"Wages before Machines: The microeconomics of solving the wage puzzle of the Industrial Revolution"
Economic historians have used day wages as a key economic indicator since the mid nineteenth century. Decades of scholarship using these wages has firmly established that throughout the late eighteenth century, as investment in new technology and production soared and output rose, ordinary workers wage incomes did not rise in Britain. Workers did not see income gains from industrialisation until the 1860s. This has often been told as a story of ‘exploitation’, but, as Crafts (2021) showed, in a macroeconomic framework wages were better than could have been expected given demographic pressures. However, the microeconomics of wage bargaining are hitherto unexplored. This lecture shows how examining the frictions and institutions of wage determination, with cases from the building industry and textile industries, helps explain how the early modern labour market ‘set’ wages, and created and supported rigidities in wage bargaining, which limited labours’ share.