Convict labour in modern American history

by Michael Poyker (UCLA)


Prison Gang in Birmingham, ca. 1870. Available at <;

The United States has the largest prison population in the world. More than half of the convicts are engaged in some form of convict labour, and inmates employed in prison industries convicts constituted 4.5% of total US manufacturing employment in 2005. They earn substantially below minimum wage, ranging from nothing to $4.90 per hour in state prisons. Such low labour costs may have effects on free labour.

Despite numerous examples of malevolent competition, no research has been done on the possible effects of how convict labour affects free labour. In addition, contemporary public policy research typically considers convict labour as purely beneficial for society (through rehabilitation of prisoners and alleviating budgetary expenses on corrections). Finally, US prisons are built in economically depressed counties under the assumption that they will provide jobs (such as guards or janitors) in the local labour market.

My research addresses the previously unstudied question of how convict labour affects local labour markets and firms that employ free labour by studying convict labour in the United States in the nineteenth and twentieth centuries.

Data on contemporary convict labour output is not available, and as prisons are strategically located in economically depressed areas, it could confound the results. I use the historical context of when convict labour first appeared in 1870s.

First, very detailed data are available. Second, the rule of prison location was different – prisons were located in large urban areas (with higher wages) to save money on transport of prisoners. Third, the introduction of convict labour system was a nation-wide movement uncorrelated with the local economic conditions.

I have collected and digitalised archival data on US prisons and convict labour camps to construct county-level exposure to convict labour for the period 1886-1940. I find a significant negative effect of convict labour on wage growth and manufacturing employment, and a positive effect on patenting.

The magnitude of convict labour output was enormous: for each manufacturing worker with an average annual wage of $242, there were at least $18 per worker of prison-made goods. Regarding convict labour exposure comparing counties at the 25th and 75th percentile, the one more exposed to convict labour experienced 12.6% slower wage growth. In terms of counterfactuals, the introduction of convict labour in the 1870s accounts for 16% slower wage growth in the period 1880-1900 (when wage growth was 7.2%).

Competition with convict labour affected firms. Firms in affected industries couldn’t compete with prison-made goods in terms of labour costs. (The unit labour cost of prison labour was 4-50% of that of free labourers) Thus, they had to innovate-away in product-space or upgrade their technology to decrease costs or substitute labour with capital. I find that the introduction of convict labour accounts for 6% of the growth in patenting in affected industries.

I also shows the effects of convict labour on other economic outcomes. Convict labour gave police the incentives to arrest more people. Counties more exposed to convict labour had higher incarceration rates. There is also suggestive evidence that convict labour adversely affected intergenerational mobility in the long run.

Nowadays, as transport costs have decreased over time, competition with prison-made goods may spread farther from the prison. Thus, the overall effect of convict labour on contemporary manufacturing wages could be smaller around the prison but more substantial overall. Moreover, the number of convicts has soared from approximately 80, 000in 1920 to more than 2.5 million today.

Overall, these findings may be important for public policy research on convict labour since it may worsen local labour market outcomes, thus overshadowing any possible positive effects from rehabilitation or jobs provided by prisons. Finally, as the state is a beneficiary of the convict labour, welfare redistribution may be necessary to offset adverse effects on those affected by competition.


EHS 2018 special: How the Second World War promoted racial integration in the American South

by Andreas Ferrara (University of Warwick)

African American and White Employees Working Together during WWII. Available at <;

European politicians face the challenge of integrating the 1.26 million refugees who arrived in 2015. Integration into the labour market is often discussed as key to social integration but empirical evidence for this claim is sparse.

My research contributes to the debate with a historical example from the American South where the Second World War increased the share of black workers in semi-skilled jobs such as factory work, jobs previously dominated by white workers.

I combine census and military records to show that the share of black workers in semi-skilled occupations in the American South increased as they filled vacancies created by wartime casualties among semi-skilled whites.

A fallen white worker in a semi-skilled occupation was replaced by 1.8 black workers on average. This raised the share of African Americans in semi-skilled jobs by 10% between 1940 and 1950.

Survey data from the South in 1961 reveal that this increased integration in the workplace led to improved social relations between black and white communities outside the workplace.

Individuals living in counties where war casualties brought more black workers into semi-skilled jobs between 1940-50 were 10 percentage points more likely to have an interracial friendship, 6 percentage points more likely to live in a mixed-race neighbourhood, and 11 percentage points more likely to favour integration over segregation in general, as well as at school and at church. These positive effects are reported by both black and white respondents.

Additional analysis using county-level church membership data from 1916 to 1971 shows similar results. Counties where wartime casualties resulted in a more racially integrated labour force saw a 6 percentage points rise in membership shares of churches, which already held mixed-race services before the war.

The church-related results are especially striking. In several of his speeches Dr Martin Luther King stated that 11am on Sunday is the most segregated hour in American life. And yet my analysis shows that workplace exposure of two groups can overcome even strongly embedded social divides such as churchgoing, which is particularly important in the South, the so-called bible belt.

This historical case study of the American South in the mid-twentieth century, where race relations were often tense, demonstrates that excluding refugees from the workforce may be ruling out a promising channel for integration.

