Two Centuries of Compensation for U.S. Production Workers in Manufacturing

Published by EH.NET (December 2009)

Lawrence H. Officer, Two Centuries of Compensation for U.S. Production Workers in Manufacturing. New York: Palgrave Macmillan, 2009. xvi + 224 pp. $115 (hardcover), ISBN: 978-0-230-61566-3.

Reviewed for EH.NET by Joshua L. Rosenbloom, Department of Economics, University of Kansas.

I suspect that few people will be tempted to read this slim volume cover to cover. But many of them will find it an extremely valuable reference to which they will return numerous times.

Lawrence Officer?s purpose in writing this book is to fill a significant gap in the long-run data series available for the U.S. economy. While economic historians have ready access to annual series for Gross Domestic Product and the Consumer Price Index back to 1800, there is no comparable, consistent and continuous series depicting labor compensation over such an extended time period.

The closest alternative is the David-Solar (1977) index of unskilled or common labor wages, which has been extended to the present by Officer and Samuel Williamson (2009). Wages of common labor reflect the fortunes of a narrow segment of the labor force, and the David-Solar index excludes the impact of other forms of compensation, which have grown increasingly important in the twentieth century. Having a broader and more inclusive measure of labor?s compensation provides a valuable window on the changing fortunes of labor over the course of American economic development.

Readers who are interested primarily in the bottom line will want to skip directly to the concluding chapter of this volume, in which the author presents his estimates of average hourly compensation and its components ? average hourly earnings, and average hourly benefits ? in both nominal and real terms. The story that these series tell is in one sense not that surprising. Since 1800, there have been huge increases in nominal compensation; although some of this increase is due to changes in the cost-of-living, real compensation has nonetheless increased dramatically in the last 200 years. The series reported here indicate that average hourly compensation adjusted for inflation increased from $0.33 in 1800 to $12.09 in 2006 (both measured in 1982-84 prices), a nearly 37-fold increase. Growth was somewhat slower in the nineteenth century, and accelerated after 1900, but the series then leveled off in the 1980s, and remained essentially flat until the early 2000s.

While the broad outlines of Officer?s series are consistent with other sources, the shorter run movements of average hourly compensation differ from those of a number of real wage series available over shorter periods. In particular, it appears that average hourly compensation grew faster than wage series constructed by other scholars for most of the nineteenth century.

Readers who stop with these headline results, however, will miss the real value of this book. As useful as the estimates Officer offers, in many respects the greatest value of this volume is provided by his discussion of the issues involved in constructing a consistent series over more than 200 years, his careful methodological considerations, and his comprehensive review of both the available data series on wages, earnings, hours of work, and of the work of previous scholars who have employed one or more of these data sources.

The book begins with a clearly laid out discussion of the methodological choices that are entailed in constructing a series of average hourly compensation in manufacturing. After a thorough discussion of the meaning and definition of ?manufacturing,? and who is a ?production worker,? Officer then goes on to take up the issues of what dimensions of pay to focus on, whether to construct a fixed-weight or current-weight series and a range of other topics. Of these choices, the one that is most important to keep in mind is the author?s decision to construct a current-weight series. As a result, changes in the resulting average hourly compensation reflect both changes in the pay of individual workers and changes in the relative importance of different groups of workers within the labor force. In other words, the resulting series does not reflect changes in pay for a homogeneous type of labor. Rather it reflects the changing composition of the manufacturing labor force over time. The second chapter, which comprises almost one-third of the book, provides a comprehensive discussion of the available data series. This discussion will be an extremely useful reference for anyone seeking to identify sources of data on compensation and hours of work, since considerable attention is devoted to explicating the relative merits of the different sources and their potential biases. Chapter 3 provides a more abbreviated review of past studies that have constructed historical time series of wages or compensation. Despite its brevity it nonetheless provides a very helpful discussion of important methodological issues raised by a number of these earlier studies.

The next three chapters describe the construction of the new series. Chapter 4 provides an overview of how the various sources are put together to assemble a single continuous series. Chapters 5 and 6 describe the construction of average hourly earnings and average hourly benefits series. As already noted, the final chapter presents the resulting series and offers a brief description of what they reveal about production worker compensation in the long-run.

Lance Davis (1968) observed of cliometrics that ?it will never be literature.? While this volume only confirms Davis? views regarding the literary merits of cliometrics, it also clearly exhibits the value of the cliometrician?s approach to understanding the past. Lawrence Officer lays out in abundant detail what he has done in a way that allows other scholars to build on, modify or adjust his series if they wish to alter any of his starting assumptions or methodological choices. Anyone with an interest in the long-run growth of the U.S. economy, or the development of American labor markets will find this book an important and useful reference.

References:

Paul A. David and Peter Solar (1977). ?A Bicentenary Contribution to the History of the Cost of Living in America.? In Paul Uselding, ed., Research in Economic History 2. Greenwich, CT: JAI Press.

Lance E. Davis (1968). ?And It Will Never Be Literature.? Explorations in Entrepreneurial History, 2nd series, 6, no. 1, 75-92.

Lawrence H. Officer and Samuel H. Williamson (2009). “Annual Wages in the United States, 1774-2008,” MeasuringWorth, 2009. URL: http://www.measuringworth.org/uswages/

Joshua L. Rosenbloom is Professor of Economics and Associate Vice Provost for Research and Graduate Studies at the University of Kansas, and a Research Associate of the National Bureau of Economic Research. He is the author of Looking for Work, Searching for Workers: Labor Markets during American Industrialization (New York and Cambridge: Cambridge University Press, 2002).