Inequality dynamics in turbulent times

by María Gómez León (Instituto Figuerola/Universidad Carlos III, Madrid) and Herman J. de Jong (University of Groningen)

 

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The Home Front in Britain during the Second World War. Available here

Recent influential studies on the historical evolution of inequality and its causes (Milanovic 2016; Piketty 2014) have attracted new interest in the topic. While attributed to different factors, there is a wide consensus on the slowdown of inequality in western Europe during the twentieth century up to the 1980s—a phenomenon commonly referred to as the ‘great levelling’ or ‘egalitarian revolution’. Yet, we do not know how differently this deceleration evolved across countries. Turbulent episodes during the first half of the twentieth century—including two World Wars, the Great Depression and the upsurge of radical parties—suggest that, at least in the short run, inequality may have followed very different patterns across European nations. However, we have little empirical evidence, due to the lack of data on income distribution before 1950, especially for the interwar years.

In a forthcoming article we provide new annual data on income inequality for two leading European countries, Germany and Britain, for the first half of the twentieth century. Using dynamic social tables, we obtain comparable annual estimates (measured as Gini coefficients) covering the full range of income distribution. Evidence from Germany and Britain (Figure 1) yields two main results. First, the drop in inequality was neither steady nor similar across these countries, supporting the notion of inequality cycles (Milanovic 2016; Prados de la Escosura 2008). Second, inequality trends in Germany and Britain tended to follow opposite patterns.

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Figure 1. Inequality trends in Britain and Germany.  For data and sources see Gómez León and de Jong (Forthcoming)

What drove inequality changes in these two countries? How did inequality develop for specific groups of the population?  On the first question, we find that in Germany before 1933 and from 1939 onwards, variations in the relationship between owners and workers as well as variations within the group of workers (across work status and gender) drove changes in income distribution. During the Nazi period, only differences between owners and workers help to explain changes in inequality, as the abolition of trade unions and the setting of maximum wages precluded the dispersion of labour earnings. On the other hand, the dispersion of earnings among British workers appears to have been the main driver of changes in inequality before the Great War and after 1939, when the reduction of skill premiums and gender payment inequalities offset the relative increase in incomes. However, from the First World War to the outbreak of the Second World War, differences between proprietors and workers, as well as changes in labour earnings dispersion, drove inequality changes.

On the second question, we observe that in both countries the winners of the economic expansion experienced between 1900 and 1950 were the upper-low and lower-middle classes (i.e. the salaried and wage-earners in both manufacturing and war-related heavy industries). However, the gains linked to industrial expansion during the First World War and the Second World War were concentrated among the upper classes in Germany, while in Britain the benefits were more evenly distributed among the working classes. The reverse occurred during the interwar period.

In line with Lindert and Williamson (2016) and Piketty (2014), our paper points primarily towards political and institutional factors as the crucial drivers of inequality trends during the first half of the twentieth century. The usefulness of dynamic social tables for exploring national income distributions in the past invites future research on other European countries as well as on other potential factors (e.g. migration, technological change) affecting short-term inequality dynamics during the period.

 

To contact the lead author: e-mail: mgomez3@clio.uc3m.es ; Twitter: @Maria0zmg

 

References:

Gómez León, M. and de Jong, J. H., ‘Inequality in turbulent times: Income distribution in Germany and Britain 1900–1950’, Economic History Review, (Forthcoming)

Lindert, P. H. and Williamson, J. G., Unequal gains: American growth and inequality since 1700 (Princeton, NJ, 2016).

Milanovic, B., Global inequality: A new approach for the age of globalization (Cambridge, Mass., 2016).

Piketty, T., Capital in the twenty-first century (Cambridge, Mass., 2014).
Prados de la Escosura, L., ‘Inequality, poverty and the Kuznets curve in Spain, 1850–2000’, European Review of Economic History, 12 (2008), pp. 287–324.

