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Petroleum and Public Safety: Risk Management in the Gulf South, 1901-2015

Author(s):McSwain, James B.
Reviewer(s):Aldrich, Mark

Published by EH.Net (November 2018)

James B. McSwain, Petroleum and Public Safety: Risk Management in the Gulf South, 1901-2015. Baton Rouge: LSU Press, 2018. xxii + 368 pp., $55 (hardcover), ISBN: 978-0-8071-6912-4.

Reviewed for EH.Net by Mark Aldrich, Department of Economics, Smith College.

 

The primary focus of this book is the development of regulations governing the safety of storing and shipping petroleum in four Gulf Coast cities — Mobile, New Orleans, Houston and Galveston — primarily around the turn of the twentieth century. The book contains, in addition to a preface and introduction, a chapter on each of these cities. There is also an initial chapter entitled “Petroleum and Nineteenth Century Risk Culture,” as well as a conclusion and epilogue. The basic arguments are that insurance companies developed an approach to petroleum risk management in the nineteenth century and that the gulf cities “convert[ed] insurance rules into legally enforceable regulations” (p. 193).

The book reflects an immense amount of research into primary and secondary works — the author seems to have read every insurance publication there was — and the chapters on individual cities contain detail that is at times overwhelming. Although there are some differences among the cities, in each case the basic story revolves around squabbles between various interest groups — petroleum suppliers and users, third parties, and insurance interests.

I found the first chapter the most interesting as the author traces efforts of various groups to corral the risks of producing and consuming petroleum products from the beginnings to about 1900, and readers may be especially interested in the discussion of insurance companies’ safety work. The discussion of the intertwining of insurance standards and rates with municipal regulations is well done, but the chapter might have included more economic analysis; there is no discussion of moral hazard or of the externalities that bedeviled fire insurance and which surely help account for insurance companies’ enthusiasm for city-wide rules. Nor does the author integrate Dalit Baranoff’s work on competitive conditions in rate setting; did rate wars spill over to standards as well? The author hints (p. 44) at this relationship between rates and standards but does not much develop it.

Markets shaped risks in other ways as well. The author notes that adulteration of kerosene diminished as markets appeared for naphtha, but he ignores the role of prices in this story. The price spread between (cheap) naphtha and (expensive) kerosene, which measured the payoff to adulteration, gradually declined, and so, apparently, did adulteration. Standard Oil probably played a role here that the author might also have noted. Company histories depict Rockefeller as obsessed with quality control and perhaps one reason was that with Standard marketing kerosene under its own name, blowing up customers could have been bad for repeat business. The author does discuss Standard’s marketing of fuel oil as factory fuel giving it a mixed safety report card (pp. 40-41).

The end of chapter 1 provides a nice summary of how concern with petroleum risks evolved over the nineteenth century from a primary focus on volatile products (kerosene) to industrial uses of fuel oil and finally in 1902 resulted in a set of “Rules and Requirements” for fuel oil use and storage promulgated by the National Board of Fuel underwriters. This was the bible from which the insurance industry would try to shape public and private action, and the author discusses it in detail. A table might have brought this into sharper focus.

I found the four city case studies less interesting — in part because they seem broadly similar. While in his introduction the author emphasizes the differences among these cities in size and economic base, these seem to make comparatively little difference to the problem at hand — how to cope with the new risks arising from the large-scale use of petroleum after the Texas discoveries surrounding Spindletop. The basic focus is on the development of municipal regulations governing storage and transportation of crude oil and its products. The regulatory focus included such matters as the size and construction of tanks and pipelines as well as their location. Surprisingly, given modern interest in environmental justice, there is no discussion of how neighborhood racial makeup may have affected location decisions. As the author tells us, the parties shaping the rules included the oil interests, insurance companies and others. For third parties who might bear the costs of fire but not of protecting stored oil, regulations could not be too strong, but one wonders why there were such major disagreements between oil and insurance interests. In discussing events in Mobile, Alabama, at one point (p. 67) the author asserts that “potential dangers to property left other parties unfazed,” but surely tort law must have internalized risks to third parties. What may well account for some of the disagreements was expertise (as the author hints on page 82), for the insurance companies brought far more experience to the table than did the oil companies.

The author’s prose sometimes makes for difficult reading. There are too many bromides: the introductory sentence of the conclusion reads “These Gulf South cities created policies to manage risks associated with storing, transporting and consuming petroleum for fuel” (p. 190). There are also long sentences with vague words that do not read easily. Consider the following one-sentence paragraph from chapter 1 (p. 13): “Acting in step with the evolution of lighting and heating technology, as well as petroleum production, refining and transportation, federal and state governments as well as municipalities formed a risk management tradition shaped by safety and liability concerns for passenger vessels and insured property in which lamps, fixtures and gas machines burned turpentine, camphene mixtures or turpentine and alcohol, as well as naphtha, gasoline and kerosene.” Finding the focus of such constructions is challenging.

These chapters contain no discussion of insurance rates. Yet Baranoff points out that as these events were playing out, insurance interests were trying to stabilize rates and ensure that backsliders did not undercut local boards. At one point (p. 59) the author notes a company used nearby rates as evidence that its oil storage tank was acceptable to insurance companies, but such insights are exceptional and in general, one wonders if insurance companies may have employed ratings to shape safety outcomes in these cities, and if not, why not.

Economists will wonder if any of these rules and policies really did reduce risks, and they will not find an answer here. Granted that the data are imperfect; yet the author never asks the question. Were fire risks higher than average in these cities; were oil fires a peculiar problem; did risks decline and rates change with the new regulations? A stab at answering some of these questions, however imperfect, would have made these chapters more interesting to this reviewer.

 
Mark Aldrich is the author of Back on Track: American Railroad Accidents and Safety, 1965-2015 (Johns Hopkins University Press).

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Subject(s):Agriculture, Natural Resources, and Extractive Industries
Geographic Area(s):North America
Time Period(s):19th Century
20th Century: Pre WWII

History of Workplace Safety in the United States, 1880-1970

Mark Aldrich, Smith College

The dangers of work are usually measured by the number of injuries or fatalities occurring to a group of workers, usually over a period of one year. 1 Over the past century such measures reveal a striking improvement in the safety of work in all the advanced countries. In part this has been the result of the gradual shift of jobs from relatively dangerous goods production such as farming, fishing, logging, mining, and manufacturing into such comparatively safe work as retail trade and services. But even the dangerous trades are now far safer than they were in 1900. To take but one example, mining today remains a comparatively risky activity. Its annual fatality rate is about nine for every one hundred thousand miners employed. A century ago in 1900 about three hundred out of every one hundred thousand miners were killed on the job each year. 2

The Nineteenth Century

Before the late nineteenth century we know little about the safety of American workplaces because contemporaries cared little about it. As a result, only fragmentary information exists prior to the 1880s. Pre-industrial laborers faced risks from animals and hand tools, ladders and stairs. Industrialization substituted steam engines for animals, machines for hand tools, and elevators for ladders. But whether these new technologies generally worsened the dangers of work is unclear. What is clear is that nowhere was the new work associated with the industrial revolution more dangerous than in America.

US Was Unusually Dangerous

Americans modified the path of industrialization that had been pioneered in Britain to fit the particular geographic and economic circumstances of the American continent. Reflecting the high wages and vast natural resources of a new continent, this American system encouraged use of labor saving machines and processes. These developments occurred within a legal and regulatory climate that diminished employer’s interest in safety. As a result, Americans developed production methods that were both highly productive and often very dangerous. 3

Accidents Were “Cheap”

While workers injured on the job or their heirs might sue employers for damages, winning proved difficult. Where employers could show that the worker had assumed the risk, or had been injured by the actions of a fellow employee, or had himself been partly at fault, courts would usually deny liability. A number or surveys taken about 1900 showed that only about half of all workers fatally injured recovered anything and their average compensation only amounted to about half a year’s pay. Because accidents were so cheap, American industrial methods developed with little reference to their safety. 4

Mining

Nowhere was the American system more dangerous than in early mining. In Britain, coal seams were deep and coal expensive. As a result, British mines used mining methods that recovered nearly all of the coal because they used waste rock to hold up the roof. British methods also concentrated the working, making supervision easy, and required little blasting. American coal deposits by contrast, were both vast and near the surface; they could be tapped cheaply using techniques known as “room and pillar” mining. Such methods used coal pillars and timber to hold up the roof, because timber and coal were cheap. Since miners worked in separate rooms, labor supervision was difficult and much blasting was required to bring down the coal. Miners themselves were by no means blameless; most were paid by the ton, and when safety interfered with production, safety often took a back seat. For such reasons, American methods yielded more coal per worker than did European techniques, but they were far more dangerous, and toward the end of the nineteenth century, the dangers worsened (see Table 1).5

Table 1
British and American Mine Safety, 1890 -1904
(Fatality rates per Thousand Workers per Year)

Years American Anthracite American Bituminous Great Britain
1890-1894 3.29 2.52 1.61
1900-1904 3.13 3.53 1.28

Source: British data from Great Britain, General Report. Other data from Aldrich, Safety First.

Railroads

Nineteenth century American railroads were also comparatively dangerous to their workers – and their passengers as well – and for similar reasons. Vast North American distances and low population density turned American carriers into predominantly freight haulers – and freight was far more dangerous to workers than passenger traffic, for men had to go in between moving cars for coupling and uncoupling and ride the cars to work brakes. The thin traffic and high wages also forced American carriers to economize on both capital and labor. Accordingly, American carriers were poorly built and used few signals, both of which resulted in many derailments and collisions. Such conditions made American railroad work far more dangerous than that in Britain (see Table 2).6

Table 2
Comparative Safety of British and American Railroad Workers, 1889 – 1901
(Fatality Rates per Thousand Workers per Year)

1889 1895 1901
British railroad workers
All causes
1.14 0.95 0.89
British trainmena
All causes
4.26 3.22 2.21
Coupling 0.94 0.83 0.74
American Railroad workers
All causes
2.67 2.31 2.50
American trainmen
All causes
8.52 6.45 7.35
Coupling 1.73c 1.20 0.78
Brakingb 3.25c 2.44 2.03

Source: Aldrich, Safety First, Table 1 and Great Britain Board of Trade, General Report.

1

Note: Death rates are per thousand employees.
a. Guards, brakemen, and shunters.
b. Deaths from falls from cars and striking overhead obstructions.

Manufacturing

American manufacturing also developed in a distinctively American fashion that substituted power and machinery for labor and manufactured products with interchangeable arts for ease in mass production. Whether American methods were less safe than those in Europe is unclear but by 1900 they were extraordinarily risky by modern standards, for machines and power sources were largely unguarded. And while competition encouraged factory managers to strive for ever-increased output, they showed little interest in improving safety.7

Worker and Employer Responses

Workers and firms responded to these dangers in a number of ways. Some workers simply left jobs they felt were too dangerous, and risky jobs may have had to offer higher pay to attract workers. After the Civil War life and accident insurance companies expanded, and some workers purchased insurance or set aside savings to offset the income risks from death or injury. Some unions and fraternal organizations also offered their members insurance. Railroads and some mines also developed hospital and insurance plans to care for injured workers while many carriers provided jobs for all their injured men. 8

Improving safety, 1910-1939

Public efforts to improve safety date from the very beginnings of industrialization. States established railroad regulatory commissions as early as the 1840s. But while most of the commissions were intended to improve safety, they had few powers and were rarely able to exert much influence on working conditions. Similarly, the first state mining commission began in Pennsylvania in 1869, and other states soon followed. Yet most of the early commissions were ineffectual and as noted safety actually deteriorated after the Civil War. Factory commissions also dated from but most were understaffed and they too had little power.9

Railroads

The most successful effort to improve work safety during the nineteenth century began on the railroads in the 1880s as a small band of railroad regulators, workers, and managers began to campaign for the development of better brakes and couplers for freight cars. In response George Westinghouse modified his passenger train air brake in about 1887 so it would work on long freights, while at roughly the same time Ely Janney developed an automatic car coupler. For the railroads such equipment meant not only better safety, but also higher productivity and after 1888 they began to deploy it. The process was given a boost in 1889-1890 when the newly-formed Interstate Commerce Commission (ICC) published its first accident statistics. They demonstrated conclusively the extraordinary risks to trainmen from coupling and riding freight (Table 2). In 1893 Congress responded, passing the Safety Appliance Act, which mandated use of such equipment. It was the first federal law intended primarily to improve work safety, and by 1900 when the new equipment was widely diffused, risks to trainmen had fallen dramatically.10

Federal Safety Regulation

In the years between 1900 and World War I, a rather strange band of Progressive reformers, muckraking journalists, businessmen, and labor unions pressed for changes in many areas of American life. These years saw the founding of the Federal Food and Drug Administration, the Federal Reserve System and much else. Work safety also became of increased public concern and the first important developments came once again on the railroads. Unions representing trainmen had been impressed by the safety appliance act of 1893 and after 1900 they campaigned for more of the same. In response Congress passed a host of regulations governing the safety of locomotives and freight cars. While most of these specific regulations were probably modestly beneficial, collectively their impact was small because unlike the rules governing automatic couplers and air brakes they addressed rather minor risks.11

In 1910 Congress also established the Bureau of Mines in response to a series of disastrous and increasingly frequent explosions. The Bureau was to be a scientific, not a regulatory body and it was intended to discover and disseminate new knowledge on ways to improve mine safety.12

Workers’ Compensation Laws Enacted

Far more important were new laws that raised the cost of accidents to employers. In 1908 Congress passed a federal employers’ liability law that applied to railroad workers in interstate commerce and sharply limited defenses an employee could claim. Worker fatalities that had once cost the railroads perhaps $200 now cost $2,000. Two years later in 1910, New York became the first state to pass a workmen’s compensation law. This was a European idea. Instead of requiring injured workers to sue for damages in court and prove the employer was negligent, the new law automatically compensated all injuries at a fixed rate. Compensation appealed to businesses because it made costs more predictable and reduced labor strife. To reformers and unions it promised greater and more certain benefits. Samuel Gompers, leader of the American Federation of Labor had studied the effects of compensation in Germany. He was impressed with how it stimulated business interest in safety, he said. Between 1911 and 1921 forty-four states passed compensation laws.13

Employers Become Interested in Safety

The sharp rise in accident costs that resulted from compensation laws and tighter employers’ liability initiated the modern concern with work safety and initiated the long-term decline in work accidents and injuries. Large firms in railroading, mining, manufacturing and elsewhere suddenly became interested in safety. Companies began to guard machines and power sources while machinery makers developed safer designs. Managers began to look for hidden dangers at work, and to require that workers wear hard hats and safety glasses. They also set up safety departments run by engineers and safety committees that included both workers and managers. In 1913 companies founded the National Safety Council to pool information. Government agencies such as the Bureau of Mines and National Bureau of Standards provided scientific support while universities also researched safety problems for firms and industries14

Accident Rates Begin to Fall Steadily

During the years between World War I and World War II the combination of higher accident costs along with the institutionalization of safety concerns in large firms began to show results. Railroad employee fatality rates declined steadily after 1910 and at some large companies such as DuPont and whole industries such as steel making (see Table 3) safety also improved dramatically. Largely independent changes in technology and labor markets also contributed to safety as well. The decline in labor turnover meant fewer new employees who were relatively likely to get hurt, while the spread of factory electrification not only improved lighting but reduced the dangers from power transmission as well. In coal mining the shift from underground work to strip mining also improved safety. Collectively these long-term forces reduced manufacturing injury rates about 38 percent between 1926 and 1939 (see Table 4).15

Table 3
Steel Industry fatality and Injury rates, 1910-1939
(Rates are per million manhours)

Period Fatality rate Injury Rate
1910-1913 0.40 44.1
1937-1939 0.13 11.7

Pattern of Improvement Was Uneven

Yet the pattern of improvement was uneven, both over time and among firms and industries. Safety still deteriorated in times of economic boon when factories mines and railroads were worked to the limit and labor turnover rose. Nor were small companies as successful in reducing risks, for they paid essentially the same compensation insurance premium irrespective of their accident rate, and so the new laws had little effect there. Underground coal mining accidents also showed only modest improvement. Safety was also expensive in coal and many firms were small and saw little payoff from a lower accident rate. The one source of danger that did decline was mine explosions, which diminished in response to technologies developed by the Bureau of Mines. Ironically, however, in 1940 six disastrous blasts that killed 276 men finally led to federal mine inspection in 1941.16

Table 4
Work Injury Rates, Manufacturing and Coal Mining, 1926-1970
(Per Million Manhours)

.

