, the minimum wage was raised in 1945, and wartime regulations allowed greater pay increases for low-paid workers than for highly-paid workers. After the war, the supply of college-educated workers increased dramatically. The GI Bill, passed in 1944, provided large subsidies to help pay the expenses of World War II veterans who wanted to attend college. This policy helped a generation of men further their education and get a college degree. So strong labor demand, government policies that raised wages at the bottom, and a rising supply of well-educated workers meant that less-educated, less-skilled workers received particularly large wage increases in the 1940s. Because African Americans were concentrated among the less-educated, low-earning workers, these general economic forces were especially helpful to African Americans and served to raise their pay relative to that of whites.

The effect of these broader forces on racial inequality helps to explain the contrast between the 1940s and 1950s evident in Table 4. The black-white pay ratio may have actually fallen a bit for men in the 1950s, and it rose much more slowly in the 1950s than in the 1940s for women. Some of this slowdown in progress reflects weaker labor markets in general, which reduced black access to new jobs. In addition, the general narrowing of the wage distribution that occurred in the 1940s stopped in the 1950s. Less-educated, lower-paid workers were no longer getting particularly large pay increases. As a result, blacks did not gain ground on white workers. It is striking that pay gains for black workers slowed in the 1950s despite a more rapid decline in the black-white schooling gap during these years (Table 5).

Unemployment

On the whole, migration and entry to new industries played a large role in promoting black relative pay increases through the years from World War I to the late 1950s. However, these changes also had some negative effects on black labor market outcomes. As black workers left Southern agriculture, their relative rate of unemployment rose. For the nation as a whole, black and white unemployment rates were about equal as late as 1930. This equality was to a great extent the result of lower rates of unemployment for everyone in the rural South relative to the urban North. Farm owners and sharecroppers tended not to lose their work entirely during weak markets, whereas manufacturing employees might be laid off or fired during downturns. Still, while unemployment was greater for everyone in the urban North, it was disproportionately greater for black workers. Their unemployment rates in Northern cities were much higher than white unemployment rates in the same cities. One result of black migration, then, was a dramatic increase in the ratio of black unemployment to white unemployment. The black/white unemployment ratio rose from about 1 in 1930 (indicating equal unemployment rates for blacks and whites) to about 2 by 1960. The ratio remained at this high level through the end of the twentieth century.

1965-1999: Civil Rights and New Challenges

In the 1960s, black workers again began to experience more rapid increases in relative pay levels (see Table 4). These years also marked a new era in government involvement in the labor market, particularly with regard to racial inequality and discrimination. One of the most far-reaching changes in government policy regarding race actually occurred a bit earlier, in the 1954 Supreme Court decision in the case of Brown v. the Board of Education of Topeka, Kansas. In that case, the Supreme Court ruled that racial segregation of schools was unconstitutional. However, substantial desegregation of Southern schools (and some Northern schools) would not take place until the late 1960s and early 1970s.

School desegregation, therefore, was probably not a primary force in generating the relative pay gains of the 1960s and 1970s. Other anti-discrimination policies enacted in the mid-1960s did play a large role, however. The Civil Rights Act of 1964 outlawed discrimination in a broad set of social arenas. Title VII of this law banned discrimination in hiring, firing, pay, promotion, and working conditions and created the Equal Employment Opportunity Commission to investigate complaints of workplace discrimination. A second policy, Executive Order 11246 (issued by President Johnson in 1965), set up more stringent anti-discrimination rules for businesses working on government contracts. There has been much debate regarding the importance of these policies in promoting better jobs and wages for African Americans. There is now increasing agreement that these policies had positive effects on labor market outcomes for black workers at least through the mid-1970s. Several pieces of evidence point to this conclusion. First, the timing is right. Many indicators of employment and wage gains show marked improvement beginning in 1965, soon after the implementation of these policies. Second, job and wage gains for black workers in the 1960s were, for the first time, concentrated in the South. Enforcement of anti-discrimination policy was targeted on the South in this era. It is also worth noting that rates of black migration out of the South dropped substantially after 1965, perhaps reflecting a sense of greater opportunity there due to these policies. Finally, these gains for black workers occurred simultaneously in many industries and many places, under a variety of labor market conditions. Whatever generated these improvements had to come into effect broadly at one point in time. Federal antidiscrimination policy fits this description.

Return to Stagnation in Relative Income

The years from 1979 to 1989 saw the return of stagnation in black relative incomes. Part of this stagnation may reflect the reversal of the shifts in wage distribution that occurred during the 1940s. In the late 1970s and especially in the 1980s, the US wage distribution grew more unequal. Individuals with less education, particularly those with no college education, saw their pay decline relative to the better-educated. Workers in blue-collar manufacturing jobs were particularly hard hit. The concentration of black workers, especially black men, in these categories meant that their pay suffered relative to that of whites. Another possible factor in the stagnation of black relative pay in the 1980s was weakened enforcement of antidiscrimination policies at this time.

While black relative incomes stagnated on average, black residents of urban centers suffered particular hardships in the 1970s and 1980s. The loss of blue-collar manufacturing jobs was most severe in these areas. For a variety of reasons, including the introduction of new technologies that required larger plants, many firms relocated their production facilities outside of central cities, to suburbs and even more peripheral areas. Central cities increasingly became information-processing and financial centers. Jobs in these industries generally required a college degree or even more education. Despite decades of rising educational levels, African Americans were still barely half as likely as whites to have completed four years of college or more: in 1990, 11.3% of blacks over the age of 25 had four years of college or more, versus 22% of whites. As a result of these developments, many blacks in urban centers found themselves surrounded by jobs for which they were poorly qualified, and at some distance from the types of jobs for which they were qualified, the jobs their parents had moved to the city for in the first place. Their ability to relocate near these blue-collar jobs seems to have been limited both by ongoing discrimination in the housing market and by a lack of resources. Those African Americans with the resources to exit the central city often did so, leaving behind communities marked by extremely high rates of poverty and unemployment.

Over the fifty years from 1939 to 1989, through these episodes of gain and stagnation, the ratio of black mens average annual earnings to white mens average annual earnings rose about 23 points, from .44 to .67. The timing of improvement in the black female/ white female income ratio was similar. However, black women gained much more ground overall: the black-white income ratio for women rose 50 points over these fifty years and stood at .95 in 1989 (down from .99 in 1979). The education gap between black women and white women declined more than the education gap between black and white men, which contributed to the faster pace of improvement in black womens relative earnings. Furthermore, black female workers were more likely to be employed full-time than were white female workers, which raised their annual income. The reverse was true among men: white male workers were somewhat more likely to be employed full time than were black male workers.

Comparable data on annual incomes from the 2000 Census are not available at the time of this writing. Evidence from other labor market surveys suggests that the tight labor markets of the late 1990s may have brought renewed relative pay gains for black workers. Black workers also experienced sharp declines in unemployment during these years, though black unemployment remained about twice as great as white unemployment.

Beyond the Labor Market: Persistent Gaps in Wealth and Health

When we look beyond these basic measures of labor market success, we find more disturbingly large and persistent gaps between African Americans and white Americans. Wealth differences between blacks and whites continue to be very large. In the mid-1990s, black households held only about one-quarter the amount of wealth that white households held, on average. If we leave out equity in ones home and personal possessions and focus on more strictly financial, income-producing assets, black households held only about ten to fifteen percent as much wealth as white households. Big differences in wealth holding remain even if we compare black and white households with similar incomes.

Much of this wealth gap reflects the ongoing effects of the historical patterns described above. When freed from slavery, African Americans held no wealth, and their lower incomes prevented them from accumulating wealth at the rate whites did. African Americans found it particularly difficult to buy homes, traditionally a households most important asset, due to discrimination in real estate markets. Government housing policies in the 1930s and 1940s may have also reduced their rate of home-buying. While the federal government made low interest loans and loan insurance available through the Home Owners Loan Corporation and the Federal Housing Authority, these programs generally could not be used to acquire homes in black or mixed neighborhoods, usually the only neighborhoods in which blacks could buy, because these were considered to be areas of high-risk for loan default. Because wealth is passed on from parents to children, the wealth differences of the mid-twentieth century continue to have an important impact today.

Differences in life expectancy have also proven to be remarkably stubborn. Certainly, black and white mortality patterns are more similar today than they once were. In 1929, the first year for which national figures are available, white life expectancy at birth was 58.6 years and black life expectancy was 46.7 years (for men and women combined). By 2000, white life expectancy had risen to 77.4 years and black life expectancy was 71.8 years. Thus, the black-white gap had fallen from about twelve years to less than six. However, almost all of this reduction in the gap was completed by the early 1960s. In 1961, the black-white gap was 6.5 years. The past forty years have seen very little change in the gap, though life expectancy has risen for both groups.

Some of this remaining difference in life expectancy can be traced to income differences between blacks and whites. Black children face a particularly high risk of accidental death in the home, often due to dangerous conditions in low-quality housing. African Americans of all ages face a high risk of homicide, which is related in part to residence in poor neighborhoods. Among older people, African Americans face high risk of death due to heart disease, and the incidence of heart disease is correlated with income. Still, black-white mortality differences, especially those related to disease, are complex and are not yet fully understood.

Infant mortality is a particularly large and particularly troubling form of health difference between blacks and whites.

In 2000 the white infant mortality rate (5.7 per 1000 live births) was less than half the rate for African Americans (14.0 per 1000). Again, some of this mortality difference is related to the effect of lower incomes on the nutrition, medical care, and living conditions available to African American mothers and newborns. However, the full set of relevant factors is the subject of ongoing research.

Summary and Conclusions

It is undeniable that the economic fortunes of African Americans changed dramatically during the twentieth century. African Americans moved from tremendous concentration in Southern agriculture to much greater diversity in residence and occupation. Over the period in which income can be measured, there are large increases in black incomes in both relative and absolute terms. Schooling differentials between blacks and whites fell sharply, as well. When one looks beyond the starting and ending points, though, more complex realities present themselves. The progress that we observe grew out of periods of tremendous social upheaval, particularly during the world wars. It was shaped in part by conflict between black workers and white workers, and it coincided with growing residential segregation. It was not continuous and gradual. Rather, it was punctuated by periods of rapid gain and periods of stagnation. The rapid gains are attributable to actions on the part of black workers (especially migration), broad economic forces (especially tight labor markets and narrowing of the general wage distribution), and specific antidiscrimination policy initiatives (such as the Fair Employment Practice Committee in the 1940s and Title VII and contract compliance policy in the 1960s). Finally, we should note that this century of progress ended with considerable gaps remaining between African Americans and white Americans in terms of income, unemployment, wealth, and life expectancy.

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Citation: Maloney, Thomas. “African Americans in the Twentieth Century”. EH.Net Encyclopedia, edited by Robert Whaples. January 14, 2002. URL http://eh.net/encyclopedia/african-americans-in-the-twentieth-century/

The Color Factor: The Economics of African-American Well-Being in the Nineteenth Century South

Author(s):Bodenhorn, Howard
Reviewer(s):Wanamaker, Marianne

Published by EH.Net (December 2015)

Howard Bodenhorn, The Color Factor: The Economics of African-American Well-Being in the Nineteenth Century South.  New York: Oxford University Press, 2015. xiv + 320 pp. $40 (hardcover), ISBN: 978-0-19-938309-2.

Reviewed for EH.Net by Marianne Wanamaker, Department of Economics, University of Tennessee.

Howard Bodenhorn’s manuscript faces two enormously difficult tasks from the onset.  First, in examining the nineteenth-century, the book is in danger of becoming just another book about slavery and its unwinding.  Second, in promising to provide an assessment of African-American “well-being,” it must necessarily take on the non-pecuniary elements of well-being that economists are frequently poorly equipped to discuss.  Bodenhorn’s accomplishments in overcoming both of these hurdles are laudable.

