Wage Inequality in American Manufacturing, 1820–1940: New Evidence

The consensus view among American economic historians is that wage inequality in manufacturing followed an inverted-U path from the early nineteenth century until just before World War Two. We provide fresh evidence that allows us to better document the inverted U and its causes. Using the US Department of Labor’s 1899 “Hand and Machine Labor” study, we show that wage inequality within manufacturing establishments rose over the nineteenth century, primarily because of increasing division of labor. Data from Massachusetts state reports allow us to construct a new time series showing that wage inequality among manufacturing production workers declined from the early 1890s to the late 1930s, mainly because of compression in the left tail of the distribution. Analysis of industry panel data suggests that electrification was the main factor behind the compression.