Looking for Work, Searching for Workers: American Labor Markets during Industrialization

Published by EH.NET (October 2002)

Joshua L. Rosenbloom, Looking for Work, Searching for Workers: American

Labor Markets during Industrialization. New York: Cambridge University

Press, 2002. xvi + 208 pp. $55 (hardback), ISBN: 0-521-80780-8; $20

(paperback), ISBN: 0-521-00287-7.

Reviewed for EH.NET by Warren C. Whatley, Department of Economics, University

of Michigan.

Joshua Rosenbloom tackles a large subject in a small book (181 pages) — “the

development of American labor market institutions during the late nineteenth in

early twentieth centuries, focusing in particular on the ways in which they

facilitated the matching of job seekers and employers across space” (p. xiii).

The book is intended for economists and historians. For economists, it

demonstrates the interplay of economic and historical forces in explaining the

development of institutions. For historians it demonstrates how markets shape

the context of social history.

The book has seven chapters. Chapter 1 establishes the importance of geographic

mobility and poses two questions: What institutions promoted this mobility? And

how did these institutions influence the course of economic development?

Chapters 2 and 3 address the first question. Chapters 4 through 6 examine the

second one.

Chapters 2 and 3 argue that the primary institutions that facilitated spatial

mobility were informal networks of friends and family. This now seems a

well-established fact. In the 1880s, thirty to forty percent of German

immigrants traveled on fares prepaid by someone already in the United States.

In 1889, sixty percent of immigrants reported that their travel had been

arranged by friends or relatives already in the country. The stock of previous

migrants of a nationality residing in a state had a positive and statistically

significant effect on the proportion of similar new arrivals destined for the

state. Informal networks were very efficient in moving workers, but they linked

specific sending and receiving regions, and thus perpetuated the influence of

the historical events surrounding the networks’ origins. After a particular

pattern of migration became established (something Rosenbloom never really

discusses) it became self-perpetuating, at the neglect of other potential

sources of labor supply (for example, the U.S. South).

How these networks came into being is left a mystery. Rosenbloom argues that

employers’ recruiting activities got things going, either directly or through

the services provided by public or private employment agencies, but he never

really tells us how. Nor does he provide historical examples or case studies.

Somehow, employers found a way to coordinate the resources necessary to

initiate a flow of labor across the Atlantic when no single employer had the

incentive or the resources to do so. The political economy of these initiatives

remains to be written.

Once established, employers encouraged the informal channels and reduced their

reliance on formal recruitment activities. Informal networks offered immigrants

an interim place to stay, information about the labor market and the

probability of finding a job, help with transportation and settling into a new

environment, etc. — all at little direct cost to the employer. Employers’

recruiting activities were confined primarily to areas where informal channels

had not yet been established. Employers also operated in temporary and seasonal

labor markets, in isolated towns, and where demand outstripped supply

temporarily. Over the course of the century, employers adapted to changing

patterns of immigration, but in each case their initial efforts were soon

superseded by the operation of informal channels of recruitment.

In chapter 3, Rosenbloom offers an explanation for the limited role of formal

labor market intermediaries. Drawing on a wide array of sources, Rosenbloom

shows quite convincingly that the successful intermediaries mimicked the

informal networks, and survived primarily where informal connections were not

viable. In explaining the absence of formal intermediaries, Rosenbloom

emphasizes the problem of information asymmetry. Workers had little reason to

trust information received from these intermediaries. Word of mouth from

friends and relatives was much more reliable.

Here I wish Rosenbloom had gone further. The economic cost of a poor reputation

would help reduce the flow of bad information. Perhaps, instead, labor market

intermediaries found it costly to acquire and convey the kind of information

that employers and employees considered most valuable. Rosenbloom mentions the

importance of long-term employment as something desirable on both sides of the

labor market. If so, much of what attached a worker to a job might have been

experiential in nature — the work environment, notions of fairness, the pace

of work, promotion probabilities, etc. These features of the job are conveyed

most accurately and reliably by people with experience in the workplace.

Similarly, a firm may value worker characteristics that are unobservable to

employment agencies but quite observable to family and friends. Add to this the

potential cost to a kin of a referral’s poor performance and it is easy to see

why informal networks were the employers’ preference.

Chapter 4 considers the interaction between external recruitment activities and

the internal allocation of labor, especially how employers filled positions

requiring specialized skills. In Rosenbloom’s words: “Evidence on employment

trends and the evolution of skill premia indicate that at the aggregate level

the supply of skilled workers was less elastic than that of unskilled workers.

In part, this inelasticity may reflect the weakness of American apprenticeship,

but it also reflects the greater reluctance of skilled European workers to

emigrate to the United States. Responding to the high and rising costs of

recruiting traditional categories of skilled labor, employers turned to

technological solutions — reorganizing work processes by introducing

specialized capital equipment and an increased division of labor. These changes

did not so much eliminate the need for skilled workers as alter the types of

skill required and increase the importance of on the job training in

employer-specific skills. These changes created incentives to increase the

duration of worker-employer attachment, a fact reflected in the emergence of a

substantial minority of workers with long job tenures. But so long as unskilled

immigrant labor was plentiful employers shied away from adopting internal

promotion and long-term jobs. Not until the end of mass migration after World

War I did employers begin to invest significantly in the development of

so-called internal labor markets” (p. 12).

Rosenbloom presents impressive evidence showing that skill premia and skilled

wages tended to be higher in the United States than in Europe, and higher in

the southern United States than in the north. We are not told, however, why

skilled workers were more difficult to reallocate across space. Perhaps

regional technology sets were different, but probably not that different. Is it

an income effect? A permanent income consideration? What? We need to know why

informal networks were less efficient among skilled workers before we can

assess the impact of American labor market institutions on the evolution of

American skills and technology.

Chapter 5 uses data on wages and earnings to trace changes in the geographic

scope of labor markets across much of the nineteenth and early twentieth

centuries. An integrated labor market in the North East and the Midwest moved

huge numbers of workers in the decades immediately following the Civil War, but

this labor market did not extend to the West or to the South. Chapter 6

considers the impact of market expansion on labor relations through an

examination of variations in employers’ use of strikebreakers in late

nineteenth century labor conflicts. Rosenbloom rejects a popularly held view

among labor historians that worker and community solidarity were stronger in

smaller places, thus making it easier to prevent strikebreaking. Instead, he

finds that the use of strikebreakers did not vary appreciably by region or city

size. He does, however, find that the source of strikebreakers varied

systematically with location, with employers in small communities located

outside the North East most likely to use outside strikebreakers.

Overall, the book yields three important insights. (1) Employers were

instrumental in initiating migration flows that were later perpetuated by

friends and families. (2) Historical forces were important in shaping the

patterns of labor market integration that emerged in the course of the

nineteenth century. Patterns of labor market recruitment that emerged during

the first half of the nineteenth century, when slavery separated southern from

northern labor markets, were perpetuated and reinforced by the reliance on kin

and friendship-based networks of labor market information. And (3) late

nineteenth century labor market institutions proved more effective at

integrating markets for less skilled workers than for more skilled workers.

This difference may have encouraged American employers to reorganize production

process.

Warren Whatley’s current research is on the trans-Atlantic slave trade,

1440-1850, with particular emphasis on the determinants of supply to the new

world. Other research interests include worker mobility and racial

discrimination in twentieth-century America, the economics of the Jim Crow

South, and inner-city economic development.