The opening two chapters make clear how the manuscript aims to avoid being just another book about slavery.  Bodenhorn is far more deliberate than the current literature in measuring the effects of color differences within the African-American community on a whole host of relevant outcomes.  The opening primer on the legal and cultural implications of mixed-race Americans is fantastically detailed. Most notably, it quickly contrasts the twentieth century “just one drop” racial definition with the more nuanced norms of the nineteenth century, both before and after the Civil War.  Although the U.S. Census failed to make accommodations for variation beyond black/white/mulatto, Bodenhorn draws on an impressive number of alternative sources to demonstrate the importance of racial composition distinctions beyond these three groupings for well-being.  The third chapter of the book, perhaps unnecessary for investigating well-being per se, is a highly informative effort to elucidate the wide variety of “science” and “philosophy” that informed these racial definitions and social norms.  The reader is better for having consumed this information as it helps to place much of the remaining discussion in the context of contemporary thought.

Having given a thorough review of the broad implications of color for African-American experiences in Southern society, Bodenhorn begins a systematic investigation of the ways in which race contributed to specific outcomes of interest: marriage, sex, fertility, plantation work assignments, manumission and escapes from slavery, property accumulation, health, height and, finally, mortality.  The thematic approach is clean and easy to follow.  Certainly the chosen categories represent a large proportion of overall well-being.  Where possible, the stage is set broadly by establishing a difference between white and non-white outcomes before moving on to more nuanced definitions of racial characterization.  For example, in the chapter on marriage, Bodenhorn examines assortative matching by color for 8,644 marriages culled from the Freedmen’s Bureau records.  In these records, ten separate race categories, ranging from black to white but also including “griff,” “light” and “quadroon,” can be identified and are transcribed for analysis.  Bodenhorn demonstrates that nineteenth century brides and grooms exhibited strong preferences for same-colored spouses, narrowly defined.

To overcome his second challenge, Bodenhorn relies, sometimes awkwardly, on economic theory to guide discussion.  But he provides remarkable narratives and primary source accounts to frame the discussion, giving the book a feel of “Cliometrics plus.”  If economic historians are guilty of too frequently reducing humanity and well-being to a measurable quantity, Bodenhorn skillfully weaves a story of people and families to surround the quantitative analysis.  For example, in a section on plantations, he highlights whether slaves had agency or bargaining power with respect to particular issues, not merely because these things mattered for economic outcomes but also as recognition that they independently impacted well-being.  The resulting work is highly satisfying and highly human.

Although the book is solidly a nineteenth-century discussion, it often feels like an antebellum study.  Perhaps this is because the literature and primary source availability in the postbellum South are weak relative to the pre-war years.  But it is more likely that the differences between mixed-race and black experiences were most stark prior to emancipation and therefore make for more interesting discussion and hypothesis testing.  The book’s epilogue briefly provides evidence of a narrowing scope for mixed-race individuals to find a “racial middle ground” in the early part of the twentieth century.  If the manuscript leaves an opportunity unexploited, it is drawing more clearly the arc between the situation in the immediate post-emancipation South and what would become the Jim Crow one-drop racial definition.   What elements of the post-war Confederate and southern Union states led to this erosion?  And why did it take a full fifty years for it to come to fruition in the form of Jim Crow?  Bodenhorn’s observation that racial-mixing and color are “recently resurgent” in the last few decades only serves to heighten curiosity.

The Color Factor is an all-encompassing assessment of the relationship between race and quality of life in the nineteenth century.  It is highly engaging and likely to become standard reading for scholars studying the economics of American slavery, southern labor markets, and household decision-making in the nineteenth century.  Bodenhorn relies on references from a wide swath of social science and humanities disciplines, and I fully anticipate the favor to be returned.

On the back cover of this manuscript, two prominent economic historians separately refer to Bodenhorn’s contribution as a “tour-de-force,” and I wholeheartedly agree.

Marianne Wanamaker’s publications include “Municipal Housekeeping: The Impact of Women’s Suffrage on Public Education” (with Celeste Carruthers), Journal of Human Resources (Fall 2015); “The Great Migration in Black and White: New Evidence on the Geographic Mobility of American Southerners” (with William Collins), Journal of Economic History (December 2015); and “Fertility and the Price of Children: Evidence from Slavery and Slave Emancipation,” Journal of Economic History (December 2014)

Copyright (c) 2015 by EH.Net. All rights reserved. This work may be copied for non-profit educational uses if proper credit is given to the author and the list. For other permission, please contact the EH.Net Administrator (administrator@eh.net). Published by EH.Net (December 2015). All EH.Net reviews are archived at http://eh.net/book-reviews/

Subject(s):Historical Demography, including Migration
Living Standards, Anthropometric History, Economic Anthropology
Social and Cultural History, including Race, Ethnicity and Gender
Geographic Area(s):North America
Time Period(s):19th Century

Century of the Leisured Masses: Entertainment and the Transformation of Twentieth-Century America

Author(s):Surdam, David George
Reviewer(s):Hanssen, F. Andrew

Published by EH.Net (October 2015)

David George Surdam, Century of the Leisured Masses: Entertainment and the Transformation of Twentieth-Century America. New York: Oxford University Press. xviii + 305 pp. $99 (hardcover), ISBN: 978-0-19-021157-8.

Reviewed for EH.Net by F. Andrew Hanssen, Department of Economics, Clemson University.

Economist David Surdam takes on an enormous task: To explore what leisure is and how it has changed, both in conception and fact, over the last hundred years or so. He not only draws liberally on the work by his fellow economists, but copiously cites research and writings by sociologists, anthropologists, psychologists, and social commentators of various orders. For a scholar contemplating research in the field of leisure, the bibliography alone is worth the price of the book. Anecdotes abound, many tremendously interesting. The author is very good at explaining the economic issues, when economic issues arise.

The book’s biggest weakness is that the author makes no overarching argument and advances no particular thesis (despite a title inspired by Thorstein Veblen, Veblen’s work comes up only briefly, most interestingly in a preface by economist Ken McCormick). Rather, the author appears content to recount what others have said. This can yield gems: Many of the quotes from long forgotten books and articles are priceless (like the commentator addressing the worry about all those washing machines sitting around idle). But the result is a disjointed work. Topics appear and disappear, sometimes to reappear again and sometimes not. There is too much repetition.

The author begins in Chapter 1 with an attempt to define leisure, and returns to the task from time-to-time throughout the book. Leisure is voluntary, and presumably unpaid. But is unpaid, voluntary time in the classroom leisure? How about paid but well-enjoyed tennis matches? How about mowing the lawn on the weekend? And where do “unhealthy” activities, like drinking or drug taking, or consuming pornography fit in? Indeed, Surdam’s attempt to define leisure brings to mind Potter Stewart’s famous comment about pornography, with the difference that leisure is hard to know even when one when one sees it.

Chapter 2 examines changing attitudes towards leisure, a topic that provides some of the most entertaining anecdotes in the book. Or should I say, unchanging attitudes? It is clear that from the dawn of time (or at least from the early twentieth century) leisure has generated two pressing fears: 1) that the quantity of it is “wrong” (usually there is too much; occasionally there is too little), and, 2) that whatever leisure there is, it is being badly used. The consistency with which these two points come up is quite striking; whether talking about the working class and their nickelodeons, black Americans and their jazz clubs, or teenagers and their drive-ins (to name just a few), things are going to the dogs! The author trots out a number of predictably ponderous and very amusing quotes about the problem du jour. I’m going to stop worrying so much about my daughter’s iPad.

Chapter 3 provides a reasonably good discussion of the economics of leisure, and the effect of rising incomes on leisure taken, both in amount and form. In Chapter 4, the author describes how leisure has evolved over time. The perhaps unsurprising bottom line is that time taken for leisure has increased and leisure activities have become more varied. In Chapter 5, he reviews expenditure on leisure, using annual data from the Census Bureau. Not surprisingly, he finds that spending rose as the twentieth century progressed. His analysis of the changing mix of spending is mostly anecdotal. Chapter 6 is a somewhat rambling discussion that seeks to contrast the leisure activities of the young and the old. The chapter is a grab bag of topics that includes comic books, jazz and rock-and-roll, the “swinging bachelor” of 1950s fame, and the leisure activities of African Americans. (As always, the fear of badly used leisure rears its ugly head.) Chapter 7 looks at trends in public health, and appears only tangentially related to leisure. Chapter 8 contains a very interesting discussion of how jobs went from dirty and dangerous to clean and safe to downright pleasant. The discussion illustrates how hard it is to draw a bold line between work and leisure — as one bats a volleyball across a net with fellow employees on the campus of a Silicon Valley high tech firm, is one recreating or working? It would have been nice to see the author explore that line of argument more thoroughly; for example, do farmers have very little leisure — they are constantly busy — or a whole lot? (One might ask the same thing about economics professors as they conduct their research!)

Chapter 9 focuses on the household, and illustrates the book’s strength and weaknesses in microcosm. It has an interesting starting point: the change in technology, social mores and so forth that gave rise to a massive increase in female labor force participation. It provides an intelligent review of the labor-leisure tradeoff in the context of household work. It presents some basic data in tables, and discusses cogently empirical analyses conducted by a number of researchers, mostly economists. Descriptions of how arduous many household tasks were in former days are fascinating, and the discussion of technological advances that changed things is interesting. I particularly enjoyed the author’s recounting of the debate over whether women used the time freed up for more leisure or to expand the set of household “chores.” But since there is no overarching theme, and no particular argument being made, it is hard to say what it all adds up to.

Chapter 10 begins to address the industries of mass leisure. The author provides good brief histories of amusement parks, saloons and cabarets, music, and theater and vaudeville. But it once again has a grab-bag feel. A paragraph on radio is followed by a paragraph on phonographs is followed by a paragraph on 45 rpm records and rock-and-roll. Chapter 11 continues with movies, sports, radio, and television. Chapter 12 covers the rise of mass transport, electricity, automobiles, the suburbs, and air conditioning. Chapter 13 briefly discusses the role of government in the leisure business, while Chapter 14 reviews antitrust cases involving music, movies, television, and professional sports. Surdam ends with an epilogue, in which he recounts that — guess what? — people are worried about how leisure is being used! There is nothing new under the sun.

I found the book great fun to dip in and out of. For example, in writing this review, I opened the book at five random points, and came up with: 1) a discussion of the “affable” Puritans; 2) Thomas Sowell’s views on acculturation; 3) the recounted astonishment of a 1959 Life magazine journalist who discovers that “the amount spent on dogs is equal to all the salaries and fees paid on legal services”; 4) a discussion of nineteenth century rag pickers; and 5) a description of how Vaudeville houses were established along newly developing New York City subway lines. (The thing I enjoyed most was reading again and again how one set of people deplored another set’s use of leisure.)

As enjoyable as all this is, because it lacks an organizing thesis, the book becomes, for the most part, a recounting of a lot of “stuff.” Thus, as a volume to browse for entertainment, I recommend it. For its terrific bibliography of work on leisure in myriad fields, I heartily endorse it. But as a means to understand mass leisure in the twentieth century, unfortunately, it comes up a bit short.

F. Andrew Hanssen’s publications include “Explaining Changes in Organizational Form: The Case of Professional Baseball” (with J. Meehan and T. Miceli), Journal of Sports Economics (forthcoming) and “Vertical Integration during the Hollywood Studio Era,” Journal of Law and Economics (2010).

Copyright (c) 2015 by EH.Net. All rights reserved. This work may be copied for non-profit educational uses if proper credit is given to the author and the list. For other permission, please contact the EH.Net Administrator (administrator@eh.net). Published by EH.Net (October 2015). All EH.Net reviews are archived at http://eh.net/book-reviews/

Subject(s):Household, Family and Consumer History
Social and Cultural History, including Race, Ethnicity and Gender
Geographic Area(s):North America
Time Period(s):20th Century: Pre WWII
20th Century: WWII and post-WWII

Discriminating Risk: The U.S. Mortgage Lending Industry in the Twentieth Century

Author(s):Stuart, Guy
Reviewer(s):Collins, William J.

Published by EH.NET (June 2004)

Guy Stuart, Discriminating Risk: The U.S. Mortgage Lending Industry in the Twentieth Century. Ithaca: Cornell University Press, 2003. xi + 248 pp. $39.95 (hardcover), ISBN: 0-8014-4066-1.

