Lawrence W. Boyd, University of Hawaii
The company town was an economic institution that was part of the market for labor. In a company town a single firm provided its employees with goods and services, hired police, collected garbage, dispensed justice, and answered (or failed to answer) complaints from residents. The economy of the company town was totally “privatized” — community services that today are provided by municipal governments were provided by the profit-maximizing firm, which ran the company town. Property rights were defined in such a way that companies could exclude competition by other firms that wished to provide goods and services to their employees.
Although company towns were most closely associated with the coal mining industry it should be noted that they existed in a number of other industries. For example, Homestead, Pennsylvania was a company town situated next to the Homestead Steel Mill. Similarly, Pullman, Illinois was a company town for workers employed at the factory that produced Pullman railroad cars. Because of large and persistent labor struggles associated with the coal industry the focus of interest, both historical and scholarly, has been on coal company towns.
Prevalence of Company Towns in the Coal Industry
The prevalence of company towns, at least in the coal industry, was related to the settlement of regions where mines were developed. When mines opened in isolated regions they needed to provide housing and other necessities to their employees. Thus in more settled regions, the proportion of miners living in company towns was less than in areas that were less settled. In the early 1920’s the United States Coal Commission found that in Southern Appalachia (West Virginia, Eastern Kentucky, Tennessee, Maryland, Virginia, and Alabama) and in the Rocky Mountains 65 to 80 percent of miners lived in company towns. In most of the Midwest only 10 to 20 percent of miners lived in company towns. In Ohio 25 percent lived in company towns, while in Pennsylvania 50 percent lived in company towns.
Property Rights in Company Towns
The leases for company houses that miners rented to a certain extent governed property rights in these company towns. These leases were also something like “tied” contracts in that miners rented their homes so long as they were employed by the company, or at least, had a good relationship with it. Leases generally allowed for a quick termination, usually five days, rather than longer notices. Many leases prevented non-employees from living in or trespassing on company housing. In some leases companies reserved the right of entry into the property and the right to make and enforce regulations on the roads leading into the property.
These rights were commonly enforced during strikes when strikers were evicted from their homes. Sometimes mine owners prevented peddlers or deliveries from independent stores from entering the towns. A practice that seemed to be more common early on was requiring workers to purchase supplies at the company store. This practice appears to have mostly disappeared by the 1920’s.
Complaints about Company Towns
The relationship between employees and owners in company towns could be contentious and this in turn generated a series of complaints that were surprisingly similar across time. The first mention of coal company towns can be found in Friedrich Engels’The Condition of the Working Class in England in 1844, which described dangerous working conditions, cheating on the weighing of coal for piece rate workers, high prices and unsanitary conditions.
Prices in Coal Company Towns
At various times prices charged by mining companies, or profits derived from the sale of goods and services, were deemed excessive. The United States Census in its Census of Mines in 1910 found many mines reported revenues from their mining operations were lower than their expenses and that they stayed in business through sales of goods and services to their employees. Lawrence Lynch in an article published during 1913 in the Political Science Quarterly found prices in company stores excessive. He used the example of black powder, which companies sold to their employees at an average markup of 62 percent.
The United States Coal Commission surveyed stores in mining districts during 1922. They found that stores in southern West Virginia mining districts of New River and Kanawha had prices that were approximately 9 and 5 percent higher, respectively, than in the nearby city of Charleston. In other mining districts the prices were equal to or lower than they were in the nearby city. The Commission also compared the price differentials between independent and company stores and found that in the southern West Virginia districts they were 4.2 percent higher in company stores while in Alabama they were 7 percent higher.
Price Fishback’s Findings
Price Fishback pointed out that a competitive labor market would limit monopolistic pricing policies on the part of firms that operated company towns and produce a single real wage for all miners participating in this market. Thus if miners were free to move among mines, and companies competed for employees then this would in turn have prevented mine owners from exploiting their employees.
Fishback suggested that the 4.2 percent price differential on food that existed between company and independent stores represented the maximum company stores could charge due to their favorable location. Furthermore, this difference was partly offset by higher wages and transportation costs.