Year Manufacturing Coal Mining
1926 24.2
1931 18.9 89.9
1939 14.9 69.5
1945 18.6 60.7
1950 14.7 53.3
1960 12.0 43.4
1970 15.2 42.6

Source: U.S. Department of Commerce Bureau of the Census, Historical Statistics of the United States, Colonial Times to 1970 (Washington, 1975), Series D-1029 and D-1031.

Postwar Trends, 1945-1970

The economic boon and associated labor turnover during World War II worsened work safety in nearly all areas of the economy, but after 1945 accidents again declined as long-term forces reasserted themselves (Table 4). In addition, after World War II newly powerful labor unions played an increasingly important role in work safety. In the 1960s however economic expansion again led to rising injury rates and the resulting political pressures led Congress to establish the Occupational Safety and Health Administration (OSHA) and the Mine Safety and Health Administration in 1970. The continuing problem of mine explosions also led to the foundation of the Mine Safety and Health Administration (MSHA) that same year. The work of these agencies had been controversial but on balance they have contributed to the continuing reductions in work injuries after 1970.17

References and Further Reading

Aldrich, Mark. Safety First: Technology, Labor and Business in the Building of Work Safety, 1870-1939. Baltimore: Johns Hopkins University Press, 1997.

Aldrich, Mark. “Preventing ‘The Needless Peril of the Coal Mine’: the Bureau of Mines and the Campaign Against Coal Mine Explosions, 1910-1940.” Technology and Culture 36, no. 3 (1995): 483-518.

Aldrich, Mark. “The Peril of the Broken Rail: the Carriers, the Steel Companies, and Rail Technology, 1900-1945.” Technology and Culture 40, no. 2 (1999): 263-291

Aldrich, Mark. “Train Wrecks to Typhoid Fever: The Development of Railroad Medicine Organizations, 1850 -World War I.” Bulletin of the History of Medicine, 75, no. 2 (Summer 2001): 254-89.

Derickson Alan. “Participative Regulation of Hazardous Working Conditions: Safety Committees of the United Mine Workers of America,” Labor Studies Journal 18, no. 2 (1993): 25-38.

Dix, Keith. Work Relations in the Coal Industry: The Hand Loading Era. Morgantown: University of West Virginia Press, 1977. The best discussion of coalmine work for this period.

Dix, Keith. What’s a Coal Miner to Do? Pittsburgh: University of Pittsburgh Press, 1988. The best discussion of coal mine labor during the era of mechanization.

Fairris, David. “From Exit to Voice in Shopfloor Governance: The Case of Company Unions.” Business History Review 69, no. 4 (1995): 494-529.

Fairris, David. “Institutional Change in Shopfloor Governance and the Trajectory of Postwar Injury Rates in U.S. Manufacturing, 1946-1970.” Industrial and Labor Relations Review 51, no. 2 (1998): 187-203.

Fishback, Price. Soft Coal Hard Choices: The Economic Welfare of Bituminous Coal Miners, 1890-1930. New York: Oxford University Press, 1992. The best economic analysis of the labor market for coalmine workers.

Fishback, Price and Shawn Kantor. A Prelude to the Welfare State: The Origins of Workers’ Compensation. Chicago: University of Chicago Press, 2000. The best discussions of how employers’ liability rules worked.

Graebner, William. Coal Mining Safety in the Progressive Period. Lexington: University of Kentucky Press, 1976.

Great Britain Board of Trade. General Report upon the Accidents that Have Occurred on Railways of the United Kingdom during the Year 1901. London, HMSO, 1902.

Great Britain Home Office Chief Inspector of Mines. General Report with Statistics for 1914, Part I. London: HMSO, 1915.

Hounshell, David. From the American System to Mass Production, 1800-1932: The Development of Manufacturing Technology in the United States. Baltimore: Johns Hopkins University Press, 1984.

Humphrey, H. B. “Historical Summary of Coal-Mine Explosions in the United States — 1810-1958.” United States Bureau of Mines Bulletin 586 (1960).

Kirkland, Edward. Men, Cities, and Transportation. 2 vols. Cambridge: Harvard University Press, 1948, Discusses railroad regulation and safety in New England.

Lankton, Larry. Cradle to Grave: Life, Work, and Death in Michigan Copper Mines. New York: Oxford University Press, 1991.

Licht, Walter. Working for the Railroad. Princeton: Princeton University Press, 1983.

Long, Priscilla. Where the Sun Never Shines. New York: Paragon, 1989. Covers coal mine safety at the end of the nineteenth century.

Mendeloff, John. Regulating Safety: An Economic and Political Analysis of Occupational Safety and Health Policy. Cambridge: MIT Press, 1979. An accessible modern discussion of safety under OSHA.

National Academy of Sciences. Toward Safer Underground Coal Mines. Washington, DC: NAS, 1982.

Rogers, Donald. “From Common Law to Factory Laws: The Transformation of Workplace Safety Law in Wisconsin before Progressivism.” American Journal of Legal History (1995): 177-213.

Root, Norman and Daley, Judy. “Are Women Safer Workers? A New Look at the Data.” Monthly Labor Review 103, no. 9 (1980): 3-10.

Rosenberg, Nathan. Technology and American Economic Growth. New York: Harper and Row, 1972. Analyzes the forces shaping American technology.

Rosner, David and Gerald Markowity, editors. Dying for Work. Blomington: Indiana University Press, 1987.

Shaw, Robert. Down Brakes: A History of Railroad Accidents, Safety Precautions, and Operating Practices in the United States of America. London: P. R. Macmillan. 1961.

Trachenberg, Alexander. The History of Legislation for the Protection of Coal Miners in Pennsylvania, 1824 – 1915. New York: International Publishers. 1942.

U.S. Department of Commerce, Bureau of the Census. Historical Statistics of the United States, Colonial Times to 1970. Washington, DC, 1975.

Usselman, Steven. “Air Brakes for Freight Trains: Technological Innovation in the American Railroad Industry, 1869-1900.” Business History Review 58 (1984): 30-50.

Viscusi, W. Kip. Risk By Choice: Regulating Health and Safety in the Workplace. Cambridge: Harvard University Press, 1983. The most readable treatment of modern safety issues by a leading scholar.

Wallace, Anthony. Saint Clair. New York: Alfred A. Knopf, 1987. Provides a superb discussion of early anthracite mining and safety.

Whaples, Robert and David Buffum. “Fraternalism, Paternalism, the Family and the Market: Insurance a Century Ago.” Social Science History 15 (1991): 97-122.

White, John. The American Railroad Freight Car. Baltimore: Johns Hopkins University Press, 1993. The definitive history of freight car technology.

Whiteside, James. Regulating Danger: The Struggle for Mine Safety in the Rocky Mountain Coal Industry. Lincoln: University of Nebraska Press, 1990.

Wokutch, Richard. Worker Protection Japanese Style: Occupational Safety and Health in the Auto Industry. Ithaca, NY: ILR, 1992

Worrall, John, editor. Safety and the Work Force: Incentives and Disincentives in Workers’ Compensation. Ithaca, NY: ILR Press, 1983.

1 Injuries or fatalities are expressed as rates. For example, if ten workers are injured out of 450 workers during a year, the rate would be .006666. For readability it might be expressed as 6.67 per thousand or 666.7 per hundred thousand workers. Rates may also be expressed per million workhours. Thus if the average work year is 2000 hours, ten injuries in 450 workers results in [10/450×2000]x1,000,000 = 11.1 injuries per million hours worked.

2 For statistics on work injuries from 1922-1970 see U.S. Department of Commerce, Historical Statistics, Series 1029-1036. For earlier data are in Aldrich, Safety First, Appendix 1-3.

3 Hounshell, American System. Rosenberg, Technology,. Aldrich, Safety First.

4 On the workings of the employers’ liability system see Fishback and Kantor, A Prelude, chapter 2

5 Dix, Work Relations, and his What’s a Coal Miner to Do? Wallace, Saint Clair, is a superb discussion of early anthracite mining and safety. Long, Where the Sun, Fishback, Soft Coal, chapters 1, 2, and 7. Humphrey, “Historical Summary.” Aldrich, Safety First, chapter 2.

6 Aldrich, Safety First chapter 1.

7 Aldrich, Safety First chapter 3

8 Fishback and Kantor, A Prelude, chapter 3, discusses higher pay for risky jobs as well as worker savings and accident insurance See also Whaples and Buffum, “Fraternalism, Paternalism.” Aldrich, ” Train Wrecks to Typhoid Fever.”

9Kirkland, Men, Cities. Trachenberg, The History of Legislation Whiteside, Regulating Danger. An early discussion of factory legislation is in Susan Kingsbury, ed.,xxxxx. Rogers,” From Common Law.”

10 On the evolution of freight car technology see White, American Railroad Freight Car, Usselman “Air Brakes for Freight trains,” and Aldrich, Safety First, chapter 1. Shaw, Down Brakes, discusses causes of train accidents.

11 Details of these regulations may be found in Aldrich, Safety First, chapter 5.

12 Graebner, Coal-Mining Safety, Aldrich, “‘The Needless Peril.”

13 On the origins of these laws see Fishback and Kantor, A Prelude, and the sources cited therein.

14 For assessments of the impact of early compensation laws see Aldrich, Safety First, chapter 5 and Fishback and Kantor, A Prelude, chapter 3. Compensation in the modern economy is discussed in Worrall, Safety and the Work Force. Government and other scientific work that promoted safety on railroads and in coal mining are discussed in Aldrich, “‘The Needless Peril’,” and “The Broken Rail.”

15 Farris, “From Exit to Voice.”

16 Aldrich, “‘Needless Peril,” and Humphrey

17 Derickson, “Participative Regulation” and Fairris, “Institutional Change,” also emphasize the role of union and shop floor issues in shaping safety during these years. Much of the modern literature on safety is highly quantitative. For readable discussions see Mendeloff, Regulating Safety (Cambridge: MIT Press, 1979), and Viscusi, Risk by Choice

History of Workplace Safety in the United States, 1880-1970

Mark Aldrich, Smith College

The dangers of work are usually measured by the number of injuries or fatalities occurring to a group of workers, usually over a period of one year. 1 Over the past century such measures reveal a striking improvement in the safety of work in all the advanced countries. In part this has been the result of the gradual shift of jobs from relatively dangerous goods production such as farming, fishing, logging, mining, and manufacturing into such comparatively safe work as retail trade and services. But even the dangerous trades are now far safer than they were in 1900. To take but one example, mining today remains a comparatively risky activity. Its annual fatality rate is about nine for every one hundred thousand miners employed. A century ago in 1900 about three hundred out of every one hundred thousand miners were killed on the job each year. 2

The Nineteenth Century

Before the late nineteenth century we know little about the safety of American workplaces because contemporaries cared little about it. As a result, only fragmentary information exists prior to the 1880s. Pre-industrial laborers faced risks from animals and hand tools, ladders and stairs. Industrialization substituted steam engines for animals, machines for hand tools, and elevators for ladders. But whether these new technologies generally worsened the dangers of work is unclear. What is clear is that nowhere was the new work associated with the industrial revolution more dangerous than in America.

US Was Unusually Dangerous

Americans modified the path of industrialization that had been pioneered in Britain to fit the particular geographic and economic circumstances of the American continent. Reflecting the high wages and vast natural resources of a new continent, this American system encouraged use of labor saving machines and processes. These developments occurred within a legal and regulatory climate that diminished employer’s interest in safety. As a result, Americans developed production methods that were both highly productive and often very dangerous. 3

Accidents Were “Cheap”

While workers injured on the job or their heirs might sue employers for damages, winning proved difficult. Where employers could show that the worker had assumed the risk, or had been injured by the actions of a fellow employee, or had himself been partly at fault, courts would usually deny liability. A number or surveys taken about 1900 showed that only about half of all workers fatally injured recovered anything and their average compensation only amounted to about half a year’s pay. Because accidents were so cheap, American industrial methods developed with little reference to their safety. 4

Mining

Nowhere was the American system more dangerous than in early mining. In Britain, coal seams were deep and coal expensive. As a result, British mines used mining methods that recovered nearly all of the coal because they used waste rock to hold up the roof. British methods also concentrated the working, making supervision easy, and required little blasting. American coal deposits by contrast, were both vast and near the surface; they could be tapped cheaply using techniques known as “room and pillar” mining. Such methods used coal pillars and timber to hold up the roof, because timber and coal were cheap. Since miners worked in separate rooms, labor supervision was difficult and much blasting was required to bring down the coal. Miners themselves were by no means blameless; most were paid by the ton, and when safety interfered with production, safety often took a back seat. For such reasons, American methods yielded more coal per worker than did European techniques, but they were far more dangerous, and toward the end of the nineteenth century, the dangers worsened (see Table 1).5

Table 1
British and American Mine Safety, 1890 -1904
(Fatality rates per Thousand Workers per Year)

Years American Anthracite American Bituminous Great Britain
1890-1894 3.29 2.52 1.61
1900-1904 3.13 3.53 1.28

Source: British data from Great Britain, General Report. Other data from Aldrich, Safety First.

Railroads

Nineteenth century American railroads were also comparatively dangerous to their workers – and their passengers as well – and for similar reasons. Vast North American distances and low population density turned American carriers into predominantly freight haulers – and freight was far more dangerous to workers than passenger traffic, for men had to go in between moving cars for coupling and uncoupling and ride the cars to work brakes. The thin traffic and high wages also forced American carriers to economize on both capital and labor. Accordingly, American carriers were poorly built and used few signals, both of which resulted in many derailments and collisions. Such conditions made American railroad work far more dangerous than that in Britain (see Table 2).6

Table 2
Comparative Safety of British and American Railroad Workers, 1889 – 1901
(Fatality Rates per Thousand Workers per Year)

1889 1895 1901
British railroad workers
All causes
1.14 0.95 0.89
British trainmena
All causes
4.26 3.22 2.21
Coupling 0.94 0.83 0.74
American Railroad workers
All causes
2.67 2.31 2.50
American trainmen
All causes
8.52 6.45 7.35
Coupling 1.73c 1.20 0.78
Brakingb 3.25c 2.44 2.03

Source: Aldrich, Safety First, Table 1 and Great Britain Board of Trade, General Report.

1

Note: Death rates are per thousand employees.
a. Guards, brakemen, and shunters.
b. Deaths from falls from cars and striking overhead obstructions.