Reviewed for EH.NET by William J. Collins, Department of Economics, Vanderbilt University.

Readers who are interested in the historical interaction of American cities, race, and mortgage finance will find many aspects of Guy Stuart’s Discriminating Risk informative and insightful. The book sheds light on the grass-roots operation of the lending process, on the influence of conceptual debates on industry practices, and on the unusual interaction of public policy and private property that characterizes the mortgage industry. Stuart’s close reading of real estate journals, manuals, and guidelines, and his collection of field interviews, provide an inside view of how information has been collected, processed, and acted upon in the mortgage industry. He often clarifies the implications of this process for long-run racial disparities in housing market outcomes. Stuart accomplishes this in a framework that emphasizes “rules, networks, and the production of space.” Economic and financial historians, urban economists, and policy makers will find some aspects of the book frustrating, as discussed below, but the book is certainly a useful contribution to the literature on the history of American housing markets. Stuart is an Associate Professor of Public Policy at Harvard’s Kennedy School of Government.

The book is organized into seven main chapters, plus a substantial and informative introductory chapter. Chapters 1 and 2 are the most interesting chapters from an historical perspective. Chapter 1 is essentially a history of how real estate professionals have defined, appraised, and anticipated changes in property values. Stuart effectively combines this conceptual history with a recounting of the institutional changes that profoundly reshaped the American mortgage industry. Throughout, Stuart highlights the primacy that real estate professionals attached to neighborhood stability and homogeneity. Not surprisingly, the promotion of such high levels of neighborhood homogeneity has tended to reinforce residential segregation by income and race, and dismantling this segregation becomes the main target for Stuart’s policy recommendations. Chapter 2 documents the industry’s standard practices for evaluating the riskiness of loans and loan applicants, and it includes a fascinating discussion of the emergence of a network of credit bureaus in the early twentieth century. By itself, the disclosure of the FHA’s first “Standardized Factual Data Report” form (circa 1935) makes the chapter worth reading. In addition to the information one would expect (e.g., income and employment), the form included queries about the applicant’s “racial descent” (“answer whether Anglo-Saxon, Greek, Hebrew, Italian, Negro etc.”), about the applicant’s wife (“Does his wife lend encouragement to him?”), and about the applicant’s personality and family reputation (“Is he self-satisfied or ambitious?” “Does his family have the reputation of living extravagantly?”). Thus, perceived “character” and “willingness to pay” were explicit considerations in lending decisions. By the century’s end, automatic underwriting software and heavy reliance on simple credit scores had greatly altered the loan-screening process.

In Chapter 3, the book moves away from an historical orientation, and it focuses on the loan application process in recent decades. Here, interviews with real estate and mortgage professionals illustrate the strength of personal networks in the industry (e.g., between real estate agents and mortgage brokers, and between real estate agents and particular neighborhoods). The interviews also demonstrate how those evaluating loan applications exercise a certain amount of “common sense” discretion within a fairly well-understood set of rules for evaluating loan applications.

Chapters 4 and 5 both draw extensively on Stuart’s detailed knowledge of Chicago’s neighborhoods and real estate markets. The chapters are fairly ahistorical, in that readers will not learn much about Chicago’s housing history by reading them. Rather, the chapters’ goals are to provide case-study level illustrations of the author’s broader points about the shaping and packaging of homogeneous neighborhoods in the context of ever-shifting patterns of demand and supply. These are the only chapters that report and discuss housing market data, and they do so only for the 1990s. I had high expectations for chapter 5’s discussion of lending discrimination, but I was disappointed. The review of the existing literature is thin, and while the discussion of lending patterns in Chicago in the mid-1990s is insightful, there is not much compelling new evidence on the nature, extent, or ultimate impact of lending discrimination. Stuart’s point that concentrating people with poor credit in particular neighborhoods makes their property illiquid and thereby reinforces high likelihoods of default is interesting and plausible, but it would certainly benefit from a more thorough empirical exploration. More generally, plausibly important assertions about discrimination, housing segregation, and access to credit are found throughout the book, but readers are usually left without convincing econometric identification of cause-and-effect relationships and without an empirical sense of just how large such effects might be.

Chapter 6 revisits and reiterates arguments from the previous chapters. Chapter 7 concludes the volume with several policy recommendations. I have reservations about this chapter. Readers are told in the introduction that the book will attempt to initiate “a practical debate about how to embed social justice in the process of delivering financial capital to all people and neighborhoods that need it” (p. 2). It becomes clear that Stuart has a particular version of “social justice” in mind, a particular sense of who “needs” financial capital, and a particular set of policy ideas for getting capital markets to conform to his idea of justice. The book’s concluding sentence notes that “the value I most cherish in the context of this discussion is the ability of people of all races, ethnicities, and incomes to live in any neighborhood, subdivision, or suburb they choose” (p. 206). This vision is difficult to square with the central reality of urban economics: land is a scarce resource that is priced accordingly. The vision is also difficult to square with the population’s tendency to sort itself by income, independent of race, ethnicity, and real estate agents. Some of the policy recommendations of Chapter 7 are intriguing, for example the suggestion that government agencies should support the development of a risk-based pricing system for home loans that includes a mutual insurance provision. But it is impossible to gauge the potential benefits or costs of such reforms on the basis of the book’s discussion.

All books must draw boundaries and that means leaving out some potentially interesting issues. In this case, topics left out include: description of the origins of American mortgage markets, the connection between mortgage finance and the development of the American banking system, and the history of inter-regional financial market integration (Kenneth Snowden’s work would have been helpful here). Also missing are any empirical characterizations of home-ownership rates and of the influence of mortgage market innovations on the costs of home ownership.

While the book frequently cites racial disparities in loan rejection rates, readers get no sense of the extent to which the higher rate of rejection passes through to African-Americans’ home ownership status (i.e., once rejected, is ownership delayed, or is it never achieved, or is it achieved readily but only for less valuable housing?). Racial disparities in assets, which are much larger than racial disparities in income, are left in the background (Edward Wolff’s work would help in this regard). The 1968 Fair Housing Act is only lightly touched upon, though more recent legislation receives more thorough discussion.

In sum, Discriminating Risk is full of useful historical and contemporary information on the lending process, insightful interviews, and a valuable close-reading of the real estate industry’s standard operating procedures. I learned a great deal by reading the book, and I recommend it to other scholars with an interest in the history of American housing markets.

William J. Collins is an Associate Professor of Economics at Vanderbilt University and the Model-Okun Fellow at the Brookings Institution (2003-2004). He is the author of “The Economic Aftermath of the 1960s Riots in American Cities: Evidence from Property Values” (with Robert Margo), NBER Working Paper 10493; “The Housing Market Impact of State-Level Anti-Discrimination Laws, 1960-1970,” Journal of Urban Economics (May 2004); “Race and the Value of Owner-Occupied Housing, 1940-1990″ (with Robert Margo), Regional Science and Urban Economics (May 2003); and “Race and Home Ownership: A Century-Long View” (with Robert Margo), Explorations in Economic History (January 2001).

Subject(s):Urban and Regional History
Geographic Area(s):North America
Time Period(s):20th Century: WWII and post-WWII

State of the Union: A Century of American Labor

Author(s):Lichtenstein, Nelson
Reviewer(s):Licht, Walter

Published by EH.NET (September 2002)

Nelson Lichtenstein, State of the Union: A Century of American Labor.

Princeton: Princeton University Press, 2002. xi + 336 pp. $29.95 (hardcover),

ISBN: 0-691-05768-0.

Reviewed for EH.NET by Walter Licht, Department of History, University of

Pennsylvania.

“What is to be done?” Nelson Lichtenstein poses Lenin’s famous question at the

conclusion of his trenchant consideration of the fluctuating fortunes of

American trade unions during the last century. Readers should forgive

Lichtenstein for his ultimate pallid proposals for reversing the recent sharp

economic and political decline of organized labor. The power of his book lies

not in prescription, but rather in his acute, erudite and provocative

historical analysis.

In the wake of the extensive strike activity of the late nineteenth and early

twentieth centuries, the “labor question” loomed as the great challenge for

Americans of the Progressive era. Social reformers and labor spokesmen promoted

“industrial democracy” — extending workers an authentic voice on the shopfloor

– as a panacea. The anxieties of Progressives and the ideal of a participatory

workplace are spotlighted in Lichtenstein’s brief introductory chapter. The

eclipse of both the “labor question” and the vision of industrial democracy is

a central theme in the thicker history he provides of American trade unions

from the 1930s to the present.

As early as the 1920s, the notion of industrial democracy lost meaning with the

institution of so-called employee representation committees by corporate

managers. The acceptance of a new principle of labor relations during the New

Deal and World War II periods, namely, collective bargaining, Lichtenstein

argues, then distinctly supplanted the ideal. Lichtenstein attributes the rise

of mass production unionism, under the banner of the newly-formed Congress of

Industrial Organizations (CIO), to an encouraging political environment and the

ability of radical labor organizers to mobilize workers across ethnic divides.

The industry and firm-wide agreements secured by the CIO afforded industrial

workers great protections and benefits, but the stipulations embedded in

lengthy contracts lifted conflict off of the shopfloor to administrative

settings, thereby containing local activism. Direct representation by shop

stewards, for example, gave way to drawn out, refereed grievance procedures.

The longstanding craft unionism of the American Federation of Labor (AFL)

offered a different model. In response to the CIO, the AFL engaged in

aggressive organizing in the late 1930s, surpassing the CIO in membership. AFL

leaders remained wary of the state; in fact, in union jurisdictional disputes,

the new National Labor Relations Board established under the Wagner Act of 1935

favored the broad industrial unionism of the CIO. The syndicalist approach of

the AFL sustained the ideal of a democratic workplace, but AFL unions with

their exclusionary practices tendered a “voice” only to white, male skilled

workers (who were largely of Irish, British and German descent).

With union recognition and collective bargaining, a historic accommodation had

been achieved between capital and labor. Lichtenstein forcefully and

persuasively argues that this was a surface accord, with the trade union

movement a weak party to a social compact at best. Organized labor faced

repeated attacks. Prominent firms adamantly resisted unionization, engendering

the allegiances of workers through paternalistic benefit plans. The business

community immediately after World War Two allied with congressional

conservatives to force passage of the Taft-Hartley Act in 1947, which limited

union organizing; amendments that required anti-Communist oaths of loyalty of

union officials left the labor movement in the hands of stodgy leaders. Highly

publicized congressional investigations of union racketeering in the late 1950s

further smeared labor — with significant losses in public approval.

Trade unionists found few defenders in the 1950s and 60s. Liberal intellectuals

heralded an end to ideology and class conflict; capitalism had been stabilized

through government fiscal policies, with the unions functioning to bring order

to the workplace. A different kind of critique issued later from the New Left:

unions, in this view, stifled rank-and-file insurgency and perpetuated racial

and gender inequities in employment through the protection of white male

workers. Moreover, the trade union movement, by negotiating for health

insurance and other benefits in contracts, contributed to the “privatization”

of welfare provision; less pressure as a result was brought to bear on the

state for programs of universal coverage.

Lichtenstein, controversially, also points to new rights-based principles that

damaged trade unionism. The Landrum-Griffin Act, passed in 1959 in response to

exposes of union corruption, provided workers with rights to sue unions and

challenge decision- making. More critically, civil rights laws of the 1960s

placed the courts at the disposal of racial minorities and women who sought

both compensation for past and present discrimination in employment and

affirmative action programs in hiring and promotion. Both companies and unions

drew suits. Lichtenstein concedes that unions historically blocked occupational

opportunities for African Americans and women, but he does not join other labor

historians in recent blanket condemnations of organized labor. Radicals in the

movement have continually forced outreach to minority workers whose economic

interests have been advanced through unionization. For Lichtenstein, civil

rights legislation (and related racial and gender identity politics) —

regrettably — have cast unions to the sidelines, undermined “the solidarity

principle” of class demand, and contributed to labor’s decline.