Currently, almost all European countries forbid refugees from participating in the labour market. Arguments put forward to justify this include fear of competition for jobs, concern about downward pressure on wages and a perceived need to deter economic migration.

While the mid-twentieth century American South is not Europe, the policy implication is to experiment more extensively with social integration through workplace integration measures. This not only concerns the refugee case but any country with socially and economically segregated minority groups.

Industrialisation and the origins of modern prosperity: evidence from the United States in the 19th century

by Ori Katz (Tel Aviv University)

Wiki Commons. Market scene by Pieter Aertsen, c.1550


The largest economic mystery is the modern prosperity of humankind. For thousands of years since the Neolithic revolution, most humans lived in small communities, working as farmers, and their average standard of living did not change much.

But in the nineteenth century, things changed: large parts of the world become industrialised. In those parts, people moved to live in huge cities, where they worked in manufacturing and commerce, had fewer children, invested more in schooling, and their standard of living began to rise, and then to rise dramatically, and it has never stopped since. Whether you look at life expectancy, birth fatality, income per person or any other measure, the trend is the same. And we don’t really know why.

We have a lot of theories. Some believe that this dramatic change has something to do with a geopolitical environment that encouraged competition and maintained stability in property rights. Others talk about a change in human preferences, maybe even in human biology. But in every theory, two of the main ingredients are the dramatic reduction in fertility and the increasing investment in human capital during the late nineteenth century.

This research examines the effect of industrialisation on human capital and fertility in the United States during the period from 1850 to 1900. This effect is hard to identify, for example because human capital also affects industrialisation, or because other variables such as ‘culture’ may affect both.

To deal with those problems, the study uses the westward expansion of the country as a ‘natural experiment’. The appearance of new large cities such as Chicago and Buffalo led to the development of new transport routes, and the study looks at counties that happened to be close to those new routes.

Those counties experienced industrialisation only because of their geographical location, and not because of the human capital of the local population or other variables. This means that analysing them is similar to a laboratory experiment, where it is possible to change only one parameter and leave the others intact.

Results show a very large effect of industrialisation on both fertility and human capital. These results are in contrast with an old theory according to which industrialisation was a ‘de-skilling’ process that increased the demand for unskilled labour. It seems that industrialisation was conducive to human capital.

They also find that the effects of industrialisation on both fertility and human capital were larger in counties that were already more developed in the first place. This led to a divergence between them and less developed counties. Indeed, when we look at the country level, we see increasing gaps between the industrialised countries and the rest of the world, starting in the nineteenth century, just like the gaps shown at the county level.

The modern period of growth is still a mystery, but these research results tell us that the effects of industrialisation on fertility and human capital are an important piece of the puzzle. These effects might be the reason for the great divergence between nineteenth century economies that created the modern wealth gaps between nations.

The impact of new universities on regional growth: evidence from the United States 1930-80

by Alexandra López Cermeño, Lund University / Universidad Carlos III de Madrid

From ODU  Twitter account

Universities generate growth spillovers beyond simply the local market. Analysing data on the universities founded in the United States between 1930 and 1980, my research shows that these drove growth of GDP and population not only in the counties that hosted them, but also in their neighbouring regions. But analysis of their longer-term impact suggests that although there are growth spillovers, the positive effect wears out if it is not periodically renewed.

The role of universities in generating growth is rarely contested. But most research tend to associate the presence of a university with long-term path dependency. In the era of knowledge and information, the role of universities as producers of new ideas and technologies is crucial to productivity. New light on this subject is required not only to understand the role of cultural amenities but also to explore the spatial dynamics around them.

Long-term analysis that compares recipient counties of their first universities between 1930 and 1980 with statistically similar counties that never got an institution shows that the effect of these new universities implies 20% more growth in terms of GDP. Moreover, the analysis shows that the new amenities eventually had an impact neighbouring counties. These dynamics seem to be related to population migration.

This sizeable increase of GDP in these counties is corresponded by a similar size increase in population: new universities generate migratory movements of workers, which eventually lead to higher housing prices and costs to use other infrastructures. Higher costs motivate many workers to relocate to nearby areas where housing and infrastructures are less expensive and access to the amenity is still feasible.

The positive effect of new universities is therefore neutralised in the longer term unless further investments reduce congestion costs. Indeed, the role of infrastructures such as roads seems to explain a large share of the effect of universities.

But the interaction of universities and infrastructure seems to be defined by the decreasing importance of the latter: whereas physical access to infrastructure seemed to constrain the impact of new amenities before the 1950s, more recently established institutions seem no longer dependent on face-to-face contact.

There is further evidence on the role of knowledge dynamics in my study: in the earlier half of the period 1930-80, all that mattered was getting a new university in the county, whereas in the latter half of the period, the quality of the institution seems to have become much more relevant. Counties where research-intensive institutions were established during the period 1950-80 grew almost 40% more.

My analysis shows that the effect of new academic institutions during the twentieth century induced regional spatial dynamics in terms of migration and GDP. But it indicates that the impact of these new amenities was seriously constrained by the congestion of utilities, which limited the extent of growth to the short run.

Thus, it questions the extent of the impact generated by these institutions that is so praised in recent literature since it suggests that their growth dynamics are not self-sustaining: further investments are needed to keep up with the agglomeration forces that attract population and firms to these counties.