Manufacturing

American manufacturing also developed in a distinctively American fashion that substituted power and machinery for labor and manufactured products with interchangeable arts for ease in mass production. Whether American methods were less safe than those in Europe is unclear but by 1900 they were extraordinarily risky by modern standards, for machines and power sources were largely unguarded. And while competition encouraged factory managers to strive for ever-increased output, they showed little interest in improving safety.7

Worker and Employer Responses

Workers and firms responded to these dangers in a number of ways. Some workers simply left jobs they felt were too dangerous, and risky jobs may have had to offer higher pay to attract workers. After the Civil War life and accident insurance companies expanded, and some workers purchased insurance or set aside savings to offset the income risks from death or injury. Some unions and fraternal organizations also offered their members insurance. Railroads and some mines also developed hospital and insurance plans to care for injured workers while many carriers provided jobs for all their injured men. 8

Improving safety, 1910-1939

Public efforts to improve safety date from the very beginnings of industrialization. States established railroad regulatory commissions as early as the 1840s. But while most of the commissions were intended to improve safety, they had few powers and were rarely able to exert much influence on working conditions. Similarly, the first state mining commission began in Pennsylvania in 1869, and other states soon followed. Yet most of the early commissions were ineffectual and as noted safety actually deteriorated after the Civil War. Factory commissions also dated from but most were understaffed and they too had little power.9

Railroads

The most successful effort to improve work safety during the nineteenth century began on the railroads in the 1880s as a small band of railroad regulators, workers, and managers began to campaign for the development of better brakes and couplers for freight cars. In response George Westinghouse modified his passenger train air brake in about 1887 so it would work on long freights, while at roughly the same time Ely Janney developed an automatic car coupler. For the railroads such equipment meant not only better safety, but also higher productivity and after 1888 they began to deploy it. The process was given a boost in 1889-1890 when the newly-formed Interstate Commerce Commission (ICC) published its first accident statistics. They demonstrated conclusively the extraordinary risks to trainmen from coupling and riding freight (Table 2). In 1893 Congress responded, passing the Safety Appliance Act, which mandated use of such equipment. It was the first federal law intended primarily to improve work safety, and by 1900 when the new equipment was widely diffused, risks to trainmen had fallen dramatically.10

Federal Safety Regulation

In the years between 1900 and World War I, a rather strange band of Progressive reformers, muckraking journalists, businessmen, and labor unions pressed for changes in many areas of American life. These years saw the founding of the Federal Food and Drug Administration, the Federal Reserve System and much else. Work safety also became of increased public concern and the first important developments came once again on the railroads. Unions representing trainmen had been impressed by the safety appliance act of 1893 and after 1900 they campaigned for more of the same. In response Congress passed a host of regulations governing the safety of locomotives and freight cars. While most of these specific regulations were probably modestly beneficial, collectively their impact was small because unlike the rules governing automatic couplers and air brakes they addressed rather minor risks.11

In 1910 Congress also established the Bureau of Mines in response to a series of disastrous and increasingly frequent explosions. The Bureau was to be a scientific, not a regulatory body and it was intended to discover and disseminate new knowledge on ways to improve mine safety.12

Workers’ Compensation Laws Enacted

Far more important were new laws that raised the cost of accidents to employers. In 1908 Congress passed a federal employers’ liability law that applied to railroad workers in interstate commerce and sharply limited defenses an employee could claim. Worker fatalities that had once cost the railroads perhaps $200 now cost $2,000. Two years later in 1910, New York became the first state to pass a workmen’s compensation law. This was a European idea. Instead of requiring injured workers to sue for damages in court and prove the employer was negligent, the new law automatically compensated all injuries at a fixed rate. Compensation appealed to businesses because it made costs more predictable and reduced labor strife. To reformers and unions it promised greater and more certain benefits. Samuel Gompers, leader of the American Federation of Labor had studied the effects of compensation in Germany. He was impressed with how it stimulated business interest in safety, he said. Between 1911 and 1921 forty-four states passed compensation laws.13

Employers Become Interested in Safety

The sharp rise in accident costs that resulted from compensation laws and tighter employers’ liability initiated the modern concern with work safety and initiated the long-term decline in work accidents and injuries. Large firms in railroading, mining, manufacturing and elsewhere suddenly became interested in safety. Companies began to guard machines and power sources while machinery makers developed safer designs. Managers began to look for hidden dangers at work, and to require that workers wear hard hats and safety glasses. They also set up safety departments run by engineers and safety committees that included both workers and managers. In 1913 companies founded the National Safety Council to pool information. Government agencies such as the Bureau of Mines and National Bureau of Standards provided scientific support while universities also researched safety problems for firms and industries14

Accident Rates Begin to Fall Steadily

During the years between World War I and World War II the combination of higher accident costs along with the institutionalization of safety concerns in large firms began to show results. Railroad employee fatality rates declined steadily after 1910 and at some large companies such as DuPont and whole industries such as steel making (see Table 3) safety also improved dramatically. Largely independent changes in technology and labor markets also contributed to safety as well. The decline in labor turnover meant fewer new employees who were relatively likely to get hurt, while the spread of factory electrification not only improved lighting but reduced the dangers from power transmission as well. In coal mining the shift from underground work to strip mining also improved safety. Collectively these long-term forces reduced manufacturing injury rates about 38 percent between 1926 and 1939 (see Table 4).15

Table 3
Steel Industry fatality and Injury rates, 1910-1939
(Rates are per million manhours)

Period Fatality rate Injury Rate
1910-1913 0.40 44.1
1937-1939 0.13 11.7

Pattern of Improvement Was Uneven

Yet the pattern of improvement was uneven, both over time and among firms and industries. Safety still deteriorated in times of economic boon when factories mines and railroads were worked to the limit and labor turnover rose. Nor were small companies as successful in reducing risks, for they paid essentially the same compensation insurance premium irrespective of their accident rate, and so the new laws had little effect there. Underground coal mining accidents also showed only modest improvement. Safety was also expensive in coal and many firms were small and saw little payoff from a lower accident rate. The one source of danger that did decline was mine explosions, which diminished in response to technologies developed by the Bureau of Mines. Ironically, however, in 1940 six disastrous blasts that killed 276 men finally led to federal mine inspection in 1941.16

Table 4
Work Injury Rates, Manufacturing and Coal Mining, 1926-1970
(Per Million Manhours)

.

Year Manufacturing Coal Mining
1926 24.2
1931 18.9 89.9
1939 14.9 69.5
1945 18.6 60.7
1950 14.7 53.3
1960 12.0 43.4
1970 15.2 42.6

Source: U.S. Department of Commerce Bureau of the Census, Historical Statistics of the United States, Colonial Times to 1970 (Washington, 1975), Series D-1029 and D-1031.

Postwar Trends, 1945-1970

The economic boon and associated labor turnover during World War II worsened work safety in nearly all areas of the economy, but after 1945 accidents again declined as long-term forces reasserted themselves (Table 4). In addition, after World War II newly powerful labor unions played an increasingly important role in work safety. In the 1960s however economic expansion again led to rising injury rates and the resulting political pressures led Congress to establish the Occupational Safety and Health Administration (OSHA) and the Mine Safety and Health Administration in 1970. The continuing problem of mine explosions also led to the foundation of the Mine Safety and Health Administration (MSHA) that same year. The work of these agencies had been controversial but on balance they have contributed to the continuing reductions in work injuries after 1970.17

References and Further Reading

Aldrich, Mark. Safety First: Technology, Labor and Business in the Building of Work Safety, 1870-1939. Baltimore: Johns Hopkins University Press, 1997.

Aldrich, Mark. “Preventing ‘The Needless Peril of the Coal Mine’: the Bureau of Mines and the Campaign Against Coal Mine Explosions, 1910-1940.” Technology and Culture 36, no. 3 (1995): 483-518.

Aldrich, Mark. “The Peril of the Broken Rail: the Carriers, the Steel Companies, and Rail Technology, 1900-1945.” Technology and Culture 40, no. 2 (1999): 263-291

Aldrich, Mark. “Train Wrecks to Typhoid Fever: The Development of Railroad Medicine Organizations, 1850 -World War I.” Bulletin of the History of Medicine, 75, no. 2 (Summer 2001): 254-89.

Derickson Alan. “Participative Regulation of Hazardous Working Conditions: Safety Committees of the United Mine Workers of America,” Labor Studies Journal 18, no. 2 (1993): 25-38.

Dix, Keith. Work Relations in the Coal Industry: The Hand Loading Era. Morgantown: University of West Virginia Press, 1977. The best discussion of coalmine work for this period.

Dix, Keith. What’s a Coal Miner to Do? Pittsburgh: University of Pittsburgh Press, 1988. The best discussion of coal mine labor during the era of mechanization.

Fairris, David. “From Exit to Voice in Shopfloor Governance: The Case of Company Unions.” Business History Review 69, no. 4 (1995): 494-529.

Fairris, David. “Institutional Change in Shopfloor Governance and the Trajectory of Postwar Injury Rates in U.S. Manufacturing, 1946-1970.” Industrial and Labor Relations Review 51, no. 2 (1998): 187-203.

Fishback, Price. Soft Coal Hard Choices: The Economic Welfare of Bituminous Coal Miners, 1890-1930. New York: Oxford University Press, 1992. The best economic analysis of the labor market for coalmine workers.

Fishback, Price and Shawn Kantor. A Prelude to the Welfare State: The Origins of Workers’ Compensation. Chicago: University of Chicago Press, 2000. The best discussions of how employers’ liability rules worked.

Graebner, William. Coal Mining Safety in the Progressive Period. Lexington: University of Kentucky Press, 1976.

Great Britain Board of Trade. General Report upon the Accidents that Have Occurred on Railways of the United Kingdom during the Year 1901. London, HMSO, 1902.

Great Britain Home Office Chief Inspector of Mines. General Report with Statistics for 1914, Part I. London: HMSO, 1915.

Hounshell, David. From the American System to Mass Production, 1800-1932: The Development of Manufacturing Technology in the United States. Baltimore: Johns Hopkins University Press, 1984.

Humphrey, H. B. “Historical Summary of Coal-Mine Explosions in the United States — 1810-1958.” United States Bureau of Mines Bulletin 586 (1960).

Kirkland, Edward. Men, Cities, and Transportation. 2 vols. Cambridge: Harvard University Press, 1948, Discusses railroad regulation and safety in New England.

Lankton, Larry. Cradle to Grave: Life, Work, and Death in Michigan Copper Mines. New York: Oxford University Press, 1991.

Licht, Walter. Working for the Railroad. Princeton: Princeton University Press, 1983.

Long, Priscilla. Where the Sun Never Shines. New York: Paragon, 1989. Covers coal mine safety at the end of the nineteenth century.

Mendeloff, John. Regulating Safety: An Economic and Political Analysis of Occupational Safety and Health Policy. Cambridge: MIT Press, 1979. An accessible modern discussion of safety under OSHA.

National Academy of Sciences. Toward Safer Underground Coal Mines. Washington, DC: NAS, 1982.

Rogers, Donald. “From Common Law to Factory Laws: The Transformation of Workplace Safety Law in Wisconsin before Progressivism.” American Journal of Legal History (1995): 177-213.

Root, Norman and Daley, Judy. “Are Women Safer Workers? A New Look at the Data.” Monthly Labor Review 103, no. 9 (1980): 3-10.

Rosenberg, Nathan. Technology and American Economic Growth. New York: Harper and Row, 1972. Analyzes the forces shaping American technology.

Rosner, David and Gerald Markowity, editors. Dying for Work. Blomington: Indiana University Press, 1987.

Shaw, Robert. Down Brakes: A History of Railroad Accidents, Safety Precautions, and Operating Practices in the United States of America. London: P. R. Macmillan. 1961.

Trachenberg, Alexander. The History of Legislation for the Protection of Coal Miners in Pennsylvania, 1824 – 1915. New York: International Publishers. 1942.

U.S. Department of Commerce, Bureau of the Census. Historical Statistics of the United States, Colonial Times to 1970. Washington, DC, 1975.

Usselman, Steven. “Air Brakes for Freight Trains: Technological Innovation in the American Railroad Industry, 1869-1900.” Business History Review 58 (1984): 30-50.

Viscusi, W. Kip. Risk By Choice: Regulating Health and Safety in the Workplace. Cambridge: Harvard University Press, 1983. The most readable treatment of modern safety issues by a leading scholar.

Wallace, Anthony. Saint Clair. New York: Alfred A. Knopf, 1987. Provides a superb discussion of early anthracite mining and safety.

Whaples, Robert and David Buffum. “Fraternalism, Paternalism, the Family and the Market: Insurance a Century Ago.” Social Science History 15 (1991): 97-122.

White, John. The American Railroad Freight Car. Baltimore: Johns Hopkins University Press, 1993. The definitive history of freight car technology.

Whiteside, James. Regulating Danger: The Struggle for Mine Safety in the Rocky Mountain Coal Industry. Lincoln: University of Nebraska Press, 1990.

Wokutch, Richard. Worker Protection Japanese Style: Occupational Safety and Health in the Auto Industry. Ithaca, NY: ILR, 1992

Worrall, John, editor. Safety and the Work Force: Incentives and Disincentives in Workers’ Compensation. Ithaca, NY: ILR Press, 1983.

1 Injuries or fatalities are expressed as rates. For example, if ten workers are injured out of 450 workers during a year, the rate would be .006666. For readability it might be expressed as 6.67 per thousand or 666.7 per hundred thousand workers. Rates may also be expressed per million workhours. Thus if the average work year is 2000 hours, ten injuries in 450 workers results in [10/450×2000]x1,000,000 = 11.1 injuries per million hours worked.

2 For statistics on work injuries from 1922-1970 see U.S. Department of Commerce, Historical Statistics, Series 1029-1036. For earlier data are in Aldrich, Safety First, Appendix 1-3.

3 Hounshell, American System. Rosenberg, Technology,. Aldrich, Safety First.

4 On the workings of the employers’ liability system see Fishback and Kantor, A Prelude, chapter 2

5 Dix, Work Relations, and his What’s a Coal Miner to Do? Wallace, Saint Clair, is a superb discussion of early anthracite mining and safety. Long, Where the Sun, Fishback, Soft Coal, chapters 1, 2, and 7. Humphrey, “Historical Summary.” Aldrich, Safety First, chapter 2.

6 Aldrich, Safety First chapter 1.

7 Aldrich, Safety First chapter 3

8 Fishback and Kantor, A Prelude, chapter 3, discusses higher pay for risky jobs as well as worker savings and accident insurance See also Whaples and Buffum, “Fraternalism, Paternalism.” Aldrich, ” Train Wrecks to Typhoid Fever.”

9Kirkland, Men, Cities. Trachenberg, The History of Legislation Whiteside, Regulating Danger. An early discussion of factory legislation is in Susan Kingsbury, ed.,xxxxx. Rogers,” From Common Law.”

10 On the evolution of freight car technology see White, American Railroad Freight Car, Usselman “Air Brakes for Freight trains,” and Aldrich, Safety First, chapter 1. Shaw, Down Brakes, discusses causes of train accidents.

11 Details of these regulations may be found in Aldrich, Safety First, chapter 5.

12 Graebner, Coal-Mining Safety, Aldrich, “‘The Needless Peril.”

13 On the origins of these laws see Fishback and Kantor, A Prelude, and the sources cited therein.

14 For assessments of the impact of early compensation laws see Aldrich, Safety First, chapter 5 and Fishback and Kantor, A Prelude, chapter 3. Compensation in the modern economy is discussed in Worrall, Safety and the Work Force. Government and other scientific work that promoted safety on railroads and in coal mining are discussed in Aldrich, “‘The Needless Peril’,” and “The Broken Rail.”

15 Farris, “From Exit to Voice.”

16 Aldrich, “‘Needless Peril,” and Humphrey

17 Derickson, “Participative Regulation” and Fairris, “Institutional Change,” also emphasize the role of union and shop floor issues in shaping safety during these years. Much of the modern literature on safety is highly quantitative. For readable discussions see Mendeloff, Regulating Safety (Cambridge: MIT Press, 1979), and

Citation: Aldrich, Mark. “History of Workplace Safety in the United States, 1880-1970”. EH.Net Encyclopedia, edited by Robert Whaples. August 14, 2001. URL http://eh.net/encyclopedia/history-of-workplace-safety-in-the-united-states-1880-1970/

Making Capitalism Safe: Work Safety and Health Regulation in America, 1880-1940

Author(s):Rogers, Donald W.
Reviewer(s):Aldrich, Mark

Published by EH.NET (May 2010)

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Donald W. Rogers, Making Capitalism Safe: Work Safety and Health Regulation in America, 1880-1940. Urbana, IL: University of Illinois Press, 2009. viii + 275 pp. $55 (hardcover), ISBN: 978-0-252-03482-4.

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Reviewed for EH.NET by Mark Aldrich, Department of Economics, Smith College.

?

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Donald Rogers has written an institutional and political history of state efforts to regulate workplace safety from the Progressive era down to about World War II.? It is, therefore, somewhat less ambitions than the title ?making capitalism safe? might suggest. The book represents an extension of his Ph.D. thesis, which focused on Wisconsin, to include material on Alabama, California, Illinois, New York and Ohio as well. The author?s central concern is to rebut historians? claims that these state regulator approaches were ?invariably ?weak,?? (p. 7) even during the 1920s.? While the book contains no sustained economic or statistical analysis, economists interested in work safety and government regulation will find it informative.?

?

The book includes an introduction, nine chapters that chronicle the evolution of state safety institutions, an epilogue that sketches developments from World War II to OSHA, an appendix, bibliography and index. Although the author occasionally discusses mining, the emphasis is on manufacturing and construction.? The work is based on a wide reading of the secondary literature and makes extensive use of primary sources including archival work relating to Wisconsin. Other states? archives were not consulted.

?

In an initial chapter Rogers sketches the necessary background. The common law approach to work safety required only that employers exercise ?ordinary care.? He also depicts the early factory acts as usually under funded, often partisan, technically imprecise, inconsistent across states, and sometimes hamstrung by judicial interpretation.

?