The recent sharp losses in union power have long-term roots for the author and

are not just to be found in either the contemporary rise of political

conservatism or restructurings of the economy. He notes that unions have been

broken and concessions demanded in economic sectors not plagued by plant

closings or the effects of globalization. He concludes that the problem is not

one of outside forces, but of will. Thus, his specific recommendations for

“what is to be done” are: more militancy, more internal union democracy, and

greater politicization of the movement. In this regard, he remains hopeful with

the recent elevation of John Sweeney to the presidency of the AFL-CIO.

With such a sweeping work, there are ample opportunities to quibble with

Lichtenstein. Unfortunately, his extended essay on the unsettled fortunes of

the American trade unionism in the twentieth century also includes little in

the way of social or cultural history; the attitudes, norms and attitudes of

American workers — which carry explanatory power — are missing. Yet, this is

a book to be greatly admired and recommended. Lichtenstein has tackled in

forthright and keen ways fractious debates among scholars as well as historical

and ongoing fractures of American society.

Walter Licht is Professor of History and Associate Dean at the University of

Pennsylvania. Most recently, he has written a chapter, entitled, “Civil Wars:

1850-1900,” in a forthcoming new history of the Commonwealth of Pennsylvania.

Subject(s):Labor and Employment History
Geographic Area(s):North America
Time Period(s):20th Century: WWII and post-WWII

Only One Place of Redress: African Americans, Labor Regulations and the Courts from Reconstruction to the New Deal

Author(s):Bernstein, David E.
Reviewer(s):Vedder, Richard K.

Published by EH.NET (April 2001)

David E. Bernstein, Only One Place of Redress: African Americans, Labor

Regulations and the Courts from Reconstruction to the New Deal. Durham, NC

and London: Duke University Press, 2001. xiii + 189 pp. $39.95 (cloth), ISBN

0-8223-2583-7.

Reviewed for EH.NET by Richard K. Vedder, Department of Economics, Ohio

University.

The conventional view is that American workers were greatly helped by

Progressive labor legislation that evolved in the late nineteenth and early

twentieth centuries, but that conservative courts blocked implementation of

those laws designed to protect helpless workers from the greedy acts of

insensitive capitalists. Bernstein, a law professor at George Mason

University, thinks that this traditional view is backwards, at least with

respect to African American workers. Much of the so-called progressive

legislation was highly discriminatory and harmful to African Americans, and

the “reactionary” court decisions actually helped reduce the damages to their

quality of life imposed by these regulations. The book is a series of case

studies that amplify this thesis.

Bernstein is not the first person to argue that governmental labor laws and

regulations can have unintended or adverse consequences. For decades, for

example, economists in the law and economics tradition have written about the

adverse effects of occupational licensing, and Harold Demsetz, for one, argued

as early as 1965 that New Deal labor reforms, far from being black America’s

salvation, were a setback in its efforts to climb the economic ladder. Yet

Bernstein combines in one engaging volume a large amount of evidence

supporting the revisionist perspective.

To Bernstein, the key Supreme Court decision supporting a “liberty of

contract” position was the 1905 case of Lochner vs. New York. In

Lochner, a majority ruled that New York state hours legislation in the

bakery industry (limiting work to 60 hours per week) violated the

constitutional right of individuals to freely enter into contracts. The

Lochner majority was a precarious one, and, while influential, the

principles in that case were only inconsistently applied in the next

thirty-two years until the Supreme Court in 1937 completely abandoned

Lochner. Nonetheless, in Bernstein’s view, the relief that conservative

courts provided African Americans under Lochner mitigated the harsh

anti-black dimensions of much 1900-era labor legislation. In the course of

this slim (117 pages of text) volume, Bernstein largely convinces this writer.

Bernstein uses four types of governmental intervention in labor markets to

make the point with respect to the pre-New Deal era: emigrant agent laws,

licensing laws, railroad labor regulations, and prevailing-wage laws. He then

provides a short but devastatingly critical assessment of the impact of New

Deal labor laws on African American labor.

A few specifics. After the Civil War, newly freed slaves were often eager to

“demonstrate their freedom” by migrating to areas, such as the Mississippi

Delta, where job opportunities were more remunerative. Information and

transportation costs were high, however, so emigrant labor agents arose to

provide services to African Americans: they arranged employment (typically in

agriculture) in new areas, lent them transportation money, and so forth. They

facilitated economically productive migration. Yet southern states responded

to the pleas of politically influential white planters who feared the loss of

a low-cost labor force, by passing laws that attempted to tax emigrant agents

out of existence. The success of this legislation varied, but these laws were

for a time thwarted by courts which followed Lochnerian legal reasoning, in

many cases even before Lochner.

While the emigrant agent laws prevailed in the South, occupational licensing

was used to restrict the entry of blacks throughout the country, particularly

in the construction industry. By imposing literacy or other relatively

irrelevant requirements for licenses to become, say, a plumber, craft unions

were able to restrict the entry of competent, low-wage workers into their

occupations, a disproportionate number of whom were African Americans. This

permitted union members to receive wages above those that would exist in an

unhampered labor market. Throughout the book, labor unions are the biggest

villains, trying to restrict black entry — in part to reduce competition, and

in part for racist reasons.

While the book eschews the tables, graphs and statistical estimations dear to

the heart of economists and cliometricians, it provides enough evidence to

show that moves by special interests to use government’s coercive powers to

restrict black participation in various moderately skilled occupations were

often devastatingly effective. Over 20 percent of America’s barbers and

hairdressers were African American in 1890, but that proportion declined due

to rigid licensing laws administered by whites interested in reducing black

competition. Thus African American membership in the leading barbers’ union

fell by more than three-fourths in the quarter century after 1903, and a few

unions had overt provisions prohibiting blacks from membership.

Railroads were an industry where blacks were well represented at the dawn of

the twentieth century. Efforts to use various legislative strategies to reduce

African American participation largely failed before the 1920s, but government

came to the rescue of the largely white leadership of the railroad

brotherhood, most importantly after the passage of the Railway Labor Act of

1926, and its 1934 amendments. The outlawing of “yellow dog” contracts,

typically heralded as a sign of progressive protection of workers wanting to

organize, had the impact of largely wiping blacks out of certain railroad

occupations, because non-union African Americans were largely replaced in

thinly disguised racist contracts negotiated with the now dominant railroad

unions. In large parts of the South, in the early twentieth century most

railroad fireman were black; by 1960, only seven percent were.

The story of the Davis-Bacon Act and associated legislation has been told

before (including by this author), but Bernstein recounts it competently and

adds some new details, showing more clearly than ever the racist origins of

that still extant legislation. Similarly, Bernstein shows that New Deal

legislation had particularly strong adverse circumstances on African

Americans; the unemployment effects of the Fair Labor Standards Act were

particularly great in the South, for example. The Wagner Act gave

discriminatory unions more power to discriminate and restrict the entry of

blacks.

This is a good book. Some economists might ask for more explicit and lengthy

demonstration of how economic theory can be used to bolster the main thesis.

Many would call for some econometric demonstration that assertions arising

from anecdotal evidence or from simple descriptive statistics hold under more

sophisticated statistical scrutiny. For example, it is possible from Census

data for 1930 and 1940 to examine changing occupational data by race,

occupation and location. Did the unemployment rate of blacks rise relative to

that of whites more in the South, as implied by Bernstein, than in other

areas less impacted by minimum wage laws? Using data back to 1890, were

occupational losses from 1890 to, say, 1930 greater in a statistical sense in

highly licensed occupations relative to those with freer entry?

Therefore, this is not the last word on the subject. But it is a very

important addition to the literature. Bernstein, using the traditional

narrative approach of legal scholars along with a little economic theory, has

demonstrated, convincingly to this author, that the coercive power of the

state was used to hurt blacks, and that the color-blind market approach

envisioned in Lochner would have provided superior job opportunities

for African Americans.

Richard Vedder, Distinguished Professor of Economics at Ohio University, is

co-author, with Lowell Gallaway, of Out of Work: Unemployment and

Government in Twentieth-Century America (1993), and is currently doing

historical research into U.S. immigration.

Subject(s):Labor and Employment History
Geographic Area(s):North America
Time Period(s):20th Century: Pre WWII

Economic History of Retirement in the United States

Joanna Short, Augustana College

One of the most striking changes in the American labor market over the twentieth century has been the virtual disappearance of older men from the labor force. Moen (1987) and Costa (1998) estimate that the labor force participation rate of men age 65 and older declined from 78 percent in 1880 to less than 20 percent in 1990 (see Table 1). In recent decades, the labor force participation rate of somewhat younger men (age 55-64) has been declining as well. When coupled with the increase in life expectancy over this period, it is clear that men today can expect to spend a much larger proportion of their lives in retirement, relative to men living a century ago.

Table 1

Labor Force Participation Rates of Men Age 65 and Over

Year Labor Force Participation Rate (percent)
1850 76.6
1860 76.0
1870 —–
1880 78.0
1890 73.8
1900 65.4
1910 58.1
1920 60.1
1930 58.0
1940 43.5
1950 47.0
1960 40.8
1970 35.2
1980 24.7
1990 18.4
2000 17.5

Sources: Moen (1987), Costa (1998), Bureau of Labor Statistics

Notes: Prior to 1940, ‘gainful employment’ was the standard the U.S. Census used to determine whether or not an individual was working. This standard is similar to the ‘labor force participation’ standard used since 1940. With the exception of the figure for 2000, the data in the table are based on the gainful employment standard.

How can we explain the rise of retirement? Certainly, the development of government programs like Social Security has made retirement more feasible for many people. However, about half of the total decline in the labor force participation of older men from 1880 to 1990 occurred before the first Social Security payments were made in 1940. Therefore, factors other than the Social Security program have influenced the rise of retirement.

In addition to the increase in the prevalence of retirement over the twentieth century, the nature of retirement appears to have changed. In the late nineteenth century, many retirements involved a few years of dependence on children at the end of life. Today, retirement is typically an extended period of self-financed independence and leisure. This article documents trends in the labor force participation of older men, discusses the decision to retire, and examines the causes of the rise of retirement including the role of pensions and government programs.

Trends in U.S. Retirement Behavior

Trends by Gender

Research on the history of retirement focuses on the behavior of men because retirement, in the sense of leaving the labor force permanently in old age after a long career, is a relatively new phenomenon among women. Goldin (1990) concludes that “even as late as 1940, most young working women exited the labor force on marriage, and only a small minority would return.” The employment of married women accelerated after World War II, and recent evidence suggests that the retirement behavior of men and women is now very similar. Gendell (1998) finds that the average age at exit from the labor force in the U.S. was virtually identical for men and women from 1965 to 1995.

Trends by Race and Region

Among older men at the beginning of the twentieth century, labor force participation rates varied greatly by race, region of residence, and occupation. In the early part of the century, older black men were much more likely to be working than older white men. In 1900, for example, 84.1 percent of black men age 65 and over and 64.4 percent of white men were in the labor force. The racial retirement gap remained at about twenty percentage points until 1920, then narrowed dramatically by 1950. After 1950, the racial retirement gap reversed. In recent decades older black men have been slightly less likely to be in the labor force than older white men (see Table 2).

Table 2

Labor Force Participation Rates of Men Age 65 and Over, by Race

Labor Force Participation Rate (percent)
Year White Black
1880 76.7 87.3
1890 —- —-
1900 64.4 84.1
1910 58.5 86.0
1920 57.0 76.8
1930 —- —-
1940 44.1 54.6
1950 48.7 51.3
1960 40.3 37.3
1970 36.6 33.8
1980 27.1 23.7
1990 18.6 15.7
2000 17.8 16.6

Sources: Costa (1998), Bureau of Labor Statistics

Notes: Census data are unavailable for the years 1890 and 1930.

With the exception of the figures for 2000, participation rates are based on the gainful employment standard

Similarly, the labor force participation rate of men age 65 and over living in the South was higher than that of men living in the North in the early twentieth century. In 1900, for example, the labor force participation rate for older Southerners was sixteen percentage points higher than for Northerners. The regional retirement gap began to narrow between 1910 and 1920, and narrowed substantially by 1940 (see Table 3).

