The Price of Everything (18 page)

Throughout history, slavery was rare in subsistence economies, such as early hunter-gatherer societies where people produced just enough to stay alive. In early horticulturalist cultures, land was not productive enough to generate a surplus that would justify enslaving additional workers. But as advances in food production generated surpluses that could feed larger populations and justify employing additional workers, landowners resorted to coercion as a way to get around the rising cost of labor. Only when population rose to a point where there were many laborers competing for jobs on scarce land did wages become a more attractive proposition for landowners than slavery.

Data from George Murdock’s
Ethnographic Atlas
shows that in advanced horticultural societies, which supported populations of about forty people per square mile, some 80 percent of landowners were found to employ slaves. Yet as the plow increased agricultural productivity and population densities rose past one hundred people per square mile, more than half of landlords paid their workers a wage rather than coerce them to work.

Slavery could quickly reestablish itself, however, if something were to change the ratio between land and labor. The Black Death, which wiped out half the population in fourteenth-century Europe and returned periodically for three hundred years, provided one such change. Serfdom was unknown in Russia before the sixteenth century. But the population shock from the plague led the landed gentry to lobby the czar to restrict the mobility of tenant peasants, keeping them attached to the land through debt servitude and laws allowing landlords to recover fugitive peasants.

In Western Europe, where serfdom had been popular for four hundred years, the Black Death paradoxically seems to have hastened its demise. Though landowners had the same incentive to shackle peasants to the land, powerful Western urban elites that were nonexistent in the East also wanted the labor and opposed these efforts.

The evolution of serfdom provides a clue as to why slavery is not more popular today. The massive loss of population following the Black Death failed to entrench serfdom across Western Europe because big cities offered workers opportunities outside agriculture. While there were attempts to reintroduce serfdom, the lack of strong central authorities made it difficult to limit peasants’ movements. The emergence of competing economic interests among the powerful urban bourgeoisie prevented landowners from imposing their will.

That didn’t mean Western Europeans renounced coercion, however. The discovery of vast, scarcely populated lands in the Americas led Western Europeans to embrace slavery where labor was scarce on the other side of the Atlantic Ocean.

Slaves accounted for about 90 percent of the population of the West Indies in the eighteenth century. About 2 million slaves were shipped from Africa to the Caribbean isles between 1600 and 1800. And three quarters of the 290,000 European migrants were indentured servants. Slavery was a particularly effective institution when the land supported large-scale farming. On these plots a few gang bosses could monitor large groups of slaves, keeping the costs of enslavement down. That made the lucrative Caribbean crops of sugar and tobacco particularly attractive to slave owners.

 

 

MANY DYNAMICS CONTRIBUTED
to the decline of labor coercion. Employers who could increase production by adding more inexpensive slaves had little incentive to invest in laborsaving technologies. Coerced workers had no incentive to become more productive—because they would just be handing a higher surplus to the boss. Both these effects hindered economic progress.

In the Americas, slavery led to slower subsequent economic growth. New World colonies in which slave labor was common in the 1830s, such as Jamaica and Guyana, are today much poorer than colonies in which slavery was rare, such as Barbados or Trinidad. In the United States, states where slave labor was widespread in the mid-nineteenth century, such as Mississippi, South Carolina, and Louisiana, are much poorer today than free states such as Connecticut, Massachusetts, and New Jersey.

An examination of the prices of slaves underscores how the institution slowed productivity growth. The price of a slave in South Carolina rose from about $110.37 in 1720 to about $307.54 in 1800. But that increase barely matched the rate of inflation. In real terms, slave prices remained flat. But, as economists point out, the price of slaves should represent the stream of profits that farmers expected from their labor. Price stability thus suggests that this expected stream did not grow very much.

Substitute illegal immigrants for slaves, and similar patterns emerge in the United States today. For decades American farmers have relied on cheap immigrant labor to tend their crops. In 1986, they pressed to pass the Immigration Reform and Control Act, which legalized nearly 3 million illegal immigrants. After that, their investments in laborsaving technology froze. By 1999, capital investments had fallen 46.7 percent from their peak in 1980.

Indeed, the institution of immigrant work in the United States may provide an answer to the question about the seeming unpopularity of slavery: it is not as unpopular as it may seem; it has just taken on a different, subtle form. Illegal immigrant workers look not too unlike indentured servants. Hiding from the cops, unable to stand up for their rights in the workplace, illegal immigrants are beholden to their employers like no other workers. Some legal immigrant laborers are formally tied to their jobs through visa requirements that forbid them to seek alternative employment.

But perhaps the most compelling answer is that, on average, workers are too cheap to make slavery worthwhile. Some workers draw high wages—bankers and other professionals with sought-after, lucrative skill sets. But the federal minimum wage is lower than it was thirty years ago. What’s more, globalization has provided manufacturers with an enormous supply of cheap workers. In March 2010, the Vietnamese government raised the monthly minimum wage to 730,000 dong—less than $40. Slaves might not be any cheaper.

The price of work is probably the most important price in people’s lives. The labor market is where we trade our skills for our keep—the rent, the food. Our wage will go a long way in determining the sort of life we will lead.