The author next describes an ?administrative transformation? (p. 31) that began in 1911 when Wisconsin repealed its factory laws and replaced them with an Industrial Commission Act.? The act not only set up a commission, it included a safe place statute to raise employers? standards of care and it inaugurated workers? compensation as well.? Rogers emphasizes John R. Commons? role in these developments and he nicely details both the ideas and the complex political maneuvering that led to this transformation.? He then briefly notes the range of responses in other states. California and Ohio largely duplicated Wisconsin?s approach; Illinois never created an organization with code making authority, while New York established separate bureaucracies for compensation, safety codes and inspection.? Here and in subsequent chapters the strength of the book is in the discussion of Wisconsin?s experience while other states are treated in a more abbreviated manner.

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The next six chapters detail these various regulatory approaches in action.? Three chapters discuss safety campaigns, code development, and enforcement in the 1910s; these are followed by similar discussions during the 1920s and 1930s.? The final chapter discusses states? efforts to grapple with occupational disease. While the author occasionally sprinkles these materials with numbers on inspections, violations and funding, the text contains no charts or tables. The appendix contains five tables, all devoted to Wisconsin.? Text tables that depict comparative funding and enforcement activities would have sharpened the discussion.

?

Rogers is at his best in narrating these alternative regulatory approaches; he is less successful in explaining why states took different paths and in evaluating the consequences of these differences.? The author often appeals to differences in states? industrial structures to explain alternative regulatory paths. ?Thus Ohio?s tepid approach to code making ?reflected big industry?s dominance? whereas ?California?s decentralized manufacturing sector … encouraged extensive administrative actions.?? And ?New York?s codes … reflected the state?s diverse economy and local interest groups.? (All quotations are on p. 83.)? Such claims seem ad hoc and the author fails to provide them with adequate support.? The author stresses that Wisconsin penalized safety code violations by increasing employers? compensation costs.? But the increase was trivial, affecting fewer than three percent of compensation cases in the 1920s and amounting to less than one percent of compensation costs.? During the same period, the author claims that ?productivity gains allowed manufacturers to tolerate higher accident levels? (p. 150).? Yet lost productivity was a major cost of accidents. He also claims that experience rating ?relaxed compensation?s financial inducements? (p. 148). ?In general, the discussion of workers? compensation would also have been improved had the author more fully engaged the work of Fishback and Kantor (2000).

?

More persuasive is Rogers? discussion of the shift in regulatory focus that came with the 1920s.? He explains that early state safety work emphasized machine guarding but by the 1920s most large businesses had protected their equipment and were focusing safety emphasis on management and worker behavior.? Regulators, accordingly, shifted their concerns to smaller workshops with less well guarded equipment.? This emphasis continues to the present; when I worked for OSHA we were less interested in improving safety at large companies such as DuPont than in trying to bring smaller firms up to their level.?

?

The penultimate chapter, on occupational disease, provides a useful if limited offset to historians? usually gloomy assessment of state and federal industrial hygiene efforts in the 1920s and 1930s.? By 1920 California and Wisconsin had begun to compensate workers for occupational diseases while Illinois, Ohio and New York followed with more narrowly defined legislation.? Codes and inspections began to focus on hazards such as spray painting and the need for ventilation.? Still, Rogers admits that regulators were slow to recognize silicosis problems, and by the late 1930s only half the states provided any form of compensation for occupational diseases.

?

Did any of this matter very much for workers? safety? Was the commission approach of Wisconsin and California more effective than the ?old fashioned? (p. 7) approach of Illinois, the ?fragmented? (p. 7) system of New York, or the near absence of safety codes and compensation in Alabama?? While the author seems to think the commission approach was superior, there is little evidence on this issue here or elsewhere.? Except for mining, no state collected adequate accident statistics before the advent of compensation legislation and even in the 1920s the data are inconsistent and inadequate.? Economic historians, although they will find some of Rogers? judgments and interpretations problematic, will find this book to be a valuable narrative treatment of state safety regulation, but perhaps inevitably, they will learn little of its effectiveness.

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Reference:

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Price Fishback and Shawn Kantor (2000), _A Prelude to the Welfare State: The Origins of Workers? Compensation_, Chicago: University of Chicago Press.

?

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Mark Aldrich is Marilyn Carlson Nelson Professor of Economic Emeritus at Smith College.? He is the author of _Safety First_ (Johns Hopkins, 1997) and _Death Rode the Rails_ (Johns Hopkins, 2006) and maintains a web site devoted to old railroad political cartoons: http://sophia.smith.edu/~maldrich.?

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Copyright (c) 2010 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 (May 2010). All EH.Net reviews are archived at http://www.eh.net/BookReview.

Subject(s):Government, Law and Regulation, Public Finance
Labor and Employment History
Markets and Institutions
Geographic Area(s):North America
Time Period(s):19th Century
20th Century: Pre WWII

Every Farm a Factory: The Industrial Ideal in American Agriculture

Author(s):Fitzgerald, Deborah
Reviewer(s):Gardner, Bruce

Published by EH.NET (June 2003)

Deborah Fitzgerald, Every Farm a Factory: The Industrial Ideal in American Agriculture. New Haven: Yale University Press, 2003. xi + 242 pp. $45 (cloth), ISBN: 0-300-08813-2.

Reviewed for EH.NET by Bruce Gardner, Agricultural and Resource Economics, University of Maryland, College Park.

Deborah Fitzgerald, Associate Professor in the Program in Science, Technology, and Society at MIT, investigates ideas about agricultural industrialization in the post-World War I era, promoted as the way forward for U.S. farming by a fascinating cast of characters. Her book takes the common core of their thinking as underpinning the technological and economic changes that transformed American farming in the twentieth century. She states that while many historians have addressed these changes, prevailing thought misses “the emergence of an industrial logic or ideal in agriculture” (p. 3). She documents the emergence of both the ideal and its implementation beginning in the late 1910s. Although the book draws on a wide range of agricultural experience, the major focus is on wheat farming in Montana, because “Wheat was the first agricultural product to be successfully industrialized, and it served as a model for all other farm products” (p. 8); and because the Campbell Farming Corporation, a paradigmatic instance of industrial practice, and M.L. Wilson, whose ideas about land use and mechanization commanded wide attention, both had strong Montana connections.

The book’s treatment is episodic and descriptive rather than comprehensive and analytical. Following an introduction setting out the agenda, five chapters cover distinct sub-topics. Chapter 2 reviews the development and dissemination of quantitative farm management principles. The leading characters here are Henry C. Taylor and George Warren among other USDA and Land-Grant University agricultural economists who played a much more hands-on role in the business of farming than their counterparts do today. Chapter 3 moves on to the role of agricultural engineers, principally in universities and farm implement companies, in inventing and marketing equipment for mechanized farming. Chapter 4 traces the emergence of “chain farms,” and other schemes for large-scale agriculture in 1915-1930. The chief characters here are farming entrepreneurs such as Howard Doane, one of several talented farm managers Fitzgerald discusses who directed operations on up to forty farms. Other multi-farm operations were established as cooperatives. With respect to these developments academic experts and even the U.S. Chamber of Commerce were as notable for being skeptics as for being boosters. And indeed the Great Depression appears to have wiped out most of these farms, although Fitzgerald does not document their overall success or failure quantitatively. Chapter 5 is an extended case study of the Campbell Farming Corporation, the creation of Thomas D. Campbell, whose story is well worth reading. His ideas were successful in maintaining a truly enormous farming operation for a long period of time, until the 1960s. Finally, Chapter 6 assesses the reactions of American observers to Soviet collective farms in the late 1920s, and the role of some notable U.S. farming entrepreneurs as advisors to the Soviets on agricultural development.

These chapters contain a wealth of information, well documented and tied together in a reasonably argued package showing how enthusiastic experts and farming entrepreneurs saw and acted upon opportunities to turn U.S. farming from what they saw as a backward, poverty-stricken sector of the economy into a progressive, prosperous engine of economic growth. But Fitzgerald does not neglect the many nay-sayers who saw industrialization of farming as a most risky venture or even a menace, a road to serfdom for farm people. The strength of expressed convictions both pro and con is similar to more recent debates about organic farming and agricultural biotechnology.

For me, the most surprising element of the story, given the well-reasoned and enthusiastic advocacy of industrialization by knowledgeable people, is how many of the twentieth century’s early experiments in agricultural industrialization came to grief, and how few ultimately survived. It is not, of course, the case that mechanization itself was a flash in the pan, or that increased farm size and new technology failed to transform much of U.S. agriculture. Rather the particular forms that transformation took turned out differently from what the early visionaries of the 1920s foresaw. Thus, while the original focus was heavily on grain growing in semi-arid conditions, the large and lasting changes in economic organization occurred in livestock feeding. While mechanization in field crops resulted in greatly increased acreage by farmer, grain growing remains today, as traditionally, the province largely of single-operator farms or family partnerships. And, while large cooperatives still flourish in rice, cotton, and dairy production, they function as collective marketing mechanisms, not on the level of farm management.

The book concludes with a chapter providing an overall assessment of agricultural industrialization in the United States which, while sensible, is not specifically grounded in findings from the earlier chapters. Developments up to the present day, including the “Green Revolution” that transformed parts of the developing world in the 1960s, are taken to be the legacy of the ventures described in those chapters. This is a stretch too far. Fitzgerald’s case studies, seen from today’s perspective, can as well be taken as lessons in how the best information available about possibilities for agricultural development, including ones that seemingly prove themselves in real-world tests and pilot projects, can nonetheless over the long term lead to dead-ends and insolvency.

Fitzgerald lists the benefits of industrialization as it has developed to the present as “a more plentiful food supply, tremendous food variety, a less physically taxing workload for farmers, a higher standard of living in the countryside,” and the costs as “continuing food distribution problems, both domestically and internationally, an increasing problem ensuring and regulating food safety, a chronic decrease in the number of farm families, a flow of people and capital from rural to urban areas, and an incomprehensible set of deals between federal officials and farmers that make little sense and potentially do as much harm as good” (p. 189). Those assertions might be viewed as suggestions for further investigation, except that they appear in the book’s concluding paragraph and may be read by casual readers as following from its evidence and arguments. Actually the book provides virtually no support for conclusions about the relationship between industrialization and food variety, the standard of rural living, food distribution, food safety, or capital flows from rural to urban areas. Fitzgerald’s accomplishments are further obscured by the back-cover blurb’s statement that the book addresses “a system of agriculture that has never served the best interests of farmers or farmland but that has always been presented to the public as necessary and inevitable.” That statement exhibits a level of tendentiousness that the book itself does not approach. In fact, fair use of the book’s content will provide many illuminating facts and vignettes about U.S. agricultural history, but will not prove a source of ammunition for either its celebrators or denigrators.

Bruce Gardner, Professor of Agricultural and Resource Economics at the University of Maryland, College Park, recently published American Agriculture in the Twentieth Century: How It Flourished and What It Cost, Harvard University Press, 2002.

Subject(s):Agriculture, Natural Resources, and Extractive Industries
Geographic Area(s):North America
Time Period(s):20th Century: Pre WWII

The Fireproof Building: Technology and Public Safety in the Nineteenth-Century American City

Author(s):Wermiel, Sara E.
Reviewer(s):McSwain, James B.

Published by EH.NET (November 2000)

Sara E. Wermiel, The Fireproof Building: Technology and Public Safety in

the Nineteenth-Century American City. Baltimore: Johns Hopkins University

Press, 2000. 301 pp. $45.00 (cloth), ISBN: 0-8018-6311-2.

Reviewed for EH.NET by James B. McSwain, Department of History, Tuskegee

University.

Sara E. Wermiel, historian of technology and city planner, has produced a

well-researched, clearly written study of the development of

fireproof/fire-resistant buildings in the United States from the late

eighteenth century to the threshold of World War I. Extensive documentation, a

useful glossary, and an excellent bibliographic essay, undergird her analysis.

Her work contains helpful reproductions of contemporary engineering,

architectural, and promotional drawings and sketches.

The drive to build fireproof buildings arose in part out of fear of

conflagration, or a city-wide fire. Many municipalities established “fire

limits,” a zone requiring strict exterior construction standards. This,

however, did not address the flammability of interior materials. Finding a

suitable non-flammable substitute for wood meant designing buildings with

noncombustible floors and roofs. The initial solution was the masonry vault,

or a barrel-shaped, load-bearing span that supported the floor above, and

rested on massive, and expensive, walls and piers. Held back by high costs and

“technical difficulties,” only a dozen masonry vaulted buildings, mainly for

the Federal Government, were put up in the U.S. before 1850. Vaulted buildings

performed well in fires, but had several drawbacks. They had a thorough-going,

anti-human atmosphere owing to the enormous walls, center pieces, columns, and

the “thrust” of the vault arches, that blocked light and used up most of the

interior space of the building.

Wermiel devotes the bulk of her book to the various solutions to the problem

of putting up fireproof/fire-resistant floors and roofs, without resorting to

vault construction. By 1850 U.S. builders relied upon a system of iron beams

and girders (horizontal spanning elements), in between which were brick

arches, quite like the masonry vaults, but not nearly as space-consuming.

Subsequently, wrought iron, having superior tensile strength, replaced cast

iron in framing buildings. Its malleability allowed rolling into “I” shaped

beams thinner and stronger than cast iron.

During the post-1865 construction boom, builders tried a number of

alternatives to brick arches and floors, including iron sheets and concrete,

stone slabs, and various sorts of solid and hollow clay (terra cotta or tile)

blocks. They generally performed well, though often structural iron failed

under intense heat. This suggested that noncombustible materials did not

guarantee the survival of a building. So, the notion of fireproof expanded to

include noncombustible materials that did not conduct heat, which could

distort flanges or other crucial components. In the 1890s building owners

found in New England “mill construction” an attractive model of affordable

fire-resistant construction that featured space separation accompanied by

fire-fighting equipment. Drawing upon this paradigm, the Associated Factory

Mutual Fire Insurance Companies (AFM) made features such as sprinklers,

stairways isolated from floor areas, and exterior access ladders, required

items. The AFM regarded this “slow-burning” construction a superior method

toachieve fire prevention at a comparatively low cost.

In the 1880s elevators allowed buildings to go beyond the six-story limit. To

make the proposed “skyscrapers” fire safe, architects and builders switched

from load bearing walls to a metal framework (skeleton), made of iron or

steel, that carried the weight of the building. However, a major problem to

resolve was egress. The contents of a fireproof/fire-resistant building could

burn and produce deadly smoke, toxic fumes, and blistering heat that killed

trapped occupants, forcing architects and engineers to focus upon how to leave

buildings. In the 1860s fire escapes became the norm for New York city

tenements. Yet, city codes for other public buildings remained dangerously

ambiguous. Boston led the way up to 1900 in imposing strict standards of

egress for many new buildings and all tenements and boarding houses. After

1900 New York city authorities tied egress to occupancy, so that the more

rooms a building had, the more exits were required.

Two fires revealed gaps between code and practice. In 1903 the Iroquois

Theatre in Chicago, outfitted with fireproof floors, roofs, and partitions,

burned, killing 581 people. However, it had steps in front of doors, fire

escapes exposed to flames, inadequate balcony stairways, and no exit signs.

Subsequent Chicago ordinances dealt with all of these shortcomings. In March

1911 the New York building containing the Triangle Shirtwaist Company burned.

The iron, steel and tile structure survived nicely. Although there were

stairways and escapes, several had doors that opened inward, and one may have

been locked. This led to building codes that redefined adequate egress from

buildings.

Wermiel concludes that the pivotal event of modern fire-resistive construction

was adoption of skeleton frame construction. It brought together existing

fireproofing materials and experience to build fire-resistant tall buildings.

She also argues that since fireproof buildings were so much more expensive

than regular buildings, government contract requirements and code regulations

provided incentives for architects, engineers, and industrial people to come

up with new materials and construction techniques for fireproof projects.

Several observations are in order. Having investigated controversies over

petroleum storage (1901-03), I was aware of insurance concerns over

conflagration in the late nineteenth century. Several names familiar to me

surfaced in Wermiel’s book. Engineers F.J.T. Stewart and William H. Merrill

served as advisors to the National Board of Fire Underwriters, the National

Fire Prevention Association and various consulting committees. I would,

therefore, have enjoyed more information about the role these groups played in

the development of and campaign for fire-resistant materials and construction

techniques. But I cannot fault Wermiel for sticking to her topic. Her work has

whetted my appetite for more explanation, an outcome I attribute only to good

books.

Further, there are important parallels between Wermiel’s book and Thomas J.