Table 3

Labor Force Participation Rates of Men Age 65 and Over, by Region

Labor Force Participation Rate (percent)
Year North South
1880 73.7 85.2
1890 —- —-
1900 66.0 82.9
1910 56.6 72.8
1920 58.8 69.9
1930 —- —-
1940 42.8 49.4
1950 43.2 42.9

Source: Calculated from Ruggles and Sobek, Integrated Public Use Microdata Series for 1880, 1900, 1910, 1920, 1940, and 1950, Version 2.0, 1997

Note: North includes the New England, Middle Atlantic, and North Central regions

South includes the South Atlantic and South Central regions

Differences in retirement behavior by race and region of residence are related. One reason Southerners appear less likely to retire in the late nineteenth and early twentieth centuries is that a relatively large proportion of Southerners were black. In 1900, 90 percent of black households were located in the South (see Maloney on African Americans in this Encyclopedia). In the early part of the century, black men were effectively excluded from skilled occupations. The vast majority worked for low pay as tenant farmers or manual laborers. Even controlling for race, southern per capita income lagged behind the rest of the nation well into the twentieth century. Easterlin (1971) estimates that in 1880, per capita income in the South was only half that in the Midwest, and per capita income remained less than 70 percent of the Midwestern level until 1950. Lower levels of income among blacks, and in the South as a whole during this period, may have made it more difficult for these men to accumulate resources sufficient to rely on in retirement.

Trends by Occupation

Older men living on farms have long been more likely to be working than men living in nonfarm households. In 1900, for example, 80.6 percent of farm residents and 62.7 percent of nonfarm residents over the age of 65 were in the labor force. Durand (1948), Graebner (1980), and others have suggested that older farmers could remain in the labor force longer than urban workers because of help from children or hired labor. Urban workers, on the other hand, were frequently forced to retire once they became physically unable to keep up with the pace of industry.

Despite the large difference in the labor force participation rates of farm and nonfarm residents, the actual gap in the retirement rates of farmers and nonfarmers was not that great. Confusion on this issue stems from the fact that the labor force participation rate of farm residents does not provide a good representation of the retirement behavior of farmers. Moen (1994) and Costa (1995a) point out that farmers frequently moved off the farm in retirement. When the comparison is made by occupation, farmers have labor force participation rates only slightly higher than laborers or skilled workers. Lee (2002) finds that excluding the period 1900-1910 (a period of exceptional growth in the value of farm property), the labor force participation rate of older farmers was on average 9.3 percentage points higher than that of nonfarmers from 1880-1940.

Trends in Living Arrangements

In addition to the overall rise of retirement, and the closing of differences in retirement behavior by race and region, over the twentieth century retired men became much more independent. In 1880, nearly half of retired men lived with children or other relatives. Today, fewer than 5 percent of retired men live with relatives. Costa (1998) finds that between 1910 and 1940, men who were older, had a change in marital status (typically from married to widowed), or had low income were much more likely to live with family members as a dependent. Rising income appears to explain most of the movement away from coresidence, suggesting that the elderly have always preferred to live by themselves, but they have only recently had the means to do so.

Explaining Trends in the Retirement Decision

One way to understand the rise of retirement is to consider the individual retirement decision. In order to retire permanently from the labor force, one must have enough resources to live on to the end of the expected life span. In retirement, one can live on pension income, accumulated savings, and anticipated contributions from family and friends. Without at least the minimum amount of retirement income necessary to survive, the decision-maker has little choice but to remain in the labor force. If the resource constraint is met, individuals choose to retire once the net benefits of retirement (e.g., leisure time) exceed the net benefits of working (labor income less the costs associated with working). From this model, we can predict that anything that increases the costs associated with working, such as advancing age, an illness, or a disability, will increase the probability of retirement. Similarly, an increase in pension income increases the probability of retirement in two ways. First, an increase in pension income makes it more likely the resource constraint will be satisfied. In addition, higher pension income makes it possible to enjoy more leisure in retirement, thereby increasing the net benefits of retirement.

Health Status

Empirically, age, disability, and pension income have all been shown to increase the probability that an individual is retired. In the context of the individual model, we can use this observation to explain the overall rise of retirement. Disability, for example, has been shown to increase the probability of retirement, both today and especially in the past. However, it is unlikely that the rise of retirement was caused by increases in disability rates — advances in health have made the overall population much healthier. Costa (1998), for example, shows that chronic conditions were much more prevalent for the elderly born in the nineteenth century than for men born in the twentieth century.

The Decline of Agriculture

Older farmers are somewhat more likely to be in the labor force than nonfarmers. Furthermore, the proportion of people employed in agriculture has declined steadily, from 51 percent of the work force in 1880, to 17 percent in 1940, to about 2 percent today (Lebergott, 1964). Therefore, as argued by Durand (1948), the decline in agriculture could explain the rise in retirement. Lee (2002) finds, though, that the decline of agriculture only explains about 20 percent of the total rise of retirement from 1880 to 1940. Since most of the shift away from agricultural work occurred before 1940, the decline of agriculture explains even less of the retirement trend since 1940. Thus, the occupational shift away from farming explains part of the rise of retirement. However, the underlying trend has been a long-term increase in the probability of retirement within all occupations.

Rising Income: The Most Likely Explanation

The most likely explanation for the rise of retirement is the overall increase in income, both from labor market earnings and from pensions. Costa (1995b) has shown that the pension income received by Union Army veterans in the early twentieth century had a strong effect on the probability that the veteran was retired. Over the period from 1890 to 1990, economic growth has led to nearly an eightfold increase in real gross domestic product (GDP) per capita. In 1890, GDP per capita was $3430 (in 1996 dollars), which is comparable to the levels of production in Morocco or Jamaica today. In 1990, real GDP per capita was $26,889. On average, Americans today enjoy a standard of living commensurate with eight times the income of Americans living a century ago. More income has made it possible to save for an extended retirement.

Rising income also explains the closing of differences in retirement behavior by race and region by the 1950s. Early in the century blacks and Southerners earned much lower income than Northern whites, but these groups made substantial gains in earnings by 1950. In the second half of the twentieth century, the increasing availability of pension income has also made retirement more attractive. Expansions in Social Security benefits, Medicare, and growth in employer-provided pensions all serve to increase the income available to people in retirement.

Costa (1998) has found that income is now less important to the decision to retire than it once was. In the past, only the rich could afford to retire. Income is no longer a binding constraint. One reason is that Social Security provides a safety net for those who are unable or unwilling to save for retirement. Another reason is that leisure has become much cheaper over the last century. Television, for example, allows people to enjoy concerts and sporting events at a very low price. Golf courses and swimming pools, once available only to the rich, are now publicly provided. Meanwhile, advances in health have allowed people to enjoy leisure and travel well into old age. All of these factors have made retirement so much more attractive that people of all income levels now choose to leave the labor force in old age.

Financing Retirement

Rising income also provided the young with a new strategy for planning for old age and retirement. Ransom and Sutch (1986a,b) and Sundstrom and David (1988) hypothesize that in the nineteenth century men typically used the promise of a bequest as an incentive for children to help their parents in old age. As more opportunities for work off the farm became available, children left home and defaulted on the implicit promise to care for retired parents. Children became an unreliable source of old age support, so parents stopped relying on children — had fewer babies — and began saving (in bank accounts) for retirement.

To support the “babies-to-bank accounts” theory, Sundstrom and David look for evidence of an inheritance-for-old age support bargain between parents and children. They find that many wills, particularly in colonial New England and some ethnic communities in the Midwest, included detailed clauses specifying the care of the surviving parent. When an elderly parent transferred property directly to a child, the contracts were particularly specific, often specifying the amount of food and firewood with which the parent was to be supplied. There is also some evidence that people viewed children and savings as substitute strategies for retirement planning. Haines (1985) uses budget studies from northern industrial workers in 1890 and finds a negative relationship between the number of children and the savings rate. Short (2001) conducts similar studies for southern men that indicate the two strategies were not substitutes until at least 1920. This suggests that the transition from babies to bank accounts occurred later in the South, only as income began to approach northern levels.

Pensions and Government Retirement Programs

Military and Municipal Pensions (1781-1934)

In addition to the rise in labor market income, the availability of pension income greatly increased with the development of Social Security and the expansion of private (employer-provided) pensions. In the U.S., public (government-provided) pensions originated with the military pensions that have been available to disabled veterans and widows since the colonial era. Military pensions became available to a large proportion of Americans after the Civil War, when the federal government provided pensions to Union Army widows and veterans disabled in the war. The Union Army pension program expanded greatly as a result of the Pension Act of 1890. As a result of this law, pensions were available for all veterans age 65 and over who had served more than 90 days and were honorably discharged, regardless of current employment status. In 1900, about 20 percent of all white men age 55 and over received a Union Army pension. The Union Army pension was generous even by today’s standards. Costa (1995b) finds that the average pension replaced about 30 percent of the income of a laborer. At its peak of nearly one million pensioners in 1902, the program consumed about 30 percent of the federal budget.

Each of the formerly Confederate states also provided pensions to its Confederate veterans. Most southern states began paying pensions to veterans disabled in the war and to war widows around 1880. These pensions were gradually liberalized to include most poor or disabled veterans and their widows. Confederate veteran pensions were much less generous than Union Army pensions. By 1910, the average Confederate pension was only about one-third the amount awarded to the average Union veteran.

By the early twentieth century, state and municipal governments also began paying pensions to their employees. Most major cities provided pensions for their firemen and police officers. By 1916, 33 states had passed retirement provisions for teachers. In addition, some states provided limited pensions to poor elderly residents. By 1934, 28 states had established these pension programs (See Craig in this Encyclopedia for more on public pensions).

Private Pensions (1875-1934)

As military and civil service pensions became available to more men, private firms began offering pensions to their employees. The American Express Company developed the first formal pension in 1875. Railroads, among the largest employers in the country, also began providing pensions in the late nineteenth century. Williamson (1992) finds that early pension plans, like that of the Pennsylvania Railroad, were funded entirely by the employer. Thirty years of service were required to qualify for a pension, and retirement was mandatory at age 70. Because of the lengthy service requirement and mandatory retirement provision, firms viewed pensions as a way to reduce labor turnover and as a more humane way to remove older, less productive employees. In addition, the 1926 Revenue Act excluded from current taxation all income earned in pension trusts. This tax advantage provided additional incentive for firms to provide pensions. By 1930, a majority of large firms had adopted pension plans, covering about 20 percent of all industrial workers.

In the early twentieth century, labor unions also provided pensions to their members. By 1928, thirteen unions paid pension benefits. Most of these were craft unions, whose members were typically employed by smaller firms that did not provide pensions.

Most private pensions survived the Great Depression. Exceptions were those plans that were funded under a ‘pay as you go’ system — where benefits were paid out of current earnings, rather than from built-up reserves. Many union pensions were financed under this system, and hence failed in the 1930s. Thanks to strong political allies, the struggling railroad pensions were taken over by the federal government in 1937.

Social Security (1935-1991)

The Social Security system was designed in 1935 to extend pension benefits to those not covered by a private pension plan. The Social Security Act consisted of two programs, Old Age Assistance (OAA) and Old Age Insurance (OAI). The OAA program provided federal matching funds to subsidize state old age pension programs. The availability of federal funds quickly motivated many states to develop a pension program or to increase benefits. By 1950, 22 percent of the population age 65 and over received OAA benefits. The OAA program peaked at this point, though, as the newly liberalized OAI program began to dominate Social Security. The OAI program is administered by the federal government, and financed by payroll taxes. Retirees (and later, survivors, dependents of retirees, and the disabled) who have paid into the system are eligible to receive benefits. The program remained small until 1950, when coverage was extended to include farm and domestic workers, and average benefits were increased by 77 percent. In 1965, the Social Security Act was amended to include Medicare, which provides health insurance to the elderly. The Social Security program continued to expand in the late 1960s and early 1970s — benefits increased 13 percent in 1968, another 15 percent in 1969, and 20 percent in 1972.

In the late 1970s and early 1980s Congress was finally forced to slow the growth of Social Security benefits, as the struggling economy introduced the possibility that the program would not be able to pay beneficiaries. In 1977, the formula for determining benefits was adjusted downward. Reforms in 1983 included the delay of a cost-of-living adjustment, the taxation of up to half of benefits, and payroll tax increases.

