Wage Rate Disparity in Antebellum America 1820 Rate Disparity in Antebellum America 1820-1860 ... The debate whether the division of labor exploits the ... This report includes approximately

Wage Rate Disparity in Antebellum America

1820-1860

The Market Economys Response to Industrialization

Courtney A. Winther

Austrian Student Scholars Conference

Mises Institute

November 3-4, 2006

Grove City College

Pennsylvania

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The exchange of labor for commodities is a simple and natural phenomenon of an

unhampered market economy. Such a straight forward transaction has been a topic of

much scrutiny. The debate whether the division of labor exploits the worker continues to

be controversial yet there is little regard for the exploitation or the interests of the

capitalist. Of particular note is the switch in American emphasis toward manufacturing

and industrialization and, in turn, a focus away from rural agriculture. The period 1820-

1860 has been the attention of both economic and labor historians due to the apparent

disparity in wage rates between occupations as well as an apparent lull in the rise of

real wages. This observation made by many historians that wages showed virtually no

growth from 1820-1860 (Vedder 2001, p. 81) is inconsistent with the patterns of data

available and basic economic theory of wage labor. A thorough understanding of both

the history of American industrialization and of the market economy indicates that the

unhampered economy is able to adapt to changing conditions in production without

exploiting workers in the process. To do so, this paper evaluates the relevant available

studies and data from this time and examines it in light of historical conditions and the

desires of the American worker. In conclusion, interpretations of changing economic

phenomenon are discussed.

Before the data is evaluated, it is important to understand why this era has been

scrutinized so heavily by labor historians in light of its relevance to Americas history.

First, the early nineteenth century provides us with the first era in Untied States history

without war. Prior to these years, America was either under the economic conditions

imposed by Britain, the drain and recovery of the Revolutionary War, or the War of 1812.

Thus, in some sense, this was the first time that the American economy could be

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evaluated apart from unnatural economic restraints. In short, it was an experiment in

the workings of the unhampered labor market. Second, research during this era evaluates

the effect of the post-revolutionary depression and the rapid increases in economic wages

in the 1790s in light of the consequences that followed. In the years preceding 1790 there

was a general similarity of wage rates between occupations for comparable skills but this

disappears after 1790 (Adams 1968, p. 405). Third, there was a decline in wage rates in

1802-1803 and in 1807-1808 that reflect the period of the Peace of Amiens and the

Jeffersonian Embargo respectively that substantially reduced United States income from

foreign trade and shipping (Adams 1968, p. 405). In addition, the country did not fully

recover from the Panic of 1819 until the mid 1820s. Other economic factors were

important including the panic of 1837, a secondary downturn in 1839, and the Panic of

1857 (Adams 1986, p 625). All of these aspects of American history relate either

immediately or consequentially to economic conditions and thus inconsistent wage trends

are often not consequences of industry differences but of historical or political factors.

With that said, economic theory continues to apply despite this and the situation is

reversed wherein economic conditions determine political and historical factors.

The other primary reason why this research is important is in the historical

geographic aspects. Not only does it allow historians to evaluate migration patterns and

the mobility of the labor market but it allows the evaluation of the convergence of

geographically distinct labor markets (Margo 1998, p. 51). As example, some have

argued that the South should have experienced a growing trend toward industrialization

much like what was seen in the North. Evaluating data provides the answer and shows

that there was very little verification for a thesis of labor scarcity and high wages as

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being the cause of technological change and urban-industrial development. (Earle and

Hoffman 1980, p. 1078)1

While many have researched the statistics available from this era, there are but a

few major studies that have been regarded as significant enough to remain the subject of

modern discussion. Perhaps the most famous was conducted by Jeffrey Williamson and

Peter Lindert (Lindert and Williamson 1980). This study uses several different records of

wages and standards of living from antebellum America with the conclusion that the

difference between non-agricultural wages widened between 1816 and 1856 (Linder

and Williamson 1982, p. 419). The result was that the gap between low or unskilled

labor and skilled artisans expanded creating wage disparity with no overall improvement

in the standard of living (Margo and Villaflor 1987, p. 883). Their conclusions are

primarily drawn from five wage series sources.2 Recent commentators have critiqued

their use of more obscure data while obtaining sometimes different conclusions and often

ignoring the more prominent and straightforward statistics compiled.

The second study that has recently become prominent was conducted by Robert

Margo (Margo 2000) and is a response to Williamson and Lindert. While Margo

examines and uses the same data, he also introduces two new sources of data that had

previously been overlooked in early nineteenth century labor history. The first comes

from the Reports of Persons and Articles Hired that exists as a compilation of payroll

1 This information is provided as part of Earle and Hoffmans critique of H. J. Habakkuks argument for the

scarcity of American labor.

2 The methods of Williamson and Linderts study are examined in more detail in Scott D. Grosses On the Alleged Antebellum Surge in Wage Differentials: A Critique of Williamson and Lindert. Five wage ratio

series are used in their study consisting of the Massachusetts carpenter/laborer series, earnings of public

school teachers, daily wages of laborers in Carroll Wrights Massachusetts data, wage ratios from Philip

Coelho and James Shepherd, a ratio of earnings of artisans and laborers, Erie Canal payrolls, and wages of

civil engineers (Grosse 1982, p. 415-8).

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records of civilian employees in the United States Army commissioned for either short or

long term employment. This report includes approximately 55,000 wage entries and has

the advantage of including all parts of the country in various occupations (Margo 1998, p.

52). While it is possible that United States Army wages may not be consistent with the

whole of the economy, Margo, as well as others, argues that these wages seem on par

with other data we have of laborers for the same year, occupation, and geographical

location (Margo 1987, p. 875, 877). One disadvantage to this data is the lack of

information in regions where there was an absence of United States Army forts. Further,

these forts did not always have need for civilian work in a consistent demand over a

number of years and thus data is not always continuous and does not account for years

when particular forts were not in operation. While the data is significant, it is not large

enough to account annual time series with much specificity (Margo 1998).

The second source of new data that Margo uses is the Census of Social Statistics

of 1850 and 1860. While it may seem that this research would only be helpful for the

years immediately before the War Between the States, the information that was gathered

in this Census included data from businesses on wage data from the early nineteenth

century. While extremely helpful, any firms that were no longer in existence when the

survey was conducted cannot be counted. Because non-pecuniary wages were often

given particularly in rural areas including board, mending, and other domestic services,

this survey distinguishes between wages with and without non-pecuniary benefits.

Margo also draws on the Weeks and Aldrich reports that were part of the 1880 census and

as part of the congressional inquiry into the effects of tariffs in the 1890s (Mitchell 1998,

p. 43). Based on existing as well as new data, Margo reaches a more optimistic

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conclusion mostly contrary to Williamson and Lindert that real wages and the standard of

living, though varied throughout antebellum America, had an overall steady increase.

While Margos data appears to be credible and of greater quantity than that of former

studies, the difference stems primarily from the manner in which in which one interprets

it.

While many minor studies have been conducted, it is important to include the vast

amount of data collected and analyzed by Donald Adams. In particular, selections of his

research focus specifically on wage rates of this era but evaluate different geographical

regions in accordance with national economic trends. These include Philadelphia,

Maryland, Weste