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Expensive Labour and the Industrial Revolution: Evidence from Stable Employment in Rural Areas

Author

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  • Rota, Mauro

    (Sapienza University of Rome)

  • Weisdorf, Jacob

    (Sapienza University of Rome)

Abstract

In explaining the Industrial Revolution, the so-called high-wage hypothesis argues that mechanisation served to replace expensive labour. Supporting evidence comes from daily wages of urban construction workers and shows that these were higher in northwest Europe than in the south. We argue that casual urban wages overestimate the cost of early-industrial labour. Early factories were rural and thus did not pay an urban wage premium. Moreover, early factories employed stable rather than casual workers and thus did not pay a premium for job insecurity. We present novel premia-free wages paid to stable workers in rural Italy, which we compare to wages paid to similar workers in England. We find that English workers earned only 20 per cent more than their Italian counterparts in 1650, but a staggering 150 per cent more in 1800. Although our empirical evidence shows that the precondition for the high-wage hypothesis is still in place, it is no longer clear – because growing English wages and early industrialisation coincide – whether it was high wages that drove mechanisation or the other way around.

Suggested Citation

  • Rota, Mauro & Weisdorf, Jacob, 2019. "Expensive Labour and the Industrial Revolution: Evidence from Stable Employment in Rural Areas," CAGE Online Working Paper Series 442, Competitive Advantage in the Global Economy (CAGE).
  • Handle: RePEc:cge:wacage:442
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    References listed on IDEAS

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    Cited by:

    1. Peter Sandholt Jensen & Cristina Victoria Radu & Paul Sharp, 2020. "Standards of Living and Skill Premia in Eighteenth Century Denmark: What can we learn from a large microlevel wage database?," Working Papers 0180, European Historical Economics Society (EHES).
    2. Peter Sandholt Jensen & Cristina Victoria Radu & Paul Sharp, 2022. "To the manor born: a new microlevel wage database for eighteenth-century Denmark [Trends in real wages in Denmark since the late Middle Ages]," European Review of Economic History, European Historical Economics Society, vol. 26(2), pages 302-310.
    3. Rota, Mauro & Weisdorf, Jacob, 2020. "Italy and the Little Divergence in Wages and Prices: New Data, New Results," The Journal of Economic History, Cambridge University Press, vol. 80(4), pages 931-960, December.
    4. Mauro Rota & Jacob Weisdorf, 2021. "Italy and the little divergence in wages and prices: evidence from stable employment in rural areas," Economic History Review, Economic History Society, vol. 74(2), pages 449-470, May.
    5. Weisdorf, Jacob & Rota, Mauro, 2020. "Italy and the Industrial Revolution: Evidence from Stable Employment in Rural Areas," CEPR Discussion Papers 14652, C.E.P.R. Discussion Papers.

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    More about this item

    Keywords

    Stable Employment; Economic Growth; Industrial Revolution; Great Divergence; Living Standards; Prices; Wages. JEL Classification: J3; J4; J8; I3; N33;
    All these keywords.

    JEL classification:

    • J3 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs
    • J4 - Labor and Demographic Economics - - Particular Labor Markets
    • J8 - Labor and Demographic Economics - - Labor Standards
    • I3 - Health, Education, and Welfare - - Welfare, Well-Being, and Poverty
    • N33 - Economic History - - Labor and Consumers, Demography, Education, Health, Welfare, Income, Wealth, Religion, and Philanthropy - - - Europe: Pre-1913

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