Today, Social Security benefits are the main source of retirement income for most retirees. Poterba, Venti, and Wise (1994) find that Social Security wealth was three times as large as all the other financial assets of those age 65-69 in 1991. The role of Social Security benefits in the budgets of elderly households varies greatly. In elderly households with less than $10,000 in income in 1990, 75 percent of income came from Social Security. Higher income households gain larger shares of income from earnings, asset income, and private pensions. In households with $30,000 to $50,000 in income, less than 30 percent was derived from Social Security.

The Growth of Private Pensions (1935-2000)

Even in the shadow of the Social Security system, employer-provided pensions continued to grow. The Wage and Salary Act of 1942 froze wages in an attempt to contain wartime inflation. In order to attract employees in a tight labor market, firms increasingly offered generous pensions. Providing pensions had the additional benefit that the firm’s contributions were tax deductible. Therefore, pensions provided firms with a convenient tax shelter from high wartime tax rates. From 1940 to 1960, the number of people covered by private pensions increased from 3.7 million to 23 million, or to nearly 30 percent of the labor force.

In the 1960s and 1970s, the federal government acted to regulate private pensions, and to provide tax incentives (like those for employer-provided pensions) for those without access to private pensions to save for retirement. Since 1962, the self-employed have been able to establish ‘Keogh plans’ — tax deferred accounts for retirement savings. In 1974, the Employment Retirement Income Security Act (ERISA) regulated private pensions to ensure their solvency. Under this law, firms are required to follow funding requirements and to insure against unexpected events that could cause insolvency. To further level the playing field, ERISA provided those not covered by a private pension with the option of saving in a tax-deductible Individual Retirement Account (IRA). The option of saving in a tax-advantaged IRA was extended to everyone in 1981.

Over the last thirty years, the type of pension plan that firms offer employees has shifted from ‘defined benefit’ to ‘defined contribution’ plans. Defined benefit plans, like Social Security, specify the amount of benefits the retiree will receive. Defined contribution plans, on the other hand, specify only how much the employer will contribute to the plan. Actual benefits then depend on the performance of the pension investments. The switch from defined benefit to defined contribution plans therefore shifts the risk of poor investment performance from the employer to the employee. The employee stands to benefit, though, because the high long-run average returns on stock market investments may lead to a larger retirement nest egg. Recently, 401(k) plans have become a popular type of pension plan, particularly in the service industries. These plans typically involve voluntary employee contributions that are tax deductible to the employee, employer matching of these contributions, and more choice as far as how the pension is invested.

Summary and Conclusions

The retirement pattern we see today, typically involving decades of self-financed leisure, developed gradually over the last century. Economic historians have shown that rising labor market and pension income largely explain the dramatic rise of retirement. Rather than being pushed out of the labor force because of increasing obsolescence, older men have increasingly chosen to use their rising income to finance an earlier exit from the labor force. In addition to rising income, the decline of agriculture, advances in health, and the declining cost of leisure have contributed to the popularity of retirement. Rising income has also provided the young with a new strategy for planning for old age and retirement. Instead of being dependent on children in retirement, men today save for their own, more independent, retirement.

References

Achenbaum, W. Andrew. Social Security: Visions and Revisions. New York: Cambridge University Press, 1986. Bureau of Labor Statistics, cpsaat3.pdf

Costa, Dora L. The Evolution of Retirement: An American Economic History, 1880-1990. Chicago: University of Chicago Press, 1998.

Costa, Dora L. “Agricultural Decline and the Secular Rise in Male Retirement Rates.” Explorations in Economic History 32, no. 4 (1995a): 540-552.

Costa, Dora L. “Pensions and Retirement: Evidence from Union Army Veterans.” Quarterly Journal of Economics 110, no. 2 (1995b): 297-319.

Durand, John D. The Labor Force in the United States 1890-1960. New York: Gordon and Breach Science Publishers, 1948.

Easterlin, Richard A. “Interregional Differences in per Capita Income, Population, and Total Income, 1840-1950.” In Trends in the American Economy in the Nineteenth Century: A Report of the National Bureau of Economic Research, Conference on Research in Income and Wealth. Princeton, NJ: Princeton University Press, 1960.

Easterlin, Richard A. “Regional Income Trends, 1840-1950.” In The Reinterpretation of American Economic History, edited by Robert W. Fogel and Stanley L. Engerman. New York: Harper & Row, 1971.

Gendell, Murray. “Trends in Retirement Age in Four Countries, 1965-1995.” Monthly Labor Review 121, no. 8 (1998): 20-30.

Glasson, William H. Federal Military Pensions in the United States. New York: Oxford University Press, 1918.

Glasson, William H. “The South’s Pension and Relief Provisions for the Soldiers of the

Confederacy.” Publications of the North Carolina Historical Commission, Bulletin no. 23, Raleigh, 1918.

Goldin, Claudia. Understanding the Gender Gap: An Economic History of American Women. New York: Oxford University Press, 1990.

Graebner, William. A History of Retirement: The Meaning and Function of an American Institution, 1885-1978. New Haven: Yale University Press, 1980.

Haines, Michael R. “The Life Cycle, Savings, and Demographic Adaptation: Some Historical Evidence for the United States and Europe.” In Gender and the Life Course, edited by Alice S. Rossi, pp. 43-63. New York: Aldine Publishing Co., 1985.

Kingson, Eric R. and Edward D. Berkowitz. Social Security and Medicare: A Policy Primer. Westport, CT: Auburn House, 1993.

Lebergott, Stanley. Manpower in Economic Growth. New York: McGraw Hill, 1964.

Lee, Chulhee. “Sectoral Shift and the Labor-Force Participation of Older Males in the United States, 1880-1940.” Journal of Economic History 62, no. 2 (2002): 512-523.

Maloney, Thomas N. “African Americans in the Twentieth Century.” EH.Net Encyclopedia, edited by Robert Whaples, Jan 18, 2002. http://www.eh.net/encyclopedia/contents/maloney.african.american.php

Moen, Jon R. Essays on the Labor Force and Labor Force Participation Rates: The United States from 1860 through 1950. Ph.D. dissertation, University of Chicago, 1987.

Moen, Jon R. “Rural Nonfarm Households: Leaving the Farm and the Retirement of Older Men, 1860-1980.” Social Science History 18, no. 1 (1994): 55-75.

Ransom, Roger and Richard Sutch. “Babies or Bank Accounts, Two Strategies for a More Secure Old Age: The Case of Workingmen with Families in Maine, 1890.” Paper prepared for presentation at the Eleventh Annual Meeting of the Social Science History Association, St. Louis, 1986a.

Ransom, Roger L. and Richard Sutch. “Did Rising Out-Migration Cause Fertility to Decline in Antebellum New England? A Life-Cycle Perspective on Old-Age Security Motives, Child Default, and Farm-Family Fertility.” California Institute of Technology, Social Science Working Paper, no. 610, April 1986b.

Ruggles, Steven and Matthew Sobek, et al. Integrated Public Use Microdata Series: Version 2.0. Minneapolis: Historical Census Projects, University of Minnesota, 1997.

http://www.ipums.umn.edu

Short, Joanna S. “The Retirement of the Rebels: Georgia Confederate Pensions and Retirement Behavior in the New South.” Ph.D. dissertation, Indiana University, 2001.

Sundstrom, William A. and Paul A. David. “Old-Age Security Motives, Labor Markets, and Farm Family Fertility in Antebellum America.” Explorations in Economic History 25, no. 2 (1988): 164-194.

Williamson, Samuel H. “United States and Canadian Pensions before 1930: A Historical Perspective.” In Trends in Pensions, U.S. Department of Labor, Vol. 2, 1992, pp. 34-45.

Williamson, Samuel H. The Development of Industrial Pensions in the United States during the Twentieth Century. World Bank, Policy Research Department, 1995.

Citation: Short, Joanna. “Economic History of Retirement in the United States”. EH.Net Encyclopedia, edited by Robert Whaples. September 30, 2002. URL http://eh.net/encyclopedia/economic-history-of-retirement-in-the-united-states/

Competition in the Promised Land: Black Migrants in Northern Cities and Labor Markets

Author(s):Boustan, Leah Platt
Reviewer(s):Bodenhorn, Howard

Published by EH.Net (April 2017)

Leah Platt Boustan, Competition in the Promised Land: Black Migrants in Northern Cities and Labor Markets. Princeton: Princeton University Press, 2017.  xv +197 pp. $30 (hardcover), ISBN: 978-0-691-15087-1.

Reviewed for EH.Net by Howard Bodenhorn, Department of Economics, Clemson University.

The principal, big-picture issue addressed in In Competition in the Promised Land is how the migration of southern African-Americans into northern and western cities transformed labor and housing markets in mid-twentieth-century urban America. There is an already extensive, high-quality literature and Leah Platt Boustan offers several original and valuable insights and extensions. Before discussing Boustan’s contributions it is useful to summarize what economic historians know about these issues. Using the 1940 and 1950 censuses, Thomas N. Maloney (1994) and Robert A. Margo (1995) decompose the black-white wage gap to better understand the observed convergence in wages and attribute the convergence to a combination of wage compression within occupations and industries, as well as an occupational, industrial, and geographic redistribution of the black labor force during the war and post-war years. Their findings are consistent with Gunnar Myrdahl’s (1944) belief that the racial gap in occupations and wages would be reduced, at least in part, by blacks moving to the North with its better employment opportunities and less discriminatory regime. William J. Collins (2000) uses individual work histories to recreate the industrial and geographic transitions for blacks in the 1940s and finds little evidence in support of the traditional “southern farm to northern factory” tale. He also documents a modest wage gap in northern employment between southern-born black migrants and northern-born blacks residing in the same city. Maloney (2001) and Collins and Marianne H. Wanamaker (2014) use linked census data to study the first wave of the Great Migration that commenced in the 1910s. Maloney finds that migrant and native-born northern blacks experienced similar rates of occupational mobility in the 1910s. Collins and Wanamaker (2014, p. 220) find that black migrants increased their wages by 90 percent and that “blacks’ relative gains may be accounted for fully by their interregional migration.” Based on the black experience in the early decades of the twentieth century, Myrdahl’s belief was not unfounded. Disfranchised and unable to influence their condition through “voice” in the Jim Crow South, it appears that southern African-Americans might improve their lot through “exit” (Hirschman 1970).

It turns out that young black men who followed Myrdahl’s exhortation to “go North” in the post-depression decades experienced slightly higher wage gains than those of the First World War-era migrants (130 percent). South-to-North white migrants, by comparison, experienced 60 percent increase in wages on average. Boustan’s readable volume reveals that despite the substantial improvements in wages due to migration, black migrants did not follow the trajectory of other immigrant groups into northern and western cities. Unlike the Irish, Germans, and Italians before them, blacks did not integrate into urban economies and continue to move up the occupational ladder.

Boustan notes that the traditional explanation for the failure of African-Americans to achieve socioeconomic parity with whites emphasizes two factors: post-1970s deindustrialization, and racism. The relatively high-paying, if grueling, urban factory jobs available to blacks in the North earlier in the twentieth century vanished. The meatpacking industry, once concentrated in Chicago dispersed after 1960; the Chicago stockyards closed in 1970. Detroit, too, where Ford’s workforce was once 50 percent African-American, entered into a period of slow decline in the 1970s (Maloney and Whatley 1995; Glaeser 2011). Other rust-belt cities followed similar trajectories.

Boustan adds a supply-side factor to the mix of explanations. The continuing influx of southern black migrants into northern and western cities, intensified competition in already tight urban labor and housing markets. Migrants, she points out, pushed up housing costs, pushed down wages, crowded more youth into already overcrowded, underfunded urban schools, all while whites fled to the suburbs. An increasing number of whites also simply fled the North altogether; the falling costs of central air conditioning and the elimination of Jim Crow made the Sunbelt a more attractive place to live and work (Wright 2013). In the five substantive chapters of her book, Boustan investigates the causes and consequences of black migration into the urban North and white migration out.