Misa’s A Nation of Steel: The Making of Modern America, 1865-1925

(1995). Wermiel points to the crucial role of government in stimulating demand

for fireproof building design and materials. Similarly, Misa explores the

relationship between central governments and an international cartel of steel

manufacturers who monopolized the fabrication of pre-WWI battleship armor.

However, in fireproofing there was much more unrestrained competition among

architects, suppliers, and contractors, than among the armor moguls. Price

considerations played a constant role in fireproof construction versus

traditional wood framing, and in iron and steel production. Here is where Misa

and Wermiel converge, because both address the market for iron and steel rails

and beams. Wermeil is clear about the role price, engineering preferences, and

the shift from wrought iron columns to steel columns, played in making

skeleton construction important to the evolution of fireproof buildings.

Misa’s account of the skyscraper is a bitmore complex and provides crucial

details of how designers and builders came to favor open-hearth steel over

steel produced by Bessemer rail shops. It is also set in the broad context of

urbanization and the push this provided to make better use of space by

building up rather than out.

Wermiel’s book is carefully crafted and informative. Though readers may

benefit from collateral reading in works such as Misa to fill out the context

of certain crucial events in the saga of fireproof construction, Wermiel has

assembled and synthesized a great deal of difficult, technical details to

support her narrative and to sustain her insightful conclusions.

James B. McSwain has recently completed “Energy and Municipal Regulation: The

Struggle to Control the Storage and Supply of Fuel Oil in Mobile, Alabama,

1894-1910,” the first of three related essays on this issue in the Gulf South

(Mobile, New Orleans, Galveston).

Subject(s):Industry: Manufacturing and Construction
Geographic Area(s):North America
Time Period(s):19th Century

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

American Railroads: Decline and Renaissance in the Twentieth Century

Author(s):Gallamore, Robert E.
Meyer, John R.
Reviewer(s):Brown, John Howard

Published by EH.Net (December 2014)

Robert E. Gallamore and John R. Meyer, American Railroads: Decline and Renaissance in the Twentieth Century. Cambridge, MA: Harvard University Press, 2014. xiii + 506 pp. $55 (hardcover), ISBN: 978-0-674-72564-5.

Reviewed for EH.Net John Howard Brown, Department of Finance and Economics, Georgia Southern University.

This book presents a historical overview of the American railroad industry through the course of the twentieth century.  The central thesis of the volume is that many of the ills suffered by the rail mode in this century were a product of the regulatory environment they faced.  In particular, in the post-World War II environment where highway transportation became an increasingly effective alternative to both freight and passenger rail service, regulation hampered effective responses by rail firms.  In the early 1970s the rigor mortis induced by regulation combined with the collapse of manufacturing in the Northeastern region of the United States thrust much of the rail capacity in the region into bankruptcy.  Salvation was delivered to the rail industry by the Staggers Act of 1980 which dramatically broadened the scope of business decisions that railroads could make without regulatory monitoring.  This thesis will be uncontroversial for economists and business historians who have studied the industry and particularly its post-1980 resurgence.

The first chapter is a paean to the “Enduring American Railroads.”  The second chapter discusses the ills of regulation in the context of the peculiar economics of the rail industry.  Curiously, given the pivotal role which sunk costs have assumed in economic theories of competition over the last forty years, the term is unmentioned in the text and index, even though the first topic discussed in the chapter is whether railroads are natural monopolies.  Since the expense of roadbed and right-of-way are both substantial and sunk, entry into a market is quite difficult where an incumbent is established, since they have already sunk their costs.  The incumbent can credibly threaten to force rates below average costs making entry unprofitable.  This dynamic often leads to monopoly.  Where entry actually occurs, the alternative is often “destructive competition” featuring rates that cannot recover the full costs of service.  A railroad’s system is thus often a checkerboard of competitive and monopolized routes.  This very characteristic of railways was responsible for attempts to regulate the industry in the nineteenth century, culminating in the Interstate Commerce Act.  The chapter concludes with a box laying out Ten Principles of Transportation Economics.  These are uncontroversial in themselves.  However, they do not offer so much as a hint of the role of sunk costs.

The third chapter summarizes the history of government control of railroads in the first half of the twentieth century.  The authors divide this era into three sub-periods: the antitrust episode, the period of direct government operation, and the period following the Transportation Act of 1920.  The antitrust episode was initiated by the Northern Securities case and represented a strike against what was viewed as excessive concentration of control in the transcontinental roads.  The authors view this episode as ill-conceived since after the Staggers Act of 1980 essentially the same systems were created in a new round of mergers.

The experience of government control during the First World War is in contrast reviewed positively.  Although it is treated as the product of special circumstances and the peculiarity of the design of the American railroad system, the authors do draw some lessons from the events.  These lessons consisted largely of the virtues of eliminating wasteful duplication of efforts.  This was the same reasoning that J.P. Morgan employed in snuffing out competition in many industries during the 1890s.  After the war, however, the roads were rapidly returned to private control.

This leads to the third epoch of the century where public rail policy was determined by the Transportation Act of 1920.   Official policy favored substantial consolidation of rail systems.  However, consolidation was never achieved.

The fourth chapter purports to examine the role that competition from alternative freight transportation modes played in the evolution of the rail industry.  In fact, the chapter is poorly organized, shifting between transport modes, policy recommendations, and historical eras haphazardly.  Three points stand out regarding the topic of intermodal freight competition.  First, prior to about 1950, waterborne carriage provided a limited competitive check on railroads in some regions of the United States, i.e. the Atlantic, Pacific, and Gulf Coasts; the Great Lakes; and the Mississippi-Ohio-Missouri basin.  Next, after 1950, highway transportation and air transport increased competitive pressure on the rail industry in freight markets.  Finally, government policies resulted in substantial subsidies to these alternative modes.  In particular, unlike railroads where right-of-ways are privately owned and maintained, internal waterway improvements, highways, and airports are usually built and maintained at government expense.

The following chapter tells a similar story regarding rail passenger traffic.  Once again, competition from competing modes was ineffectual prior to World War II.  Afterwards, both highways and air travel supplanted railroads in passenger service.  Some of this was attributable to the improved comfort and safety of these modes due to technical improvements, particularly the development of passenger jet aircraft.  Additionally, as was the case for rail freight, the implicit subsidies provided by governmental investments in highways, airports, and the air traffic control system placed the rails at a disadvantage.

The trends related in these two chapters paint a picture of steadily mounting pressure from competing and partially-subsidized modes.  The classic response of railroads to competition has always been deferral of maintenance.  Thus the rail system entered the nineteen sixties with substantial portions of its trackage functionally obsolete or at least in sore need of maintenance.  One possible solution, merger, is the topic of the succeeding chapter.

The sixth chapter discusses the dynamics of railroad mergers during the 1950s and 60s.  As always, public policy makers were ambivalent about the issue of rail consolidation.  Two different approaches to railroad mergers were available.  Parallel mergers joined firms whose route structures were largely overlapping.  On their face, such mergers reduce competition while perhaps reducing costs by elimination of duplicate functions.  End-to-end mergers joined roads which already had a collaborative relationship due to their interchange of freight.  These mergers might improve services available to shippers but were not anticipated to result in substantial cost reductions. Having pointed out that regulators generally opted for parallel and cost saving mergers, even though they threatened to reduce competition, the authors engage in a detailed rehearsal of the details of rail mergers.  The chapter concludes with the wreck of the Penn Central.

The seventh chapter discusses the rather muddled public policy response to the crisis induced by Penn Central’s collapse.  The 1970s featured more Congressional policy making for railroads than any prior decade.  The initial responses in the form of the so-called 3R and 4R bills can be classified as attempts at muddling through.  The most consequential result of these acts was the creation of the United States Railway Administration (USRA).  This body was charged with nothing less than the reorganization of the entire railway system.  The acts also created Conrail, an empty vessel into which the USRA was to pour its reorganization plan.  The Staggers Act concluded the decade with a radical departure from the prior eighty years of American public policy, although it was a logical extension of the deregulatory fervor which seized official Washington and the Carter administration.

The following chapter discusses the Frankenstein creation which was Conrail.  The chain reaction bankruptcies induced by the failed Penn Central merger threatened to exterminate rail freight service throughout much of the northeastern United States.  The creation of Conrail was the ad hoc response to the perceived crisis.  Like Frankenstein’s monster, Conrail took on a life of its own, far outlasting the crisis that birthed it, in the process besting a cabinet secretary determined to privatize it by merger.  Instead, it prospered as an independent, private firm up to the 1990s.

The ninth chapter backtracks chronologically to discuss the development of the Staggers Act and the consequences of deregulation.  Two features of the act were essential: streamlining the process by which railroads could abandon legacy lines that could not achieve economic traffic density and phasing out common carrier obligations.  Class I railroads aggressively pruned their route systems. All railroads took advantage of their newly acquired freedom to enter into private contracts.

The Staggers Act permitted the Interstate Commerce Commission, and its successor, the Surface Transportation Board, to “protect” captive shippers from exploitation by railroads.  The balance of the ninth chapter comprehensively covers the struggles between shippers and railroads over rates which could adequately compensate the railroads without exploiting shippers.  No very satisfactory result was ever achieved in squaring this circle.  Nor is it clear to the authors that any regulatory solution would be desirable.

The tenth chapter takes up the story of the post-Staggers Act consolidation of the U.S. rail industry into five Class I roads and innumerable short lines erected on tracks abandoned by the Class I roads.  The different mergers and their competitive logic (or occasionally lack thereof) are discussed in detail.  One flaw in this chapter is recurrent name dropping about rail executives who are mentioned positively without providing detailed evidence to support the judgments.

The final result of the flurry of mergers was paired duopolies, Burlington Northern-Santa Fe and Union Pacific-Southern Pacific west of the Mississippi and Norfolk Southern with CSX in the east.  Kansas City Southern remains an anomaly operating routes predominantly north and south while the other Class I operators’ traffic flows are east to west.  The authors conclude with a report card of the final four.

Chapter eleven returns to passenger rail and the Amtrak experience.  The dilemma of rail passenger service policy is twofold.  On one hand, Congress has sought to have Amtrak succeed on a commercial basis, i.e. cover expenses from passenger revenues.  This policy implies minimal federal subsidies.  However, only a few high-density corridors in the United States, particularly between Boston and Washington and some very large metropolitan areas, could commuter traffic support rail service on such a basis.  Once subsidies are required, the logic of legislative deal making demands passenger routes that can never be successful on a commercial basis in order to build legislative majorities.  For example, Amtrak’s transcontinental routes are not economically viable.

Chapter twelve documents the remarkable technological progressiveness of American railways in the twentieth century despite their not infrequent economic distress.  Broadly speaking two sources of technical progress can be identified, innovations embodied in physical capital and innovations in business practices.  The first is represented for railroads by the replacement of steam locomotives with diesel at mid-century.  The development in the post-Staggers era of the unit train illustrates the second category of technical change.

In addition, some improved technology was developed specifically for railroads, such as the diesel-electric locomotive and improved systems for braking and train control.  Other technologies were generated as a part of the twentieth century’s remarkable technological efflorescence but were readily adapted to the needs of railroads, e.g. computers and communication systems. The cumulative, synergistic effects of these changes was the transformation of a labor- and fuel-intensive industry in the late nineteenth century into an industry of unmatched productivity with respect to both in the early twenty-first.

The thirteenth chapter provides a summing up, consisting of ten propositions regarding the experience of the railroad industry during the twentieth century.  The first is that regulation was hugely damaging to the industry in the first eight decades of the century.  At the same time the authors concede in their second point that railroads represent an industry “affected with the public interest.”  Financial crises and bankruptcy under the competitive pressure from alternative modes constitute their points three through five.  Points six, seven, and ten take up the story of the chaotic 1970s, the belated regulatory reforms, particularly the Staggers Act, and the resurgence the railroads experienced in the final two decades.  Propositions eight and nine cover the notable progress of railway technology and the travails of passenger rail service.  There is nothing to criticize in this summary.  Although, as is too frequently the case, the organization of the presentation leaves something to be desired.

A final chapter closes the book with some observations about further regulatory reforms which might reinforce the current good health of the American rail industry.  They also highlight some post-millennial developments and their implications for the future of the industry.   These recommendations and observations are of particular interest in light of recent proposals of further Class I mergers.

This book is comprehensive and the authors clearly quite knowledgeable.  John Meyer, now deceased, was a professor at Harvard University and Robert Gallamore, was a former student, now retired from the rail industry and teaching at Michigan State University.  However, this book disappoints.  The authors have chosen a narrative structure that is neither fish nor fowl.  The chapter organization is largely topical.  However, the organization of the topics follows an imperfect chronological ordering.  The internal organization of chapters leaves much to be desired also, since they tend to leap from subject to subject with little connective logic.

The book appears also to suffer from sloppy editing.  Thus in one chapter we read that, “no comparable period in U.S. history had less success in actual railroad consolidations than the forty-year span, 1920 to 1940” (p. 66).  In several other places, tables displaying economic values over substantial time periods are reported in nominal, rather than real terms (see Figure 5.1, p. 121 and Figure 11.2, p. 333).  The latter figure distorts the levels of support Amtrak has received over its lifetime by understating subsidies in the 1970s and overstating the subsidies of the twenty-first century.

In summary, this book imperfectly fills the need for a comprehensive historical treatment of the American railroad industry in the last century.  Given the inherent interest and importance of the subject, this is unfortunate.

John Howard Brown is an Associate Professor of Economics in the Department of Finance and Economics at Georgia Southern University.  His article, “The ‘Railroad Problem’ and the Interstate Commerce Act” was published in a special issue of the Review of Industrial Organization on the 125th anniversary of the Interstate Commerce Act.

Copyright (c) 2014 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 2014). All EH.Net reviews are archived at http://eh.net/book-reviews/

Subject(s):Transport and Distribution, Energy, and Other Services
Geographic Area(s):North America
Time Period(s):20th Century: Pre WWII
20th Century: WWII and post-WWII

Child Workers and Industrial Health in Britain, 1780-1850

Author(s):Kirby, Peter
Reviewer(s):Tuttle, Carolyn

Published by EH.Net (February 2014)

Peter Kirby, Child Workers and Industrial Health in Britain, 1780-1850.  Woodbridge, Suffolk, UK:  Boydell Press, 2013. xi + 212 pp.  $30 (paperback), ISBN: 978-1-84383-884-5.

Reviewed for EH.Net by Carolyn Tuttle, Department of Economics, Lake Forest College.

This book significantly contributes to the child labor literature in discerning the health of the children who worked in British factories and mines from 1780 to 1850.  Although the debate over the exploitation of children during the British Industrial Revolution continues to rage on between the Optimists and the Pessimists, this is the first extensive examination into the occupational health of early industrial children.  The main contribution of this book is in producing a “comprehensive overview of the factors bearing upon the health and industrial working conditions of children in the context of the major occupational and epidemiological transitions of the Industrial Revolution” (p. 35).  Peter Kirby argues that the health of the industrial child was fairly good, was not worsened by their work or working conditions but rather that “the child workers who staffed the mills and factories of the Industrial Revolution were at no greater risk of poor health than those in other occupations” (p. 161).  The book presents several types of evidence, some more compelling than others.  Considerable archival work on child work-related injuries, children’s heights, child muscular and skeletal development and childhood diseases challenges the existing view that children’s health declined once they had worked in the textile mills or coal mines for an extended period of time.  In addition, this research challenges the evidence which led to the prevailing image of the skinny, crooked, bruised factory child.  He casts doubt on the representativeness of Sadler’s Report, the representativeness of two well-known child laborers – Robert Blincoe (the parish apprentice) and William Dodd (the factory cripple) – and the conclusions drawn from the observations of contemporary factory operatives and medical men.

Chapters 1 and 2 rightly put the issue of the health of child laborers into the broader context of growing industrial cities and the emergence of a poor working class.  By identifying the externalities of industrial growth, such as the air pollution caused by the smoke of coal-burning factories, the potential source(s) of children’s poor health is highlighted.  In addition, the detrimental impact of poor nutrition of both the expectant and then nursing mother explains lower birth weights, weaker immune systems and lower heights of children from poor families.  These arguments are convincing as children from poor families, regardless of their occupation, would tend to be smaller and sicklier.  Kirby concludes that “infectious diseases were ubiquitous amongst children and it is likely that many young people commenced their working lives carrying physical impairments conferred by disease in early childhood.  This almost certainly led medical commentators to confuse broader epidemiological effects such as deformity and short stature with the influence of the workplace” (p. 60).