It has improved since slavery gave way to a free market for work. In developed industrial economies, wages soared in the past century alone. In 1918 a dozen eggs cost the typical American manufacturing worker the equivalent of a little more than an hour of work at the prevailing wage. Today she can afford them in less than five minutes. The Montgomery Ward catalog, launched in the late nineteenth century to bring big-city goods to small-town America, in 1895 offered a one-speed bicycle for $65—about six and a half weeks of work for a typical worker. Today the online Ward catalog lists multispeed models for about $350, which the average worker at the prevailing wage can pay for in fewer than nineteen hours of work.

But though the pay may be better, the market for labor is in some respects no less ruthless than it ever was, and in some regards perhaps more so. Two things drive wages: productivity—how valuable the job is to the employer—and the supply and demand for workers of a given skill. Rising pay has nothing to do with justice. Today, a worker can produce in less than ten minutes what it took a worker in 1890 an hour to make. That’s why wages rose.

Some patterns of compensation are fairly easy to understand. Highly educated workers tend to earn more than those with less schooling. In India, men who are fluent in English earn 34 percent more than those who don’t speak the language, even if they otherwise have the same level of education. Other patterns are less so. The tall make 10 percent more for every four inches in extra height. American men who are six feet two inches tall are 3 percent more likely to be executives than those who are only five feet ten inches. And the ugly earn less than the pretty—regardless of whether beauty has anything to do with the job. A study based on job interviews in the United States and Canada concluded that workers who were identified by the interviewer as of below-average beauty made about 7 percent less than the average, while those of above-average looks made 5 percent more. Men suffered a 9 percent ugliness penalty; ugly women were paid 5 percent less.

These pay gaps are probably due in part to discrimination. But much of the difference in pay has to do with how physical traits signal productivity improvements. Studies in Sweden found that taller people are smarter and stronger and have better social skills because they were healthier and better nourished as children. Being taller, they had higher self-esteem. The short are simply less productive. And productivity is what bosses go to the labor market to buy.

Then there is competition among workers for work. Those given to nostalgia like to reminisce about a kinder, gentler labor market, where wages weren’t so precisely calibrated to skills and employers cared that their workers had a decent standard of living. Early in the twentieth century, firms like Sears and Eastman Kodak created mini-welfare states for their workers in an attempt to foster labor stability and keep unions out of their plants and stores.

The Eastman Kodak Company was famous for taking photography from the professional studio to the corner drugstore. (Its slogan—“You press the button. We do the rest”). But founder George Eastman was also an innovator in industrial relations. Kodak offered a performance bonus to workers as far back as 1899. By 1929, six years before Roosevelt signed Social Security and the National Labor Relations Act into law, it had profit sharing, a fund to compensate injured workers, retirement bonuses and a pension plan, accident insurance, and sickness benefits. After Eastman committed suicide in 1932 by shooting himself in the heart, the obituary in the
New York Times
applauded his “advanced ideas in the field of personal industrial relations.”

Other pioneers tried to deploy pay as an incentive. Facing low worker morale and high turnover on the production line, in January 1914 Henry Ford raised wages to five dollars a day, doubling at a stroke most workers’ pay. It worked, apparently. Job seekers formed a line around Ford’s shop. The journalist O. J. Abell wrote at the time that after the pay hike Ford was churning out 15 percent more cars a day with 14 percent fewer workers. Henry Ford later observed: “The payment of five dollars a day for an eight-hour day was one of the finest cost-cutting moves we ever made.” Gradually, the rest of the car industry followed. By 1928, wages in the auto industry were already about 40 percent higher than at other manufacturers. And this was before the United Auto Workers union had placed its stamp on the industry.

But the soft, paternalistic corporations of a century ago are not that different from their descendants. The critical difference today is that companies have cheaper options. And they can no longer afford the generosity of the corporate leviathans of the early twentieth century, which relied on a unique feature of American capitalism of the time: monopoly profits. As a dominant company in a new industry with high barriers to entry, Eastman Kodak had a near monopoly over photographic film. Ford also enjoyed fat profits unheard of in the cutthroat competitive environment of today. Today, multinational companies scour the globe seeking cheap labor and low taxes, abundant raw materials, and proximity to consumers. And competition is ruthless.

Princeton economists Alan Blinder, a former vice chairman of the Federal Reserve, and Alan Krueger, deputy Treasury secretary in the Obama administration, estimated that about a quarter of the jobs performed in the United States are “offshorable”—meaning they could be done by cheaper workers overseas taking advantage of new information technology and telecommunications networks. Computers have also replaced workers in a range of tasks, in the corporate suite or on the factory floor. Technology has enabled new players to tap markets once thought impenetrable. The steel mills along America’s rust belt suffered not just because of cheap imported steel. The minimills in the South that made steel from scrap metal contributed at least as much to the demise of the nation’s integrated mills as foreign rivals.

These economic forces have brought prosperity to many workers around the world. China’s gross domestic product per person tripled over the last decade, to $7,200, as manufacturers have relocated production there to take advantage of its cheaper workforce. Since 1990, the share of the Chinese population living on less than a dollar a day dropped from 60 percent to 16 percent. But in the United States, this intense competition upended many of the agreements and institutions that governed the labor market through much of the twentieth century. Eastman Kodak is going through a wrenching transformation as film gives way to digital imaging. In 2009 it discontinued Kodachrome, which had been around for seventy-four years. And it lost $232 million. Its workforce has dwindled to fewer than twenty thousand, less than a third of its staffing at its peak.