 

Servants in Rural Europe 1400-1900

SAVE 25% when you order direct from the publisher. Discount applies to print and eBook editions. Click the link, add to basket and enter offer code BB500 in the box at the checkout. Alternatively call Boydell’s distributor, Wiley, on 01243 843 291 and quote the same code. Offer ends on the 9th February. For any queries please email marketing@boydell.co.uk

Jane Whittle ed. Servants in Rural Europe 1400-1900, Boydell and Brewer, Woodbridge, 2017, ISBN (978 1 78327 239 6).
Contributors: Christine Fertig, Jeremy Hayhoe, Sarah Holland, Thijs Lambrecht, Charmian Mansell, Hannah Østhus, Richard Paping, Cristina Prytz, Raffaella Sarti, Carolina Uppenberg, Lies Vervaet, Jane Whittle.

 

UntitledOne of the most distinctive features of the early modern economy of Europe was the presence of large numbers of servants. Across Western Europe servants typically made up between 5% and 15% of the total population. Rather than being domestic servants in the nineteenth-century sense, the term ‘servant’ was used in early modern society to describe wage workers who lived in their employer’s household, and were employed for several months to a year at a time. Servants were usually young unmarried people between the ages of 15 and 25, and men and women were employed in roughly equal numbers. Servants did all kinds of work, ranging from agriculture, craftwork, and retailing to housework and childcare, depending on the needs of their employer. The majority of days worked by wage workers in the rural early modern economy were undertaken not by casual labourers employed by the day or task, but by servants. Given this ubiquity, it is surprising how little attention servants have received from economic historians. There are a number of excellent studies of urban servants, but the majority of servants, like the majority of the population in early modern Europe, lived in rural communities. Servants in Rural Europe 1500-1900 is the first book to offer a European overview of the topic.

The book has chapters on Norway, Sweden, the Netherlands, Germany, Belgium, England, France and Italy, with research focusing on periods from the early fifteenth century to the early twentieth century, and varying in scale from in-depth studies of single farms to national overviews. Yet strong common themes underpin the contributions. For everyone the starting point is the ground-breaking work of Peter Laslett and John Hajnal. From the 1960s onwards Laslett and Hajnal repeatedly asserted the importance of acknowledging and understanding the ubiquity of (and variations in) the employment of servants for the comparative demographic history of Europe. The institution of service allowed young people to circulate between households before marriage, acquiring skills and saving wages, and redistributing labour according to demand. It was part of the European marriage system which was characterised by a first age of marriage for women in their early to late twenties, and a relatively high proportion of people never marrying: service was how many adults supported themselves when they were not married. It also allowed young people to accumulate the resources to set up a new household at marriage and to do so independently from their parents. This contrasts with the situation in many societies based on small-scale agriculture in which parents controlled the choice of marriage partner and timing of marriage, women married in their mid to late teens and marriage was almost universal, and where young people began married life as junior members of the parents’ household.

But service, or working as a servant, was much more than part of demographic system. It was an integral element in the development of wage labour in early modern Europe, and an element that was heavily controlled by law. From the late medieval period onwards governments passed legislation that attempted to regulate servants’ contracts, wage rates and mobility. A consistent theme was the insistence that young unmarried people should work as servants rather than day labourers. Once within a contracted period of service, servants became the legal dependents of their employer, with a status similar to children within the household. For early modern governments, concerned about the implications of growing numbers of landless labourers for levels of poverty, crime and social unrest, service was a far more attractive prospect. It combined the flexibility of wage labour with social control within landholding households, as part of the existing social order. In countries such as England and Sweden, service was compulsory for young unmarried people. In England this was inconsistently enforced, but in eighteenth-century Sweden enforcement was very effective. There, the government even regulated how many children could stay at home and how many servants each household could employ. Servants remind us that the story of western Europe’s economic development during the early modern period was not simply one of smooth transition from an economy based on small scale agriculture (peasant society) to one where the majority of the population were landless wage earners (capitalism). The early modern economy had characteristics which set it apart from both earlier and later periods, and service is perhaps the most important of these.