The first chapter analyzes black migration out of the South. Here, and throughout the volume, she offers a brief depiction of the traditional interpretation and then, rather than trying to overturn those interpretations, she offers extensions and subtleties. The traditional explanation for black exit from the South, for example, focuses on violence, racism, and large exogenous events, such as the great Mississippi flood of 1927. While not denying that these factors were important, she contends that economic conditions were quantitatively more important determinants of the choice to leave and that existing transportation networks determined where blacks went. Southern areas more reliant on cotton cultivation and with more segregationist institutions experienced greater black migration, while areas in the South that offered industrial employment opportunities experienced less migration. A more interesting feature, however, was how railroad networks influenced where blacks went when they left the South. Blacks tended to move “due North,” because the principal rail lines did (p. 32). Blacks from the Mississippi delta, for example, tended to end up in Chicago; those from the Carolinas settled in Philadelphia, Newark, and New York.

Chapter 2 considers who migrated. She finds that sons of common laborers and sons of the small class of southern white-collar blacks were the most likely to leave. Sons of tenant farmers were less likely to migrate. Any economic analysis of the subsequent employment and earnings of black migrants must confront the issue of selection bias. Was it the case that blacks with more gumption were more likely to leave? To eliminate the effects of selection, she gathers and analyzes data on brothers, at least one of whom migrated and at least one of whom did not. This identification strategy will correct for any bias that results from common household factors, except, of course, differences in unobservable gumption across siblings. Because she finds relatively small differences in the return to migration between the overall (unmatched) and brother sample, Boustan concludes that selection is not driving the result. She then makes an effort to show that the gumption effect itself is fairly small, by comparing the earnings of northern-born and migrant blacks. Assuming that the northern-born sample exhibits the full distribution of characteristics, the trivial difference in earnings points to absence of selection on unobserved characteristics.

The book’s third chapter analyzes black employment and wages, and Boustan’s results are consistent with earlier studies (Donohue and Heckman 1991; Sundstrom 1994). Discriminatory hiring practices prevented northern-born blacks from moving out of traditionally black employments and southern immigrants pushed blacks’ relative wages down. Racial segmentation in the job market followed from both pre-market (education, training, experience) factors and market-based discrimination (employers’ refusals to hire blacks into supervisory, sales and clerical roles). Boustan’s estimates imply that pre-market factors account for about two-thirds of the imperfect substitutability of black for white workers. Lower-quality southern schools left many blacks ill-prepared for skilled and semi-skilled urban employments. “Discrimination,” concludes Boustan (p. 81), “originated not at the northern factory gate but in the southern schoolhouse; by the time southern blacks arrived in the North, they were already at a disadvantage.”

I find the fourth and fifth chapters, which document and explain white flight to the suburbs, the most fascinating and compelling section of the book. Black migration into urban areas may have encouraged white flight through three channels: the housing market channel; the social interactions channel; and the fiscal channel. The housing market channel signifies that the influx of southern blacks drove up rents and home prices, which made the suburbs cost competitive (home prices versus commuting costs). The social interactions channel posits that whites preferred not to live in close proximity to blacks, and there is a now large theoretical literature on tipping points consistent with the hypothesis that consumers prefer to reside in proximity to like persons, and considerable empirical evidence consistent with theory (Schelling 1971; Blair 2016). The fiscal channel posits that the increasing share of blacks in an urban area alters the political coalitions and local government spending priorities.

The empirical problem is sorting out the relative contribution of these three effects. Boustan offers two relatively ingenious approaches. She first tackles the social interactions channel. She adopts an instrumental variables (IV) approach based on the observed patterns of chain migration between southern and northern locales. Chicago, for example, historically attracted southern migrants from the lower Mississippi valley. Some may have been pulled by high wages in Chicago, while others were pushed by low wages in the delta. At the same time, urban, white Chicagoans may have been pulled to the suburbs by high wages in Arlington Heights or Evanston, or they may have been pushed by a distaste for living next to black migrants. Boustan’s identification strategy is premised on the idea that low wages in the delta should not have any effect on whites’ decisions to move to the suburbs except through the connection between low southern wages and black migration in historically white areas. Her IV estimates imply that each black migrant into the urban North is associated with 2.5 suburb-bound whites. A rate greater than 1.0 implies a white distaste for black neighbors. Still, she cannot yet conclude that whites exited due to a distaste for proximity or whether they had different preferences for local public goods.

To distinguish between prejudice and public goods, or the interactions versus fiscal channels, Boustan employs what are essentially within-metropolitan area, cross-border effects to identify the motivations for white flight. If black migration shifted the political balance and fiscal priorities of city governments, even whites residing in all-white enclaves may have headed for the exit. Although white families could probably maintain control of local elementary and middle schools, for example, they may not have been willing to send their teenagers to economically and racially diverse high schools. It is also possible that black and white neighborhoods differed in their preferences for public safety and other municipally supplied public goods. The evidence pretty clearly demonstrates increasing segregation: in 1940, 21 percent of whites lived within two miles of a black enclave; in 2000, just 13 percent of whites did. But she finds that much of that change is due to local political and fiscal factors. When comparing two comparable, adjacent neighborhoods separated by an urban-suburban political border, she finds that housing prices are significantly higher to the white side and lower to the black. Whites are willing to pay more for housing to reside on the white side; the wider the gap in black population share between city and suburb, the larger the housing price differential. But the motivating factor appears to be differences in mean income across the border rather than race per se. Different incomes also lead to different fiscal choices. While suburbanites do not spend more per pupil on education or on parks, sanitation or road maintenance, they spend less on public safety perhaps because they face fewer social problems and they pay less in taxes (p. 140). Suburbanites also live around more college graduates, a valuable amenity if peer effects influence current and future labor productivity and wages.

Some readers might, and perhaps should, question some of Boustan’s approaches and conclusions, yet her volume is a thoughtful and valuable contribution to the economic literature on race relations and social interactions. While reading her analysis of brothers’ outcomes, I could not help but reflect on the casual observation that I have known lots of brothers that were different in so many dimensions that a household fixed effect will not capture. Still it is a methodological advance in accounting for potential selection of movers and stayers. And in her analysis of white and black enclaves, I kept asking whether two miles, or even four, represents a meaningful distance when automobiles are ubiquitous. I attended high school in a suburban Virginia town in which the high school was about 60 percent white and lived about two miles from a black enclave, separated by a four-lane divided highway. I had virtually no interaction with black students during school hours, but lots of interaction after school on the outdoor basketball courts across the highway. Was that what my parents were paying for? And how can Boustan account for it? I look forward to seeing her answers to these and other questions as she continues to grapple with these kinds of difficult questions.

References:

Blair, Peter Q. 2016. “The Effect of Outside Options on Tipping Points.” Working paper, Clemson University.

Collins, William J. 2000. “African-American Economic Mobility in the 1940s: A Portrait from the Palmer Surveys,” Journal of Economic History 60(3): 756-781.

Collins, William J. and Marianne H. Wanamaker. 2014. “Selection and Economic Gains in the Great Migration of African Americans: New Evidence from Linked Census Data,” American Economic Review: Applied Economics 6(1): 220-252.

Donohue, John J. III and James Heckman. 1991. “Continuous versus Episodic Change: The Impact of Civil Rights Policy on the Economic Status of Blacks,” Journal of Economic Literature 29(4): 1603-43.

Glaeser, Edward. 2011. Triumph of the City: How Our Greatest Invention Makes Us Richer, Smarter, Greener, Healthier, and Happier. New York: Penguin.

Hirschman, Albert O. 1970. Exit, Voice, and Loyalty: Responses to Decline in Firms, Organizations, and States. Cambridge: Harvard University Press.

Maloney, Thomas N. 1994. “Wage Compression and Wage Inequality between Black and White Males in the United States, 1940-1960,” Journal of Economic History 54(2): 358-81.

Maloney, Thomas N. 2001. “Migration and Economic Opportunity in the 1910s: New Evidence on African-American Occupational Mobility in the North,” Explorations in Economic History 38(): 147-65.

Maloney, Thomas N., and Warren C. Whatley. “Making the Effort: The Contours of Racial Discrimination in Detroit’s Labor Markets, 1920–1940,” Journal of Economic History 55(3): 465-493.

Margo, Robert A. 1995. “Explaining Black-White Wage Convergence, 1940-1950,” Industrial and Labor Relations Review 48(3): 470-81.

Myrdahl, Gunnar. 1944. An American Dilemma: The Negro Problem and Modern Democracy. New York: Harper & Brothers.

Schelling, Thomas C. 1971. “Dynamic Models of Segregation,” Journal of Mathematical Sociology 1(2): 143-186.

Sundstrom, William A., 1994. “The Color Line: Racial Norms and Discrimination in Urban Labor Markets, 1910–1950,” Journal of Economic History 54(2): 382-396.

Howard Bodenhorn is a professor of economics at Clemson University. He is author of The Color Factor: The Economics of African-American Well-being in the Nineteenth-Century South (Oxford University Press, 2015).

Copyright (c) 2017 by EH.Net. All rights reserved. This work may be copied for non-profit educational uses if proper credit is given to the author and the list. For other permission, please contact the EH.Net Administrator (administrator@eh.net). Published by EH.Net (April 2017). All EH.Net reviews are archived at http://eh.net/book-reviews/

Subject(s):Education and Human Resource Development
Historical Demography, including Migration
Household, Family and Consumer History
Labor and Employment History
Urban and Regional History
Geographic Area(s):North America
Time Period(s):20th Century: Pre WWII
20th Century: WWII and post-WWII

Roaring Metropolis: Businessmen’s Campaign for a Civic Welfare State

Author(s):Amsterdam, Daniel
Reviewer(s):Smith, Fred H.

Published by EH.Net (October 2016)

Daniel Amsterdam, Roaring Metropolis: Businessmen’s Campaign for a Civic Welfare State. Philadelphia: University of Pennsylvania Press, 2016. v + 230 pp. $45 (hardcover), ISBN: 978-0-8122-4810-4.

Reviewed for EH.Net by Fred H. Smith, Department of Economics, Davidson College.

Most economists know that there was a fundamental change in the government’s role in the American economy during the first decades of the twentieth century.  With the passage of the Sixteenth Amendment, the First World War, and the Great Depression, there were abundant opportunities for the government to become ever more interwoven into the fabric of the economy.  However, I suspect that it is much less widely known or understood that that these changes were happening at federal and at local levels of government and that the magnitude of the changes at the local level was truly massive.  In Roaring Metropolis, Daniel Amsterdam presents a case study of three cities — Detroit, Philadelphia, and Atlanta — in order to show how these changes occurred and how the changes affected the lives of the cities’ residents.

In the introductory chapter Amsterdam makes it clear that his book fills a meaningful gap in the urban economic history literature.  He shows that local government expenditures exploded in cities across the United States between 1916 and 1928, and makes a persuasive case that the challenges faced by urban leaders in the 1910s and 1920s are remarkably similar to the challenges faced by urban leaders today. He also defines the term “civic welfare” to make it clear that it meant something very different to the business leaders of the early twentieth century than it might to the policy makers of today.  This is especially critical to understanding all that is to follow in Roaring Metropolis.  The civic welfare that Amsterdam writes about in the core chapters of the book describes social policy that was created to make a city more economically competitive with its neighbors; it was not policy designed to buffer a city’s residents from the harsh realities of a modern, industrial economy.

Chapter one introduces us to the earliest efforts of business leaders and politicians seeking to enact civic welfare policies.  While the civic leaders in Detroit, Philadelphia, and Atlanta faced some common obstacles in implementing civic welfare policy, each set of leaders also faced a distinct challenge that affected their city more than it did the other two.  In Detroit, business leaders of the 1910s were forced to work with a large, inefficient city council.  Philadelphia’s leaders faced off against a powerful Republican political machine that was reluctant (initially) to support civic welfare initiatives.  And, finally, Atlanta’s leaders had to navigate the interactions of a racially heterogeneous population and a city charter that required a supermajority in order to approve any referendum on bond financed spending.  Amsterdam shows that the combination of challenges each city faced before the end of World War I prevented any real progress from being made on the civic welfare programs that business leaders wanted.  In identifying the root causes of each city’s failures, he also sets the stage for the core chapters of the book (chapters two through four) — the case studies of each of the three cities.