Fishback also found that the use of scrip, or advances by the company, used to finance living expenses was limited. Companies seldom carried debt longer than two weeks. Furthermore most miners had no more than 60 percent of their pay deducted as a result of the use of scrip. This meant that miners were not tied to the company through exorbitant debt. In addition he found that rents on company housing were normal in comparison to rents in independent communities. He also found that companies that offered exceptional sanitation, such as flush toilets, paid lower wages (roughly 3.4 percent less). This suggests that wages adjusted to differences in amenities offered by different company towns.
Lawrence Boyd’s Findings
Lawrence Boyd made use of the data in the 1923 Coal Commission’s Report to develop a price index for food that was comparable across districts. This was something the Commission had not done in their original report. The Commission decided not to compare living conditions in various districts because:
It would blur the picture of living conditions beyond recognition if the information were assembled in one composite photograph. Notwithstanding their common occupational interest, the American mountaineer miner of West Virginia, the Slovakian on Pennsylvania’s plateaus and hills, the Alabama negro, the Italian miner in Illinois towns, differ greatly in habits and ideals. (United States Coal Comission, Report. 1453)
Boyd found that close to 90 percent of the items listed in the Commission’s Report could also be found in other districts. Thus a price index for these items could be constructed that allowed a comparison between those districts where most miners lived in company towns and those where company towns were less prevalent.
Boyd found that that the price index was as much as 15 percent lower in districts where the fewest miners lived in company towns such as Illinois and Ohio. Furthermore, districts where there were fewer miners in company towns tended to have higher incomes. If the price index was used to deflate nominal incomes then real incomes were approximately 70 percent higher in a district like Illinois. Boyd suggests that this indicates that miners were mobile within mining districts but not between mining districts.
Boyd’s comparisons were only for food, which comprised approximately 45 percent of miner’s budgets in southern West Virginia and about 30 percent in districts around Illinois. The Coal Commissions reported that miners in Southern Appalachia spent nearly twice as much on flour as they did on rent. Unfortunately, records for other prices, as well as wages, were not available, due in part to a fire that burned some of the archives of the U. S. Coal Commission.
The Decline of Company Towns
Company towns declined as an institution as automobiles and highways became more common. As the Coal Commission found in 1923, company towns were limited to areas newly settled and thus isolated from previous patterns of settlement. As areas became more settled and connected to transportation networks company towns declined. Many former company towns simply were abandoned when mines shut down. Others became incorporated or unincorporated communities. Former company towns such as Homestead are now suburbs of cities like Pittsburgh. Anniston, Alabama, on the other hand, started out as a company town and was transformed into a public town. Grace Gates documents this transition and describes the role of diversification of industry and commerce in this transformation. The necessity that workers live close to their place of employment ended with the development of modern transportation networks.
What can be said about the company town is that it does not appear to have risen to the level of exploitation many commentators have assumed. As Fishback concludes coal miners were able to protect themselves from exploitation through the use of both “voice and exit.” They could engage in collective action through strikes, and joining a union, or through individual actions such as quitting and moving to a better location. Thus the functioning of a competitive labor market could blunt the worst aspects of the company town.
Boyd, Lawrence W. “The Coal Company Town.” Ph.D. Dissertation, West Virginia University, 1993.
Fishback, Price V. Soft Coal, Hard Choices: The Economic Welfare of Bituminous Coal Miners 1890-1930. New York: Oxford University Press, 1992.
Gates, Grace Hooten. The Model City of the New South: Anniston, Alabama, 1872-1900. Tuscaloosa, AL: University of Alabama Press, 1996.
United States Coal Commission, Report, 5 parts, Senate Document 195, 68th Congress, Second Session. Washington, DC: U. S. Government Printing Office, 1925.
Citation: Boyd, Lawrence. “The Company Town”. EH.Net Encyclopedia, edited by Robert Whaples. January 30, 2003. URL http://eh.net/encyclopedia/the-company-town/