To contact the author:
J.C.Whittle@exeter.ac.uk
Twitter: @jcwhittle1

What happened to immigrant earnings during the Great Depression?

by Chris Minns, Economic History Department, LSE

 

The Great Depression devastated North American labour markets for a decade, with about a quarter of the work force unemployed at the peak of the crisis. It is well known that the headline figure conceals the extent to which the burden of the Depression was shared unequally. In addition to sharp differences in employment patterns between cities and regions, it was less-skilled workers who saw demand for their labour fall more than those able to access white-collar work. Older men who lost their jobs were particularly vulnerable to falling into the trap of long-term unemployment. There is some evidence to suggest that the Depression may have exacerbated ethnic differences in the labour market, with black men in the United States were affected more heavily than their white counterparts. How was the Depression experienced by the foreign-born population who had settled in large numbers in both Canada and the United States up until the early 1920s? A recent research paper by Kris Inwood, Fraser Summerfield, and myself sought to answer this question using statistical evidence drawn from new digital samples of the Canadian Censuses from 1911 to 1931.

There are three reasons we were particularly interested in this topic. First, while some social historians have argued that immigrants suffered greater exposure to labour market discrimination when jobs were rationed in the 1930s, there is surprisingly little published evidence to confirm or contradict this contention. Second, by focusing on the earnings of immigrants over a twenty year period, we wanted to see whether the experience of the Depression had implications for the long-run labour market adjustment of immigrants relative to native-born Canadians. Third, Canada offers an excellent laboratory in which to conduct this research. The Depression experience in Canada was comparable to the United States in terms of unemployment trends in the early 1930s, and the country was a leading destination for European immigrants from the late 19th century. A unique feature of early 20th century Canada was that Census questionnaires asked respondents to report their earnings beginning in 1901. This means that our measure of attainment can reflect changes in pay within occupations and the effects of spell of unemployment on total earnings.

Our analysis of Census earnings yields a striking pattern: immigrants experienced “reverse assimilation” in Canadian labour markets, with the gap in pay between immigrants and the native-born growing between 1921 and 1931. Figures 1 and 2 show predicted earnings for immigrants relative to otherwise identical native-born Canadians for young, recent migrants (Figure 1), and older migrants with longer tenure in Canada (Figure 2). Free migrants had unrestricted access to Canada, and came mainly from the United States and the United Kingdom and Ireland. Preferred and non-preferred migrants hailed mostly from Continental Europe. The figures show that the relative decline of immigrant earnings was strongest among older men, even among those who had lived in Canada for decades when the Depression hit. We also find that the effects are focused almost entirely among immigrants from continental Europe who were not native English speakers, with American and British migrants experiencing no reversal in relative earnings.

Figure 1: Predicted relative immigrant earnings, born 1886, arriving 1911

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Figure 2: Predicted relative immigrant earnings, born 1871, arriving 1896

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The evidence of reverse assimilation is not a statistical artefact due to selective return migration of European migrants, or selective outmigration of Canadian residents to the United States; international migration flows were much lower in the early 1930s than the late 1920s, despite the government encouraging the return of indigent migrants to their home countries. Nor are the problems of migrants accounted for by a skills mismatch created by the differential shocks of the late 1920s and early 1930s, with immigrants having the misfortune of being concentrated in the jobs that were hit hardest. One factor that does account for a large share in the earnings gap is unemployment; immigrants in the 1931 Census were more likely to have lost time out of work than their native-born counterparts. This suggests that one way in which ethnicity mattered in the Depression was that those who were most obviously foreign were the first to lose their jobs and the last to be rehired. But unemployment does not fully account for reverse assimilation, as non-English speaking immigrants from continental Europe experienced a significant decline in weekly earnings between 1921 and 1931, relative to their native-born counterparts.

Our findings point to a disturbing conclusion: apparently well-integrated immigrants were more vulnerable to the adverse effects of a sustained recession than native-born workers with similar skills.  Whether this pattern has been repeated in immigrant receiving economies during the recent crisis is an important question for future research.