Although some medical doctors may have been misinformed or misled, it is unlikely they all were. Throughout the book Kirby dismisses the observations and examinations of the “medical men” reporting to Parliament by claiming they were not qualified to identify occupational aliments, and therefore erroneously attributed all the diseases and deformities of children to their work and not to their general living conditions.  He argues that many were not trained in occupational health, many had no experience with industrial workplaces, and that the majority of Sadler’s medical witnesses never visited a mill or factory.  Rather than provide a more nuanced assessment of their extensive commentary, Kirby dismisses all of their testimony and concludes that “the evidence of early nineteenth-century medical men is therefore a highly unreliable basis for a serious inquiry into the health of industrial children” (p. 34).

As a result, the main weakness of this book is that the evidence put forth ignores medical commentary at the time and instead uses recent research in occupational medicine and health studies of children working in developing countries.  Although this approach is useful due to the similarities of child labor past and present, it must be placed into context.  There are considerable differences in the technology (or lack thereof), tasks performed, and working conditions of child laborers today that significantly impact their occupational health.  Kirby instead cites a mill surgeon, a lecturer to the Leeds Mechanics’ Institute and a member of the Provincial Medical and Surgical Association as reliable “experts” on occupational health; all three found no link between standing for long periods of time and knock-knees and skeletal distortions (p. 64).  Kirby assumes, moreover, that the tasks children performed in the factories were light, the least laborious of all indoor work.  He concludes that this may explain why many children who worked in the mills were disabled, “There is considerable evidence that slender or disabled children were positively selected to work in factories” (p. 77).  This opinion is not supported by the organizational charts of factories in 1833 where children were listed not just as helpers doing light work (“piecers,” “doffers,” and “cleaners”) but were also performing adult tasks (specifically spinners, winders, combers, carders and weavers).  Kirby’s assessment on page 77 also contradicts an earlier statement he made that “the health of children and adolescents was therefore crucial to the formation of contracts with employers and masters would not normally accept a child with an obvious illness or disability” (p. 58).  Kirby’s arguments about how factory conditions affected or didn’t affect child workers are more confusing than convincing.

Chapter 3 has a very interesting and important discussion on the difficulties of establishing a child’s age and therefore enforcing the age requirements set in the Factory Act of 1833 (which prohibited children under age 9 from working).  Age certificates were not valid or reliable until 1846. Early factory legislation made parents primarily responsible for confirming the ages of their working children.  Parents were known to lie in order to insure their children would get hired.  The Factory Act of 1833 shifted the responsibility to the employers, but since children did not have birth certificates, who would verify their age?  The Factory Commission recommended the appointment of certifying surgeons to confirm a child’s age and hence eligibility for work.  Although this system was an improvement, this research identifies the new problems that arose.  How does one determine the age of a child? Kirby has a thorough discussion of the problems with using height and the reasons officials turned to examining the stages of child dentition.

Compelling evidence is offered in Table 4 and Figure 4 illustrating that there was little difference in the height of the factory and non-factory children who attended Sunday school in Manchester and Stockport.  Kirby concludes that the factors stunting their growth occurred before they began working in the factory. “The effect of factory occupation upon the health and growth of working children therefore appears to have been negligible” (p. 115).  One exception is coal mining, where the occupation did contribute to their smaller stature (and larger chests), as Kirby documents carefully in Tables 5, 6 and 7. He astutely argues that children in the mines, due to their hours of work underground had a complete deficiency of ultraviolet light which was thought to have contributed to slow and abnormal bone growth (p. 120).

Chapter 4 discusses an extremely important topic on the ill treatment of working children but does not make a cohesive argument.  The conclusion that “the beating of child factory workers was extremely rare” (p. 150) is based on no new evidence and stands in contrast to Nardinelli’s (1982) findings that systematic corporal punishment occurred in many factories and mines.  Instead of examining the testimony of child laborers and overseers, Kirby makes the claim that life in Industrial Britain was far from peaceful – a working-class child was exposed to either violence at home, at school or at work.  Physical discipline was customary at school and at work and abuse or domestic violence at home was not uncommon.  Thus, rather than deny that corporal punishment occurred (which was his initial position), Kirby admits it did exist but argues it was justifiable – “where corporal punishment was practiced in any systematic manner in industrial situations, it tended to be generally moderate and connected in highly complex ways with the needs of production or the maintenance of workplace safety” (p. 149).

Kirby concludes in Chapter 5 that the “often simplistic stereotype of the health-impaired and abused industrial child can no longer be sustained” (p. 151).  The poor health of child laborers was caused by “a wide range of exogenous factors such as the urban disease environment, social class, household poverty, pre-existing disability or orphanage, and such influences almost certainly proved more harmful to their health and welfare than discrete workplace factors” (p. 151).  This research is thought-provoking and should encourage economic history scholars to delve into the other Factory Inspector Reports (besides Sadler’s 1833 Report) and the 1842 Mining Report for evidence on workplace accidents, the use of corporal punishment, and childhood diseases.  I believe the book has broad appeal and should be of interest to economic historians and social historians, as well as psychologists and sociologists.  It is well written and superbly documented and is accessible to students at both the undergraduate and graduate level.

Carolyn Tuttle is the Betty Jane Schultz Hollender Professor of Economics at Lake Forest College.  Recent publications include “Child Labor: A Revival of the Pessimist View” in Research in Economic History and a book entitled Mexican Women in American Factories: Free Trade and Exploitation on the Border (2012) by University of Texas Press.  She is currently working on an article with Simone Wegge of CSI-CUNY entitled “The Role of Child Labor in Industrialization.”  She can be reached at tuttle@mx.lakeforest.edu

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Subject(s):Labor and Employment History
Geographic Area(s):Europe
Time Period(s):18th Century
19th Century

The History of American Labor Market Institutions and Outcomes

Joshua Rosenbloom, University of Kansas

One of the most important implications of modern microeconomic theory is that perfectly competitive markets produce an efficient allocation of resources. Historically, however, most markets have not approached the level of organization of this theoretical ideal. Instead of the costless and instantaneous communication envisioned in theory, market participants must rely on a set of incomplete and often costly channels of communication to learn about conditions of supply and demand; and they may face significant transaction costs to act on the information that they have acquired through these channels.

The economic history of labor market institutions is concerned with identifying the mechanisms that have facilitated the allocation of labor effort in the economy at different times, tracing the historical processes by which they have responded to shifting circumstances, and understanding how these mechanisms affected the allocation of labor as well as the distribution of labor’s products in different epochs.

Labor market institutions include both formal organizations (such as union hiring halls, government labor exchanges, and third party intermediaries such as employment agents), and informal mechanisms of communication such as word-of-mouth about employment opportunities passed between family and friends. The impact of these institutions is broad ranging. It includes the geographic allocation of labor (migration and urbanization), decisions about education and training of workers (investment in human capital), inequality (relative wages), the allocation of time between paid work and other activities such as household production, education, and leisure, and fertility (the allocation of time between production and reproduction).

Because each worker possesses a unique bundle of skills and attributes and each job is different, labor market transactions require the communication of a relatively large amount of information. In other words, the transactions costs involved in the exchange of labor are relatively high. The result is that the barriers separating different labor markets have sometimes been quite high, and these markets are relatively poorly integrated with one another.

The frictions inherent in the labor market mean that even during macroeconomic expansions there may be both a significant number of unemployed workers and a large number of unfilled vacancies. When viewed from some distance and looked at in the long-run, however, what is most striking is how effective labor market institutions have been in adapting to the shifting patterns of supply and demand in the economy. Over the past two centuries American labor markets have accomplished a massive redistribution of labor out of agriculture into manufacturing, and then from manufacturing into services. At the same time they have accomplished a huge geographic reallocation of labor between the United States and other parts of the world as well as within the United States itself, both across states and regions and from rural locations to urban areas.

This essay is organized topically, beginning with a discussion of the evolution of institutions involved in the allocation of labor across space and then taking up the development of institutions that fostered the allocation of labor across industries and sectors. The third section considers issues related to labor market performance.

The Geographic Distribution of Labor

One of the dominant themes of American history is the process of European settlement (and the concomitant displacement of the native population). This movement of population is in essence a labor market phenomenon. From the beginning of European settlement in what became the United States, labor markets were characterized by the scarcity of labor in relation to abundant land and natural resources. Labor scarcity raised labor productivity and enabled ordinary Americans to enjoy a higher standard of living than comparable Europeans. Counterbalancing these inducements to migration, however, were the high costs of travel across the Atlantic and the significant risks posed by settlement in frontier regions. Over time, technological changes lowered the costs of communication and transportation. But exploiting these advantages required the parallel development of new labor market institutions.

Trans-Atlantic Migration in the Colonial Period

During the seventeenth and eighteenth centuries a variety of labor market institutions developed to facilitate the movement of labor in response to the opportunities created by American factor proportions. While some immigrants migrated on their own, the majority of immigrants were either indentured servants or African slaves.

Because of the cost of passage—which exceeded half a year’s income for a typical British immigrant and a full year’s income for a typical German immigrant—only a small portion of European migrants could afford to pay for their passage to the Americas (Grubb 1985a). They did so by signing contracts, or “indentures,” committing themselves to work for a fixed number of years in the future—their labor being their only viable asset—with British merchants, who then sold these contracts to colonists after their ship reached America. Indentured servitude was introduced by the Virginia Company in 1619 and appears to have arisen from a combination of the terms of two other types of labor contract widely used in England at the time: service in husbandry and apprenticeship (Galenson 1981). In other cases, migrants borrowed money for their passage and committed to repay merchants by pledging to sell themselves as servants in America, a practice known as “redemptioner servitude (Grubb 1986). Redemptioners bore increased risk because they could not predict in advance what terms they might be able to negotiate for their labor, but presumably they did so because of other benefits, such as the opportunity to choose their own master, and to select where they would be employed.

Although data on immigration for the colonial period are scattered and incomplete a number of scholars have estimated that between half and three quarters of European immigrants arriving in the colonies came as indentured or redemptioner servants. Using data for the end of the colonial period Grubb (1985b) found that close to three-quarters of English immigrants to Pennsylvania and nearly 60 percent of German immigrants arrived as servants.

A number of scholars have examined the terms of indenture and redemptioner contracts in some detail (see, e.g., Galenson 1981; Grubb 1985a). They find that consistent with the existence of a well-functioning market, the terms of service varied in response to differences in individual productivity, employment conditions, and the balance of supply and demand in different locations.

The other major source of labor for the colonies was the forced migration of African slaves. Slavery had been introduced in the West Indies at an early date, but it was not until the late seventeenth century that significant numbers of slaves began to be imported into the mainland colonies. From 1700 to 1780 the proportion of blacks in the Chesapeake region grew from 13 percent to around 40 percent. In South Carolina and Georgia, the black share of the population climbed from 18 percent to 41 percent in the same period (McCusker and Menard, 1985, p. 222). Galenson (1984) explains the transition from indentured European to enslaved African labor as the result of shifts in supply and demand conditions in England and the trans-Atlantic slave market. Conditions in Europe improved after 1650, reducing the supply of indentured servants, while at the same time increased competition in the slave trade was lowering the price of slaves (Dunn 1984). In some sense the colonies’ early experience with indentured servants paved the way for the transition to slavery. Like slaves, indentured servants were unfree, and ownership of their labor could be freely transferred from one owner to another. Unlike slaves, however, they could look forward to eventually becoming free (Morgan 1971).

Over time a marked regional division in labor market institutions emerged in colonial America. The use of slaves was concentrated in the Chesapeake and Lower South, where the presence of staple export crops (rice, indigo and tobacco) provided economic rewards for expanding the scale of cultivation beyond the size achievable with family labor. European immigrants (primarily indentured servants) tended to concentrate in the Chesapeake and Middle Colonies, where servants could expect to find the greatest opportunities to enter agriculture once they had completed their term of service. While New England was able to support self-sufficient farmers, its climate and soil were not conducive to the expansion of commercial agriculture, with the result that it attracted relatively few slaves, indentured servants, or free immigrants. These patterns are illustrated in Table 1, which summarizes the composition and destinations of English emigrants in the years 1773 to 1776.

Table 1

English Emigration to the American Colonies, by Destination and Type, 1773-76

Total Emigration
Destination Number Percentage Percent listed as servants
New England 54 1.20 1.85
Middle Colonies 1,162 25.78 61.27
New York 303 6.72 11.55
Pennsylvania 859 19.06 78.81
Chesapeake 2,984 66.21 96.28
Maryland 2,217 49.19 98.33
Virginia 767 17.02 90.35
Lower South 307 6.81 19.54
Carolinas 106 2.35 23.58
Georgia 196 4.35 17.86
Florida 5 0.11 0.00
Total 4,507 80.90

Source: Grubb (1985b, p. 334).

International Migration in the Nineteenth and Twentieth Centuries

American independence marks a turning point in the development of labor market institutions. In 1808 Congress prohibited the importation of slaves. Meanwhile, the use of indentured servitude to finance the migration of European immigrants fell into disuse. As a result, most subsequent migration was at least nominally free migration.

The high cost of migration and the economic uncertainties of the new nation help to explain the relatively low level of immigration in the early years of the nineteenth century. But as the costs of transportation fell, the volume of immigration rose dramatically over the course of the century. Transportation costs were of course only one of the obstacles to international population movements. At least as important were problems of communication. Potential migrants might know in a general way that the United States offered greater economic opportunities than were available at home, but acting on this information required the development of labor market institutions that could effectively link job-seekers with employers.

For the most part, the labor market institutions that emerged in the nineteenth century to direct international migration were “informal” and thus difficult to document. As Rosenbloom (2002, ch. 2) describes, however, word-of-mouth played an important role in labor markets at this time. Many immigrants were following in the footsteps of friends or relatives already in the United States. Often these initial pioneers provided material assistance—helping to purchase ship and train tickets, providing housing—as well as information. The consequences of this so-called “chain migration” are readily reflected in a variety of kinds of evidence. Numerous studies of specific migration streams have documented the role of a small group of initial migrants in facilitating subsequent migration (for example, Barton 1975; Kamphoefner 1987; Gjerde 1985). At a more aggregate level, settlement patterns confirm the tendency of immigrants from different countries to concentrate in different cities (Ward 1971, p. 77; Galloway, Vedder and Shukla 1974).

Informal word-of-mouth communication was an effective labor market institution because it served both employers and job-seekers. For job-seekers the recommendations of friends and relatives were more reliable than those of third parties and often came with additional assistance. For employers the recommendations of current employees served as a kind of screening mechanism, since their employees were unlikely to encourage the immigration of unreliable workers.

While chain migration can explain a quantitatively large part of the redistribution of labor in the nineteenth century it is still necessary to explain how these chains came into existence in the first place. Chain migration always coexisted with another set of more formal labor market institutions that grew up largely to serve employers who could not rely on their existing labor force to recruit new hires (such as railroad construction companies). Labor agents, often themselves immigrants, acted as intermediaries between these employers and job-seekers, providing labor market information and frequently acting as translators for immigrants who could not speak English. Steamship companies operating between Europe and the United States also employed agents to help recruit potential migrants (Rosenbloom 2002, ch. 3).

By the 1840s networks of labor agents along with boarding houses serving immigrants and other similar support networks were well established in New York, Boston, and other major immigrant destinations. The services of these agents were well documented in published guides and most Europeans considering immigration must have known that they could turn to these commercial intermediaries if they lacked friends and family to guide them. After some time working in America these immigrants, if they were successful, would find steadier employment and begin to direct subsequent migration, thus establishing a new link in the stream of chain migration.

The economic impacts of immigration are theoretically ambiguous. Increased labor supply, by itself, would tend to lower wages—benefiting employers and hurting workers. But because immigrants are also consumers, the resulting increase in demand for goods and services will increase the demand for labor, partially offsetting the depressing effect of immigration on wages. As long as the labor to capital ratio rises, however, immigration will necessarily lower wages. But if, as was true in the late nineteenth century, foreign lending follows foreign labor, then there may be no negative impact on wages (Carter and Sutch 1999). Whatever the theoretical considerations, however, immigration became an increasingly controversial political issue during the late nineteenth and early twentieth centuries. While employers and some immigrant groups supported continued immigration, there was a growing nativist sentiment among other segments of the population. Anti-immigrant sentiments appear to have arisen out of a mix of perceived economic effects and concern about the implications of the ethnic, religious and cultural differences between immigrants and the native born.

