The Market for Manufacturing Workers During Early Industrialization: The American Northeast, 1820 to 1860

This paper studies how well labor markets operated, and industrial workers fared, during early American industrialization. The principal bodies of evidence examined are four cross-sections of manufacturing firm data from 1820 to 1860, and newly-constructed price indexes for classes of products in different locales. The central findings are that real wages rose substantially over time for all segments of the manufacturing labor force. Workers responded flexibly to changing circumstances, and benefited almost immediately from the rapid expansion of the 1820s. Impressive growth in compensation was maintained until the late 1840s or early 1850s, when progress was slowed by heavy immigration and the mechanization of a number of previously labor intensive industries. Of course, these gains were not continuous, but the evidence bears against the view that the difficult years were due to poorly-functioning markets, rapid changes in technology, or other aspects of industrialization. On the contrary, the chief deviations from the upward trend in real wages seem to be attributable to supply-side shocks originating in the agricultural sector or in unusually large immigration flows, rather than to the path of industrial development.