Wages and Labor Markets in the United States, 1820-1860

Wages and Labor Markets in the United States, 1820-1860

Adams, Donald R Jr

Wages and Labor Markets in the United States, 1820-1860. By Robert A. Margo. Chicago: University of Chicago Press, 2000. Pp. 200. $30.00. ISBN 0-226-50507-3.

Wages and Labor Markets in the United States, 1820-1860 is part of the series Long-term Factors in Economic Development, sponsored by the National Bureau of Economic Research. It continues the tradition of solid scholarship which characterizes this series, and adds significantly to our knowledge of the nature and pace of nineteenth century U.S. economic growth.

Margo embraces the somewhat daunting task of reconciling two opposing views regarding antebellum labor markets. One maintains that such markets were “reasonably effective in guiding labor from low- to high-value locations” [3]. This presumably led to a convergence of geographic wage differentials over time. The opposing view contends that “geographic imbalances in labor demand and supply were ubiquitous and persistent before the Civil War and that the emergence of spatially integrated labor markets was a milestone of a much later period in American history” [3].

According to Margo, one principal reason for the inability to choose between these competing views is the lack of an appropriate data base to test the opposing hypotheses. Drawing on two recently-developed statistical sources, the author hopes to reconcile the contending viewpoints. The first source is the Reports of Persons and Articles Hired, a collection of monthly payrolls documenting the wages of civilian workers employed at United States Army posts throughout the country. This source generated approximately 62,000 wage observations. The second new source is the Census of Social Statistics, conducted in 1850 and 1860. This yields information on average monthly or daily wages and the weekly cost of board.

Chapter 2 reviews previous work on antebellum wages as well as the shortcomings of previous wage series. The remainder of Chapter 2 evaluates the representativeness of the new data and the comparability of the two new data sets.

Chapter 3 contains the quantitative foundation of this work. It presents an extended discussion of how the data were collected, collated, and analyzed. It also presents a detailed interregional and intersectoral wage series for the period 1820-1860. The latter series appears in a lengthy appendix.

Chapters 4 and 5 deal, respectively, with the intersectoral efficiency of the labor market and geographic aspects of labor market integration. These chapters conclude that, when adjusted for geographic differences in the cost of living, the real wages of agricultural and nonfarm workers appear to have been about the same in 1850 and 1860. Moreover, although real wages differed across regions in the 1820s, real wages converged in most regions by the 1850s. Chapter 6 deals with the impact of the California Gold Rush on local labor markets.

Chapter 7 lays out the main findings and conclusions. Among other things, Margo concludes that real wage growth of about 1.01 percent per annum closely paralleled the growth of output per worker of 0.99 percent per annum derived from the work of Robert Gallman and Tom Weiss. He finds that increases in antebellum price levels were associated with a decline in real wages and vice versa. However, Margo notes that nominal wage increases and decreases tended to lag changes in prices. This was a result of imperfect information, and a belief on the part of workers that while prices might rise and fall in the short run, long-run price levels are relatively stable. Such expectations, Margo contends, would only be changed if price changes persisted. This adaptive rational expectations assumption probably deserves further investigation.

In the end, Margo concludes that antebellum labor markets functioned reasonably well in reallocating labor both geographically and intersectorally. Geographically, wage rates exhibited a tendency of “regression to the mean” (with the possible exception of the Southeast), and the author finds few instances in which wage rates failed to respond to sectoral change. Wages grew most rapidly for white-collar workers over the period, and more rapidly for common labor than skilled labor. This led to a decline in the skilled/unskilled ratio. But, this was consistent with the changes occurring in the developing U.S. economy.

This book brings together important empirical evidence relating to the early American labor market. It should be read by economists and historians interested in when the “market revolution” took hold in American society. Margo’s work may change some minds. It documents how and where Americans earned their daily bread in the years before the Civil War, and provides a solid statistical analysis of the economic changes taking place in early nineteenth century America, Economists interested in the pace and nature of early market developments, and historians seeking to evaluate the underlying economic forces which motivated working men and women in early America, will find this book an indispensable source.

Donald R. Adams, Jr.

West Virginia University

Copyright Eastern Economic Association Winter 2002

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