In 1882, Congress passed the Chinese Exclusion Act. Subsequent legislative efforts to impose further restrictions on immigration passed Congress but foundered on presidential vetoes. The balance of political forces shifted, however, in the wake of World War I. In 1917 a literacy requirement was imposed for the first time, and in 1921 an Emergency Quota Act was passed (Goldin 1994).

With the passage of the Emergency Quota Act in 1921 and subsequent legislation culminating in the National Origins Act, the volume of immigration dropped sharply. Since this time international migration into the United States has been controlled to varying degrees by legal restrictions. Variations in the rules have produced variations in the volume of legal immigration. Meanwhile the persistence of large wage gaps between the United States and Mexico and other developing countries has encouraged a substantial volume of illegal immigration. It remains the case, however, that most of this migration—both legal and illegal—continues to be directed by chains of friends and relatives.

Recent trends in outsourcing and off-shoring have begun to create a new channel by which lower-wage workers outside the United States can respond to the country’s high wages without physically relocating. Workers in India, China, and elsewhere possessing technical skills can now provide services such as data entry or technical support by phone and over the internet. While the novelty of this phenomenon has attracted considerable attention, the actual volume of jobs moved off-shore remains limited, and there are important obstacles to overcome before more jobs can be carried out remotely (Edwards 2004).

Internal Migration in the Nineteenth and Twentieth Centuries

At the same time that American economic development created international imbalances between labor supply and demand it also created internal disequilibrium. Fertile land and abundant natural resources drew population toward less densely settled regions in the West. Over the course of the century, advances in transportation technologies lowered the cost of shipping goods from interior regions, vastly expanding the area available for settlement. Meanwhile transportation advances and technological innovations encouraged the growth of manufacturing and fueled increased urbanization. The movement of population and economic activity from the Eastern Seaboard into the interior of the continent and from rural to urban areas in response to these incentives is an important element of U.S. economic history in the nineteenth century.

In the pre-Civil War era, the labor market response to frontier expansion differed substantially between North and South, with profound effects on patterns of settlement and regional development. Much of the cost of migration is a result of the need to gather information about opportunities in potential destinations. In the South, plantation owners could spread these costs over a relatively large number of potential migrants—i.e., their slaves. Plantations were also relatively self-sufficient, requiring little urban or commercial infrastructure to make them economically viable. Moreover, the existence of well-established markets for slaves allowed western planters to expand their labor force by purchasing additional labor from eastern plantations.

In the North, on the other hand, migration took place through the relocation of small, family farms. Fixed costs of gathering information and the risks of migration loomed larger in these farmers’ calculations than they did for slaveholders, and they were more dependent on the presence of urban merchants to supply them with inputs and market their products. Consequently the task of mobilizing labor fell to promoters who bought up large tracts of land at low prices and then subdivided them into individual lots. To increase the value of these lands promoters offered loans, actively encourage the development of urban services such as blacksmith shops, grain merchants, wagon builders and general stores, and recruited settlers. With the spread of railroads, railroad construction companies also played a role in encouraging settlement along their routes to speed the development of traffic.

The differences in processes of westward migration in the North and South were reflected in the divergence of rates of urbanization, transportation infrastructure investment, manufacturing employment, and population density, all of which were higher in the North than in the South in 1860 (Wright 1986, pp. 19-29).

The Distribution of Labor among Economic Activities

Over the course of U.S. economic development technological changes and shifting consumption patterns have caused the demand for labor to increase in manufacturing and services and decline in agriculture and other extractive activities. These broad changes are illustrated in Table 2. As technological changes have increased the advantages of specialization and the division of labor, more and more economic activity has moved outside the scope of the household, and the boundaries of the labor market have been enlarged. As a result more and more women have moved into the paid labor force. On the other hand, with the increasing importance of formal education, there has been a decline in the number of children in the labor force (Whaples 2005).

Table 2

Sectoral Distribution of the Labor Force, 1800-1999

Share in
Non-Agriculture
Year Total Labor Force (1000s) Agriculture Total Manufacturing Services
1800 1,658 76.2 23.8
1850 8,199 53.6 46.4
1900 29,031 37.5 59.4 35.8 23.6
1950 57,860 11.9 88.1 41.0 47.1
1999 133,489 2.3 97.7 24.7 73.0

Notes and Sources: 1800 and 1850 from Weiss (1986), pp. 646-49; remaining years from Hughes and Cain (2003), 547-48. For 1900-1999 Forestry and Fishing are included in the Agricultural labor force.

As these changes have taken place they have placed strains on existing labor market institutions and encouraged the development of new mechanisms to facilitate the distribution of labor. Over the course of the last century and a half the tendency has been a movement away from something approximating a “spot” market characterized by short-term employment relationships in which wages are equated to the marginal product of labor, and toward a much more complex and rule-bound set of long-term transactions (Goldin 2000, p. 586) While certain segments of the labor market still involve relatively anonymous and short-lived transactions, workers and employers are much more likely today to enter into long-term employment relationships that are expected to last for many years.

The evolution of labor market institutions in response to these shifting demands has been anything but smooth. During the late nineteenth century the expansion of organized labor was accompanied by often violent labor-management conflict (Friedman 2002). Not until the New Deal did unions gain widespread acceptance and a legal right to bargain. Yet even today, union organizing efforts are often met with considerable hostility.

Conflicts over union organizing efforts inevitably involved state and federal governments because the legal environment directly affected the bargaining power of both sides, and shifting legal opinions and legislative changes played an important part in determining the outcome of these contests. State and federal governments were also drawn into labor markets as various groups sought to limit hours of work, set minimum wages, provide support for disabled workers, and respond to other perceived shortcomings of existing arrangements. It would be wrong, however, to see the growth of government regulation as simply a movement from freer to more regulated markets. The ability to exchange goods and services rests ultimately on the legal system, and to this extent there has never been an entirely unregulated market. In addition, labor market transactions are never as simple as the anonymous exchange of other goods or services. Because the identities of individual buyers and sellers matter and the long-term nature of many employment relationships, adjustments can occur along other margins besides wages, and many of these dimensions involve externalities that affect all workers at a particular establishment, or possibly workers in an entire industry or sector.

Government regulations have responded in many cases to needs voiced by participants on both sides of the labor market for assistance to achieve desired ends. That has not, of course, prevented both workers and employers from seeking to use government to alter the way in which the gains from trade are distributed within the market.

The Agricultural Labor Market

At the beginning of the nineteenth century most labor was employed in agriculture, and, with the exception of large slave plantations, most agricultural labor was performed on small, family-run farms. There were markets for temporary and seasonal agricultural laborers to supplement family labor supply, but in most parts of the country outside the South, families remained the dominant institution directing the allocation of farm labor. Reliable estimates of the number of farm workers are not readily available before 1860, when the federal Census first enumerated “farm laborers.” At this time census enumerators found about 800 thousand such workers, implying an average of less than one-half farm worker per farm. Interpretation of this figure is complicated, however, and it may either overstate the amount of hired help—since farm laborers included unpaid family workers—or understate it—since it excluded those who reported their occupation simply as “laborer” and may have spent some of their time working in agriculture (Wright 1988, p. 193). A possibly more reliable indicator is provided by the percentage of gross value of farm output spent on wage labor. This figure fell from 11.4 percent in 1870 to around 8 percent by 1900, indicating that hired labor was on average becoming even less important (Wright 1988, pp. 194-95).

In the South, after the Civil War, arrangements were more complicated. Former plantation owners continued to own large tracts of land that required labor if they were to be made productive. Meanwhile former slaves needed access to land and capital if they were to support themselves. While some land owners turned to wage labor to work their land, most relied heavily on institutions like sharecropping. On the supply side, croppers viewed this form of employment as a rung on the “agricultural ladder” that would lead eventually to tenancy and possibly ownership. Because climbing the agricultural ladder meant establishing one’s credit-worthiness with local lenders, southern farm laborers tended to sort themselves into two categories: locally established (mostly older, married men) croppers and renters on the one hand, and mobile wage laborers (mostly younger and unmarried) on the other. While the labor market for each of these types of workers appears to have been relatively competitive, the barriers between the two markets remained relatively high (Wright 1987, p. 111).

While the predominant pattern in agriculture then was one of small, family-operated units, there was an important countervailing trend toward specialization that both depended on, and encouraged the emergence of a more specialized market for farm labor. Because specialization in a single crop increased the seasonality of labor demand, farmers could not afford to employ labor year-round, but had to depend on migrant workers. The use of seasonal gangs of migrant wage laborers developed earliest in California in the 1870s and 1880s, where employers relied heavily on Chinese immigrants. Following restrictions on Chinese entry, they were replaced first by Japanese, and later by Mexican workers (Wright 1988, pp. 201-204).

The Emergence of Internal Labor Markets

Outside of agriculture, at the beginning of the nineteenth century most manufacturing took place in small establishments. Hired labor might consist of a small number of apprentices, or, as in the early New England textile mills, a few child laborers hired from nearby farms (Ware 1931). As a result labor market institutions remained small-scale and informal, and institutions for training and skill acquisition remained correspondingly limited. Workers learned on the job as apprentices or helpers; advancement came through establishing themselves as independent producers rather than through internal promotion.

With the growth of manufacturing, and the spread of factory methods of production, especially in the years after the end of the Civil War, an increasing number of people could expect to spend their working-lives as employees. One reflection of this change was the emergence in the 1870s of the problem of unemployment. During the depression of 1873 for the first time cities throughout the country had to contend with large masses of industrial workers thrown out of work and unable to support themselves through, in the language of the time, “no fault of their own” (Keyssar 1986, ch. 2).

The growth of large factories and the creation of new kinds of labor skills specific to a particular employer created returns to sustaining long-term employment relationships. As workers acquired job- and employer-specific skills their productivity increased giving rise to gains that were available only so long as the employment relationship persisted. Employers did little, however, to encourage long-term employment relationships. Instead authority over hiring, promotion and retention was commonly delegated to foremen or inside contractors (Nelson 1975, pp. 34-54). In the latter case, skilled craftsmen operated in effect as their own bosses contracting with the firm to supply components or finished products for an agreed price, and taking responsibility for hiring and managing their own assistants.

These arrangements were well suited to promoting external mobility. Foremen were often drawn from the immigrant community and could easily tap into word-of-mouth channels of recruitment. But these benefits came increasingly into conflict with rising costs of hiring and training workers.

The informality of personnel policies prior to World War I seems likely to have discouraged lasting employment relationships, and it is true that rates of labor turnover at the beginning of the twentieth century were considerably higher than they were to be later (Owen, 2004). Scattered evidence on the duration of employment relationships gathered by various state labor bureaus at the end of the century suggests, however, at least some workers did establish lasting employment relationship (Carter 1988; Carter and Savocca 1990; Jacoby and Sharma 1992; James 1994).

The growing awareness of the costs of labor-turnover and informal, casual labor relations led reformers to advocate the establishment of more centralized and formal processes of hiring, firing and promotion, along with the establishment of internal job-ladders, and deferred payment plans to help bind workers and employers. The implementation of these reforms did not make significant headway, however, until the 1920s (Slichter 1929). Why employers began to establish internal labor markets in the 1920s remains in dispute. While some scholars emphasize pressure from workers (Jacoby 1984; 1985) others have stressed that it was largely a response to the rising costs of labor turnover (Edwards 1979).

The Government and the Labor Market

The growth of large factories contributed to rising labor tensions in the late nineteenth- and early twentieth-centuries. Issues like hours of work, safety, and working conditions all have a significant public goods aspect. While market forces of entry and exit will force employers to adopt policies that are sufficient to attract the marginal worker (the one just indifferent between staying and leaving), less mobile workers may find that their interests are not adequately represented (Freeman and Medoff 1984). One solution is to establish mechanisms for collective bargaining, and the years after the American Civil War were characterized by significant progress in the growth of organized labor (Friedman 2002). Unionization efforts, however, met strong opposition from employers, and suffered from the obstacles created by the American legal system’s bias toward protecting property and the freedom of contract. Under prevailing legal interpretation, strikes were often found by the courts to be conspiracies in restraint of trade with the result that the apparatus of government was often arrayed against labor.

Although efforts to win significant improvements in working conditions were rarely successful, there were still areas where there was room for mutually beneficial change. One such area involved the provision of disability insurance for workers injured on the job. Traditionally, injured workers had turned to the courts to adjudicate liability for industrial accidents. Legal proceedings were costly and their outcome unpredictable. By the early 1910s it became clear to all sides that a system of disability insurance was preferable to reliance on the courts. Resolution of this problem, however, required the intervention of state legislatures to establish mandatory state workers compensation insurance schemes and remove the issue from the courts. Once introduced workers compensation schemes spread quickly: nine states passed legislation in 1911; 13 more had joined the bandwagon by 1913, and by 1920 44 states had such legislation (Fishback 2001).

Along with workers compensation state legislatures in the late nineteenth century also considered legislation restricting hours of work. Prevailing legal interpretations limited the effectiveness of such efforts for adult males. But rules restricting hours for women and children were found to be acceptable. The federal government passed legislation restricting the employment of children under 14 in 1916, but this law was found unconstitutional in 1916 (Goldin 2000, p. 612-13).

The economic crisis of the 1930s triggered a new wave of government interventions in the labor market. During the 1930s the federal government granted unions the right to organize legally, established a system of unemployment, disability and old age insurance, and established minimum wage and overtime pay provisions.

In 1933 the National Industrial Recovery Act included provisions legalizing unions’ right to bargain collectively. Although the NIRA was eventually ruled to be unconstitutional, the key labor provisions of the Act were reinstated in the Wagner Act of 1935. While some of the provisions of the Wagner Act were modified in 1947 by the Taft-Hartley Act, its passage marks the beginning of the golden age of organized labor. Union membership jumped very quickly after 1935 from around 12 percent of the non-agricultural labor force to nearly 30 percent, and by the late 1940s had attained a peak of 35 percent, where it stabilized. Since the 1960s, however, union membership has declined steadily, to the point where it is now back at pre-Wagner Act levels.

The Social Security Act of 1935 introduced a federal unemployment insurance scheme that was operated in partnership with state governments and financed through a tax on employers. It also created government old age and disability insurance. In 1938, the federal Fair Labor Standards Act provided for minimum wages and for overtime pay. At first the coverage of these provisions was limited, but it has been steadily increased in subsequent years to cover most industries today.

In the post-war era, the federal government has expanded its role in managing labor markets both directly—through the establishment of occupational safety regulations, and anti-discrimination laws, for example—and indirectly—through its efforts to manage the macroeconomy to insure maximum employment.

A further expansion of federal involvement in labor markets began in 1964 with passage of the Civil Rights Act, which prohibited employment discrimination against both minorities and women. In 1967 the Age Discrimination and Employment Act was passed prohibiting discrimination against people aged 40 to 70 in regard to hiring, firing, working conditions and pay. The Family and Medical Leave Act of 1994 allows for unpaid leave to care for infants, children and other sick relatives (Goldin 2000, p. 614).

Whether state and federal legislation has significantly affected labor market outcomes remains unclear. Most economists would argue that the majority of labor’s gains in the past century would have occurred even in the absence of government intervention. Rather than shaping market outcomes, many legislative initiatives emerged as a result of underlying changes that were making advances possible. According to Claudia Goldin (2000, p. 553) “government intervention often reinforced existing trends, as in the decline of child labor, the narrowing of the wage structure, and the decrease in hours of work.” In other cases, such as Workers Compensation and pensions, legislation helped to establish the basis for markets.

The Changing Boundaries of the Labor Market

The rise of factories and urban employment had implications that went far beyond the labor market itself. On farms women and children had found ready employment (Craig 1993, ch. 4). But when the male household head worked for wages, employment opportunities for other family members were more limited. Late nineteenth-century convention largely dictated that married women did not work outside the home unless their husband was dead or incapacitated (Goldin 1990, p. 119-20). Children, on the other hand, were often viewed as supplementary earners in blue-collar households at this time.

Since 1900 changes in relative earnings power related to shifts in technology have encouraged women to enter the paid labor market while purchasing more of the goods and services that were previously produced within the home. At the same time, the rising value of formal education has lead to the withdrawal of child labor from the market and increased investment in formal education (Whaples 2005). During the first half of the twentieth century high school education became nearly universal. And since World War II, there has been a rapid increase in the number of college educated workers in the U.S. economy (Goldin 2000, p. 609-12).