The case studies focus on how the leaders of each city navigated the particular set of challenges that stood before them as they sought to implement the civic welfare initiatives they supported.  Given the difficulties Detroit has faced for the last three decades, it is ironic that it stands out as an especially well-functioning city in Roaring Metropolis.  Detroit’s major obstacle to enacting civic welfare before and during World War I was the structure of its city council.  The city charter called for a ward-based city council with thirty-six members.  With such a large city council, and with representatives loyal to their respective wards, it was difficult for business leaders to garner the support for their preferred projects.  So, civic leaders persuaded the electorate to allow the city’s charter to be rewritten.  Under the new charter the city council was comprised of nine members who were elected at large.  At-large representation, coupled with a smaller city council, made it easy for business leaders to ensure that their preferred candidates won seats and supported key civic welfare initiatives.

The business leaders in Philadelphia, with its well-established political machine, had a more difficult road to travel.  Philadelphia’s leaders had to work within the existing political structure, but, through carefully formed political alliances that allowed them to leverage existing political rivalries within the city’s Republican machine, they finally made progress on their civic welfare goals in the 1920s.  Indeed, of the three cities Amsterdam examines in Roaring Metropolis Philadelphia completed the most iconic civic welfare projects: The downtown parkway and the Philadelphia Museum of Art.

Atlanta’s business leaders also enjoyed successes in implementing their civic welfare policies, but they faced a set of challenges rather unlike Detroit or Philadelphia’s.  In 1920 Atlanta was a much smaller city than Detroit or Philadelphia, but it was also much more racially heterogeneous.  While Atlanta’s white population typically had no interest in seeing the city’s African-Americans vote, the city’s charter forced them to reconsider this position when it came to mustering support for civic welfare projects.  Atlanta’s city charter required the support of a two-thirds majority of registered voters in order to issue municipal bonds.  Thus, not only did the business leaders need a supermajority to pass a bond initiative, they needed to turn out at least two-thirds of the registered voters to even have a chance of passing the initiative.  African-American voters gained a surprising degree of power through this arrangement.  Simply registering to vote and staying home on election day exerted influence in Atlanta.  When looking to pass a new bond initiative, white civic leaders ignored the African-American community at their peril.

Ultimately, chapters two through four show us the myriad accomplishments of the cities’ business leaders.  In each city, civic welfare initiatives led to some combination of new schools, new sewers, additional water lines, and miles of new streets.  In Philadelphia, the city also spent money on public transportation infrastructure and constructed its first subway line.  Moreover, Detroit and Philadelphia built beautiful art museums, public libraries, and parks.  But, chapter five shows us what civic leaders did not accomplish.  Civic leaders did not implement civic welfare policies designed to alleviate the suffering that could be caused by living in a large city in a modern, industrial economy.  As Amsterdam points out, the “welfare capitalism” business leaders experimented with in the 1920s — limited fringe benefits, structured opportunities to socialize with co-workers outside of work, and recreational facilities at the firm — was designed to increase workers’ loyalty to their employers.  Business leaders still had no desire to create a social safety net of the sort that would be created during the Great Depression.

Roaring Metropolis ends with an epilogue that provides a brief overview of how each of these cities was to fare after the close of the decade, and, more specifically, how the cities fared during the Great Depression.  It also weaves the themes of the book together in a way that highlights the important contributions of this book and that ties the themes of the book to the present day.  In particular, Amsterdam does an exceptional job of making two points.

First, the civic welfare policies implemented in Detroit, Philadelphia, and Atlanta made these cities more livable, but, more importantly, these policies made the cities more attractive for businesses.  Yes, a better school system was a benefit to residents. But an educated workforce made a city a more attractive place to open or operate a firm, too.  Moreover, it is essential to remember that the civic welfare policies implemented in the 1920s did little to insulate city residents from the forces of a modern industrial economy.

Second, these gains were achieved almost exclusively through debt financing.  This is a theme that will be all too familiar to urban economists in the twenty-first century.  The business leaders and residents of a city might want better schools, additional acres of parks, and better infrastructure, but all too often voters are unwilling to pay the taxes needed to fund these initiatives.  In Roaring Metropolis, Amsterdam has chosen three cities that spent large sums of borrowed money on civic welfare because debt financing in the 1920s was not a problem.  After the brief economic downturn at the beginning of the decade, the economy performed well, and each of the three cities experienced rapid population growth.  But, as Amsterdam writes in the epilogue, the debt incurred in the 1920s became a crushing burden when the economy imploded in the 1930s.

Roaring Metropolis is a great success because it tells a fascinating story very effectively, it links historical events to present day challenges, and it discusses three cities that appear to be representative of the experiences of a wide range of American cities.  There is little to find fault with in the book, though economic historians may be frustrated by one of its quirks.  Amsterdam cites figures throughout the book, but he only occasionally puts them into terms that an economist might find useful.  For example, he typically quotes figures in levels (instead of discussing things in, say, per capita terms), and he rarely converts nominal values into real values.  These are minor quibbles, though.  Roaring Metropolis is a terrific read, and I highly recommend it to any urban economic historian who wants a better understanding of urban political economy in the 1910s and 1920s.

Fred Smith’s most recent paper, “What’s Manhattan Worth?” (co-authored with Jason Barr of Rutgers University), appeared on the program at the 2016 American Economic Association Annual Meeting.

Copyright (c) 2016 by EH.Net. All rights reserved. This work may be copied for non-profit educational uses if proper credit is given to the author and the list. For other permission, please contact the EH.Net Administrator (administrator@eh.net). Published by EH.Net (October 2016). All EH.Net reviews are archived at http://eh.net/book-reviews/

Subject(s):Government, Law and Regulation, Public Finance
Urban and Regional History
Geographic Area(s):North America
Time Period(s):20th Century: Pre WWII

Builders of a New South: Merchants, Capital, and the Remaking of Natchez, 1865-1914

Author(s):Anderson, Aaron D.
Reviewer(s):Gillespie, Michele

Published by EH.Net (March  2015)

Aaron D. Anderson, Builders of a New South: Merchants, Capital, and the Remaking of Natchez, 1865-1914. Jackson, MS: University Press of Mississippi, 2013. vii +279 pp. $40 (hardcover), ISBN: 978-1-61703-667-5.

Reviewed for EH.Net by Michele Gillespie, Department of History, Wake Forest University.

In Builders of a New South, Aaron D. Anderson, assistant professor of history at Alcorn State University, argues that post-war merchants rebuilt Natchez, Mississippi’s sharecropping regime with new furnishing and credit systems, making merchants instrumental in the staple crop market’s transition from slavery to freedom.  He offers a close analysis of the economic and social networks generated by ten successful merchant families and their contractual relationships with planters and freedmen over five decades.  He uses this micro-history to argue that a new class of entrepreneurial merchants used hitherto ignored economic prowess to assemble a sharecropping system that worked to their advantage in the confusion of post-war Natchez.  In the process, he insists, they remade the city.  In a departure from well-known earlier studies, Anderson shows how this postbellum merchant class used local culture and favorable laws as well as socioeconomic realities to control the petty financing of cotton, and as a result, managed to take on the mantle of Natchez’s newest elite by the late nineteenth century.  He bases his argument not only on the usual census, property, tax and probate records, but on thousands of chattel mortgage contracts, a largely overlooked but invaluable archival source.

Although informed by an older historiographic tradition, including Harold D. Woodman’s classic study on New South merchants as King Cotton’s newest retainers, Anderson embraces more recent approaches by insisting on the interdependence of socioeconomic and cultural realities.  He joins a younger generation of historians of southern economy and society who have been insistent that all historians recognize the importance of an ambitious commercial and professional middle class sandwiched between yeomen and planters in the antebellum era. He adds to their work by stretching that time frame through the end of the nineteenth century.  Thus, his argument provides a valuable book end to Frank Byrne’s Becoming Bourgeois: Merchant Culture in the South, 1820-1865 (2006).  Byrne revealed merchants as overlooked economic linchpins in the antebellum South who, despite their relative economic success, more often than not failed at securing social inclusion and political influence in planter society.  In contrast, Anderson shows us how the Civil War’s destruction of the antebellum southern economy brought with it plentiful opportunities for postbellum merchants in the Reconstruction South to secure not just new wealth, prestige, and power but a starring role in shaping the New South economy.

The argument for the central place of these merchants in constructing a dynamic postbellum Natchez and its surroundings is conveyed through Anderson’s in-depth analysis of ten families, who began their Natchez careers as essentially outsiders; eight of the ten family heads were non-native southerners and six were Jewish. Despite their atypicality as southerners, these merchants built massive plantation-furnishing houses and cotton-buying firms. They accrued foreclosed land left and right, including cotton plantations, paid for with the profits they made by offering high-interest credit not just to planters but to freedpeople too.  The merchants’ fresh fortunes secured from across the social class spectrum propelled them to the top of Natchez’s fragile postbellum social and commercial worlds, where they became fervent southerners and prominent civic leaders, best exemplified by Isaac Lowenburg who, although he had only arrived in Natchez as an immigrant in 1863, was elected the city’s first Jewish mayor twenty years later.

Anderson’s book is at its best when it insists on the centrality of freed African Americans as consumers and producers to the post-war southern economy.  In this sharply altered world, the author shows his readers, the most successful merchants recognized from whom they could make money the quickest, snatching up the opportunity to provide freed blacks goods and credit in what was essentially an enormous new market.  Anderson emphasizes that merchants’ money-making skills could be leveraged even further by powerful social networks of religion, marriage, and ethnicity, and by favorable new agricultural lien laws in 1867 that gave them a near monopoly on the business of local cotton.  Struggling planters and farmers were able to use their local crops as security, thus benefitting the local merchants over their former big-city competitors in New Orleans and Mobile. The failing planter class and the rising merchant class increasingly intermixed in the social, economic, and civic circles of Natchez, as planters’ sons turned businessmen out of necessity, and the two groups conspired together to keep African Americans in a subordinated place.  The merchants’ rise to power in Natchez was ultimately a brief one, for the ratcheting up of Jim Crow racism drove black men and women out of the region, just as the cotton economy suffered precipitous declines.  While Anderson champions the merchants for putting the post-war economy back on its feet and marching the region’s population down the road to modern capitalism, he is also quick to point out that these merchants lacked any progressive instincts, routinely manipulated and exploited their customers, and left the region as soon as opportunity in early twentieth-century Natchez began looking bleak.

Missing from Anderson’s otherwise sharp analysis is closer attention to the role of women and gender.  Understanding women as economic actors in their own right and as powerful facilitators of cultural influence with spillover effects in political economic realms have been especially noteworthy developments in history as a discipline over the last thirty years.  Although Anderson is attentive to the multi-generational, dynastic aspects of his merchant families and their clever use of capital to secure wealth, and mentions the role of marriage and wives in facilitating this new merchant wealth and status (pp. 158-162), he has not explicitly addressed the ways marriage, widowhood, inheritance, female wealth and female authority shaped his merchant family case study, or the ways merchants may have negotiated the new plethora of female-headed households of freedpeople and planters.  There is more work to be pursued here on the new gendered realities of this post-war world, how gendered differentials in access to law and credit, as well as racial ones, denied opportunity for some and generated it for others. Indeed, this welcome case study and its important thesis invites new work in general through comparative studies of regional economies and merchants in other postwar cities across the South.

Michele Gillespie is the author of Katharine and R.J. Reynolds: Partners of Fortune in the Making of the New South (University of Georgia Press, 2012), gillesmk@wfu.edu.

Copyright (c) 2015 by EH.Net. All rights reserved. This work may be copied for non-profit educational uses if proper credit is given to the author and the list. For other permission, please contact the EH.Net Administrator (administrator@eh.net). Published by EH.Net (March 2015). All EH.Net reviews are archived at http://eh.net/book-reviews/

Subject(s):Business History
Geographic Area(s):North America
Time Period(s):19th Century
20th Century: Pre WWII