World Economy – The Real Wage debate and SoL
Two views on SoL
Pessimists – SoL of labouring poor declined during the IR despite growth. Includes Engels (1844),
Feinstein (1998), Allen (2007)
Optimists – Some workers suffered but for most, conditions improved. Includes Ashton (1949),
Hartwell (1959), Clark (2005).
Did real wages rise? What happened to the cost of living?
Harder to put together a cost of living index than nominal wages!
These price indexes suffered from several key issues:
• Use of wholesale prices – not consumer prices
• Prices were for organisations, not families
• Prices not regional, only London
• Basket of goods inaccurate – included industrial raw materials and not potatoes, zero weight
for housing.
• Basket of goods unrepresentative – not diverse
What happened to real wages?
Summary of findings:
• Some variability and stagnation in 18th C
• Real wage boom in early 19th C
• Overall real wages nearly double from mid-18th c to mid-19th c
• Every class of worker better off by early 19th c.
This confirms the optimists view on the IR – net wage gains from IR too high for pessimists’ view.
Issues and criticisms
Issues in missing factors (unemployment and disamenities) – check star in lecture notes
Issues of using adult male wages
• Horrell & Humphries (1992) criticised use of adult male wages instead of family incomes
• If women and children considered the net effect is negligible (women’s wages rose and more
chose to stay at home)
Issues of aggregation
• Hunt, Botham 1987 criticised lack of regional industry evidence
• Case study they did showed northern industrial wages rose even earlier than L&W had
argued.
• In northern industrial cities wages were rising earlier and larger.
Revised estimates in late 1990’s – pessimism perpetuated
Feinstein 1998 introduced major revisions and findings:
• Wage data updated with missing sectors of labour force -> 80% wage earners now covered
• Captures all payments. Includes earnings of women and juveniles
• Basket of goods more comprehensive and weights allowed to vary over time.
Two views on SoL
Pessimists – SoL of labouring poor declined during the IR despite growth. Includes Engels (1844),
Feinstein (1998), Allen (2007)
Optimists – Some workers suffered but for most, conditions improved. Includes Ashton (1949),
Hartwell (1959), Clark (2005).
Did real wages rise? What happened to the cost of living?
Harder to put together a cost of living index than nominal wages!
These price indexes suffered from several key issues:
• Use of wholesale prices – not consumer prices
• Prices were for organisations, not families
• Prices not regional, only London
• Basket of goods inaccurate – included industrial raw materials and not potatoes, zero weight
for housing.
• Basket of goods unrepresentative – not diverse
What happened to real wages?
Summary of findings:
• Some variability and stagnation in 18th C
• Real wage boom in early 19th C
• Overall real wages nearly double from mid-18th c to mid-19th c
• Every class of worker better off by early 19th c.
This confirms the optimists view on the IR – net wage gains from IR too high for pessimists’ view.
Issues and criticisms
Issues in missing factors (unemployment and disamenities) – check star in lecture notes
Issues of using adult male wages
• Horrell & Humphries (1992) criticised use of adult male wages instead of family incomes
• If women and children considered the net effect is negligible (women’s wages rose and more
chose to stay at home)
Issues of aggregation
• Hunt, Botham 1987 criticised lack of regional industry evidence
• Case study they did showed northern industrial wages rose even earlier than L&W had
argued.
• In northern industrial cities wages were rising earlier and larger.
Revised estimates in late 1990’s – pessimism perpetuated
Feinstein 1998 introduced major revisions and findings:
• Wage data updated with missing sectors of labour force -> 80% wage earners now covered
• Captures all payments. Includes earnings of women and juveniles
• Basket of goods more comprehensive and weights allowed to vary over time.