Assessing the Efficiency of Labor Market Institutions

The function of labor markets is to match workers and jobs. As this essay has described the mechanisms by which labor markets have accomplished this task have changed considerably as the American economy has developed. A central issue for economic historians is to assess how changing labor market institutions have affected the efficiency of labor markets. This leads to three sets of questions. The first concerns the long-run efficiency of market processes in allocating labor across space and economic activities. The second involves the response of labor markets to short-run macroeconomic fluctuations. The third deals with wage determination and the distribution of income.

Long-Run Efficiency and Wage Gaps

Efforts to evaluate the efficiency of market allocation begin with what is commonly know as the “law of one price,” which states that within an efficient market the wage of similar workers doing similar work under similar circumstances should be equalized. The ideal of complete equalization is, of course, unlikely to be achieved given the high information and transactions costs that characterize labor markets. Thus, conclusions are usually couched in relative terms, comparing the efficiency of one market at one point in time with those of some other markets at other points in time. A further complication in measuring wage equalization is the need to compare homogeneous workers and to control for other differences (such as cost of living and non-pecuniary amenities).

Falling transportation and communications costs have encouraged a trend toward diminishing wage gaps over time, but this trend has not always been consistent over time, nor has it applied to all markets in equal measure. That said, what stands out is in fact the relative strength of forces of market arbitrage that have operated in many contexts to promote wage convergence.

At the beginning of the nineteenth century, the costs of trans-Atlantic migration were still quite high and international wage gaps large. By the 1840s, however, vast improvements in shipping cut the costs of migration, and gave rise to an era of dramatic international wage equalization (O’Rourke and Williamson 1999, ch. 2; Williamson 1995). Figure 1 shows the movement of real wages relative to the United States in a selection of European countries. After the beginning of mass immigration wage differentials began to fall substantially in one country after another. International wage convergence continued up until the 1880s, when it appears that the accelerating growth of the American economy outstripped European labor supply responses and reversed wage convergence briefly. World War I and subsequent immigration restrictions caused a sharper break, and contributed to widening international wage differences during the middle portion of the twentieth century. From World War II until about 1980, European wage levels once again began to converge toward the U.S., but this convergence reflected largely internally-generated improvements in European living standards rather then labor market pressures.

Figure 1

Relative Real Wages of Selected European Countries, 1830-1980 (US = 100)

Source: Williamson (1995), Tables A2.1-A2.3.

Wage convergence also took place within some parts of the United States during the nineteenth century. Figure 2 traces wages in the North Central and Southern regions of the U.S relative to those in the Northeast across the period from 1820 to the early twentieth century. Within the United States, wages in the North Central region of the country were 30 to 40 percent higher than in the East in the 1820s (Margo 2000a, ch. 5). Thereafter, wage gaps declined substantially, falling to the 10-20 percent range before the Civil War. Despite some temporary divergence during the war, wage gaps had fallen to 5 to 10 percent by the 1880s and 1890s. Much of this decline was made possible by faster and less expensive means of transportation, but it was also dependent on the development of labor market institutions linking the two regions, for while transportation improvements helped to link East and West, there was no corresponding North-South integration. While southern wages hovered near levels in the Northeast prior to the Civil War, they fell substantially below northern levels after the Civil War, as Figure 2 illustrates.

Figure 2

Relative Regional Real Wage Rates in the United States, 1825-1984

(Northeast = 100 in each year)

Notes and sources: Rosenbloom (2002, p. 133); Montgomery (1992). It is not possible to assemble entirely consistent data on regional wage variations over such an extended period. The nature of the wage data, the precise geographic coverage of the data, and the estimates of regional cost-of-living indices are all different. The earliest wage data—Margo (2000); Sundstrom and Rosenbloom (1993) and Coelho and Shepherd (1976) are all based on occupational wage rates from payroll records for specific occupations; Rosenbloom (1996) uses average earnings across all manufacturing workers; while Montgomery (1992) uses individual level wage data drawn from the Current Population Survey, and calculates geographic variations using a regression technique to control for individual differences in human capital and industry of employment. I used the relative real wages that Montgomery (1992) reported for workers in manufacturing, and used an unweighted average of wages across the cities in each region to arrive at relative regional real wages. Interested readers should consult the various underlying sources for further details.

Despite the large North-South wage gap Table 3 shows there was relatively little migration out of the South until large-scale foreign immigration came to an end. Migration from the South during World War I and the 1920s created a basis for future chain migration, but the Great Depression of the 1930s interrupted this process of adjustment. Not until the 1940s did the North-South wage gap begin to decline substantially (Wright 1986, pp. 71-80). By the 1970s the southern wage disadvantage had largely disappeared, and because of the decline fortunes of older manufacturing districts and the rise of Sunbelt cities, wages in the South now exceed those in the Northeast (Coelho and Ghali 1971; Bellante 1979; Sahling and Smith 1983; Montgomery 1992). Despite these shocks, however, the overall variation in wages appears comparable to levels attained by the end of the nineteenth century. Montgomery (1992), for example finds that from 1974 to 1984 the standard deviation of wages across SMSAs was only about 10 percent of the average wage.

Table 3

Net Migration by Region, and Race, 1870-1950

South Northeast North Central West
Period White Black White Black White Black White Black
Number (in 1,000s)
1870-80 91 -68 -374 26 26 42 257 0
1880-90 -271 -88 -240 61 -43 28 554 0
1890-00 -30 -185 101 136 -445 49 374 0
1900-10 -69 -194 -196 109 -1,110 63 1,375 22
1910-20 -663 -555 -74 242 -145 281 880 32
1920-30 -704 -903 -177 435 -464 426 1,345 42
1930-40 -558 -480 55 273 -747 152 1,250 55
1940-50 -866 -1581 -659 599 -1,296 626 2,822 356
Rate (migrants/1,000 Population)
1870-80 11 -14 -33 55 2 124 274 0
1880-90 -26 -15 -18 107 -3 65 325 0
1890-00 -2 -26 6 200 -23 104 141 0
1900-10 -4 -24 -11 137 -48 122 329 542
1910-20 -33 -66 -3 254 -5 421 143 491
1920-30 -30 -103 -7 328 -15 415 160 421
1930-40 -20 -52 2 157 -22 113 116 378
1940-50 -28 -167 -20 259 -35 344 195 964

Note: Net migration is calculated as the difference between the actual increase in population over each decade and the predicted increase based on age and sex specific mortality rates and the demographic structure of the region’s population at the beginning of the decade. If the actual increase exceeds the predicted increase this implies a net migration into the region; if the actual increase is less than predicted this implies net migration out of the region. The states included in the Southern region are Oklahoma, Texas, Arkansas, Louisiana, Mississippi, Alabama, Tennessee, Kentucky, West Virginia, Virginia, North Carolina, South Carolina, Georgia, and Florida.

Source: Eldridge and Thomas (1964, pp. 90, 99).

In addition to geographic wage gaps economists have considered gaps between farm and city, between black and white workers, between men and women, and between different industries. The literature on these topics is quite extensive and this essay can only touch on a few of the more general themes raised here as they relate to U.S. economic history.

Studies of farm-city wage gaps are a variant of the broader literature on geographic wage variation, related to the general movement of labor from farms to urban manufacturing and services. Here comparisons are complicated by the need to adjust for the non-wage perquisites that farm laborers typically received, which could be almost as large as cash wages. The issue of whether such gaps existed in the nineteenth century has important implications for whether the pace of industrialization was impeded by the lack of adequate labor supply responses. By the second half of the nineteenth century at least, it appears that farm-manufacturing wage gaps were small and markets were relatively integrated (Wright 1988, pp. 204-5). Margo (2000, ch. 4) offers evidence of a high degree of equalization within local labor markets between farm and urban wages as early as 1860. Making comparisons within counties and states, he reports that farm wages were within 10 percent of urban wages in eight states. Analyzing data from the late nineteenth century through the 1930s, Hatton and Williamson (1991) find that farm and city wages were nearly equal within U.S. regions by the 1890s. It appears, however that during the Great Depression farm wages were much more flexible than urban wages causing a large gap to emerge at this time (Alston and Williamson 1991).

Much attention has been focused on trends in wage gaps by race and sex. The twentieth century has seen a substantial convergence in both of these differentials. Table 4 displays comparisons of earnings of black males relative to white males for full time workers. In 1940, full-time black male workers earned only about 43 percent of what white male full-time workers did. By 1980 the racial pay ratio had risen to nearly 73 percent, but there has been little subsequent progress. Until the mid-1960s these gains can be attributed primarily to migration from the low-wage South to higher paying areas in the North, and to increases in the quantity and quality of black education over time (Margo 1995; Smith and Welch 1990). Since then, however, most gains have been due to shifts in relative pay within regions. Although it is clear that discrimination was a key factor in limiting access to education, the role of discrimination within the labor market in contributing to these differentials has been a more controversial topic (see Wright 1986, pp. 127-34). But the episodic nature of black wage gains, especially after 1964 is compelling evidence that discrimination has played a role historically in earnings differences and that federal anti-discrimination legislation was a crucial factor in reducing its effects (Donohue and Heckman 1991).

Table 4

Black Male Wages as a Percentage of White Male Wages, 1940-2004

Date Black Relative Wage
1940 43.4
1950 55.2
1960 57.5
1970 64.4
1980 72.6
1990 70.0
2004 77.0

Notes and Sources: Data for 1940 through 1980 are based on Census data as reported in Smith and Welch (1989, Table 8). Data for 1990 are from Ehrenberg and Smith (2000, Table 12.4) and refer to earnings of full time, full year workers. Data from 2004 are for median weekly earnings of full-time wage and salary workers derived from data in the Current Population Survey accessed on-line from the Bureau of Labor Statistic on 13 December 2005; URL ftp://ftp.bls.gov/pub/special.requests/lf/aat37.txt.

Male-Female wage gaps have also narrowed substantially over time. In the 1820s women’s earnings in manufacturing were a little less than 40 percent of those of men, but this ratio rose over time reaching about 55 percent by the 1920s. Across all sectors women’s relative pay rose during the first half of the twentieth century, but gains in female wages stalled during the 1950s and 1960s at the time when female labor force participation began to increase rapidly. Beginning in the late 1970s or early 1980s, relative female pay began to rise again, and today women earn about 80 percent what men do (Goldin 1990, table 3.2; Goldin 2000, pp. 606-8). Part of this remaining difference is explained by differences in the occupational distribution of men and women, with women tending to be concentrated in lower paying jobs. Whether these differences are the result of persistent discrimination or arise because of differences in productivity or a choice by women to trade off greater flexibility in terms of labor market commitment for lower pay remains controversial.

In addition to locational, sectoral, racial and gender wage differentials, economists have also documented and analyzed differences by industry. Krueger and Summers (1987) find that there are pronounced differences in wages by industry within well-specified occupational classes, and that these differentials have remained relatively stable over several decades. One interpretation of this phenomenon is that in industries with substantial market power workers are able to extract some of the monopoly rents as higher pay. An alternative view is that workers are in fact heterogeneous, and differences in wages reflect a process of sorting in which higher paying industries attract more able workers.

The Response to Short-run Macroeconomic Fluctuations

The existence of unemployment is one of the clearest indications of the persistent frictions that characterize labor markets. As described earlier, the concept of unemployment first entered common discussion with the growth of the factory labor force in the 1870s. Unemployment was not a visible social phenomenon in an agricultural economy, although there was undoubtedly a great deal of hidden underemployment.

Although one might have expected that the shift from spot toward more contractual labor markets would have increased rigidities in the employment relationship that would result in higher levels of unemployment there is in fact no evidence of any long-run increase in the level of unemployment.

Contemporaneous measurements of the rate of unemployment only began in 1940. Prior to this date, economic historians have had to estimate unemployment levels from a variety of other sources. Decennial censuses provide benchmark levels, but it is necessary to interpolate between these benchmarks based on other series. Conclusions about long-run changes in unemployment behavior depend to a large extent on the method used to interpolate between benchmark dates. Estimates prepared by Stanley Lebergott (1964) suggest that the average level of unemployment and its volatility have declined between the pre-1930 and post-World War II periods. Christina Romer (1986a, 1986b), however, has argued that there was no decline in volatility. Rather, she argues that the apparent change in behavior is the result of Lebergott’s interpolation procedure.

While the aggregate behavior of unemployment has changed surprisingly little over the past century, the changing nature of employment relationships has been reflected much more clearly in changes in the distribution of the burden of unemployment (Goldin 2000, pp. 591-97). At the beginning of the twentieth century, unemployment was relatively widespread, and largely unrelated to personal characteristics. Thus many employees faced great uncertainty about the permanence of their employment relationship. Today, on the other hand, unemployment is highly concentrated: falling heavily on the least skilled, the youngest, and the non-white segments of the labor force. Thus, the movement away from spot markets has tended to create a two-tier labor market in which some workers are highly vulnerable to economic fluctuations, while others remain largely insulated from economic shocks.

Wage Determination and Distributional Issues

American economic growth has generated vast increases in the material standard of living. Real gross domestic product per capita, for example, has increased more than twenty-fold since 1820 (Steckel 2002). This growth in total output has in large part been passed on to labor in the form of higher wages. Although labor’s share of national output has fluctuated somewhat, in the long-run it has remained surprisingly stable. According to Abramovitz and David (2000, p. 20), labor received 65 percent of national income in the years 1800-1855. Labor’s share dropped in the late nineteenth and early twentieth centuries, falling to a low of 54 percent of national income between 1890 and 1927, but has since risen, reaching 65 percent again in 1966-1989. Thus, over the long term, labor income has grown at the same rate as total output in the economy.

The distribution of labor’s gains across different groups in the labor force has also varied over time. I have already discussed patterns of wage variation by race and gender, but another important issue revolves around the overall level of inequality of pay, and differences in pay between groups of skilled and unskilled workers. Careful research by Picketty and Saez (2003) using individual income tax returns has documented changes in the overall distribution of income in the United States since 1913. They find that inequality has followed a U-shaped pattern over the course of the twentieth century. Inequality was relatively high at the beginning of the period they consider, fell sharply during World War II, held steady until the early 1970s and then began to increase, reaching levels comparable to those in the early twentieth century by the 1990s.

An important factor in the rising inequality of income since 1970 has been growing dispersion in wage rates. The wage differential between workers in the 90th percentile of the wage distribution and those in the 10th percentile increased by 49 percent between 1969 and 1995 (Plotnick et al 2000, pp. 357-58). These shifts are mirrored in increased premiums earned by college graduates relative to high school graduates. Two primary explanations have been advanced for these trends. First, there is evidence that technological changes—especially those associated with the increased use of information technology—has increased relative demand for more educated workers (Murnane, Willett and Levy (1995). Second, increased global integration has allowed low-wage manufacturing industries overseas to compete more effectively with U.S. manufacturers, thus depressing wages in what have traditionally been high-paying blue collar jobs.

Efforts to expand the scope of analysis over a longer-run encounter problems with more limited data. Based on selected wage ratios of skilled and unskilled workers Willamson and Lindert (1980) have argued that there was an increase in wage inequality over the course of the nineteenth century. But other scholars have argued that the wage series that Williamson and Lindert used are unreliable (Margo 2000b, pp. 224-28).

Conclusions

The history of labor market institutions in the United States illustrates the point that real world economies are substantially more complex than the simplest textbook models. Instead of a disinterested and omniscient auctioneer, the process of matching buyers and sellers takes place through the actions of self-interested market participants. The resulting labor market institutions do not respond immediately and precisely to shifting patterns of incentives. Rather they are subject to historical forces of increasing-returns and lock-in that cause them to change gradually and along path-dependent trajectories.

For all of these departures from the theoretically ideal market, however, the history of labor markets in the United States can also be seen as a confirmation of the remarkable power of market processes of allocation. From the beginning of European settlement in mainland North America, labor markets have done a remarkable job of responding to shifting patterns of demand and supply. Not only have they accomplished the massive geographic shifts associated with the settlement of the United States, but they have also dealt with huge structural changes induced by the sustained pace of technological change.

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Citation: Rosenbloom, Joshua. “The History of American Labor Market Institutions and Outcomes”. EH.Net Encyclopedia, edited by Robert Whaples. March 16, 2008. URL http://eh.net/encyclopedia/the-history-of-american-labor-market-institutions-and-outcomes/