The 19th Century Labor Market - Term Paper Example

? Macro & Micro Economics 4 December The 19th Century Labor Market During the 19th century, America experienced positive economic growth. The national product grew at a rate of 4 percent each year. However, this could not be attributed to changes in technology, but rather growth in factor supplies. These included growth in capital, natural resources and labor. Of all the three, growth in labor supply accounted the most for the overall growth in the nineteenth century. This can be seen from the structure, composition and size of the 19th century labor force. In 1800, a quarter of the American population was in the labor force. Between 1800 and 1900, the labor force increased at an annual rate of approximately 3 percent. This growth was unprecedented although the civil war slowed it down. The arrival of immigrants in America affected the growth of the nineteenth century labor force. Majority of the immigrants came from East and South Europe. The composition of the work force included more males than females. However, males below the age of fifteen did not work since they needed to attend schools at the time. Those above the age of fifteen were however the largest percentage in the labor force. Females also accounted for a proportion of the labor force although they were not as many. However, their rate of participation kept increasing throughout the century. Majority of these women were single and young, since most of the married ones stayed at home. Slaves also accounted for the overall amount of those in the labor force. At the close of the civil war, slavery was abolished and this is among the reasons why there was a decrease in the overall labor force. Since majority of black women and children had forcefully worked as slaves, when slavery was declared illegal, they ceased to work. The proportion of men however remained the same as most of them continued to work to sustain their families. It was during this time that craft workers in the workshops were replaced by the large industrial working class people. At the end of the 19th century and the start of the Second World War, the labor market entered in a phase of labor homogenization. This meant that the market was divided as either primary or secondary labor market. The primary labor market was disproportionately composed of highly skilled or the well-educated white male. In this category, the employment was secure, the earnings were high, and the edging benefits were generous. The secondary labor market was disproportionately composed of a large number of women, racial minorities, Africans, and Hispanics. These people were unskilled and lacked education. They worked in small enterprises that had low investments, employment was insecure, the earnings were low, and edging benefits were insufficient. In the 19th century, most of the American businesses were categorized as a monopoly. As other businesses continued to emerge, others such as the petroleum, sugar, and tobacco industries took control of the labor market. Due to the monopoly, many firms faced competition from their competitors, and this resulted to lowing of prices and passing of the saving along to the consumer in order to increase sales and make profits. During this period, there was pressure from the competitors, and there was a threat of reduced profits that motivated the US companies to reduce prices and maintain high levels of production. During this era, there was a lot of wasted land that needed to be exploited, yet wealth per capita was increasing at a high rate in Europe, and all available land was used. The neo-classists explained that there was equilibrium growth in terms of accumulated capital. This had put a lot of emphasis on savings as the main source of growth. Walrasian stated that, the net saving by the wealth-holders was shammed to be exactly balanced by net investment in additional production capacity. During the 19th century, industrial revolutions occurred; these included the invention of long distance transport, the steam engine, and the railway. During the mid19th century, sailing ships were replaced by steamships and horse-drawn vehicles by railway trains that brought about international and interregional trade. The progressive mode of transport was on large scale for long booty of shipment between seaport and inland freights. Foot and bicycle transport was replaced by car transport. The establishment of transport systems had made movement from one place to another to be easier, cheaper, and faster. The expansion of transport had represented a large symbol of American progress in the Gilded Age. Transport was introduced during this age and the problems were solved; problems like movement of perishable goods and movement of people from one place to another. The railroads were completed in 1869, and with this completion, literal and metaphorical unity among nations was forged. The railroad that united the East and West became a symbol for American intelligence, technological superiority, and material progress. Another mode of transport that was established was the coach cars that replaced the former passenger cars and this provided more room and comfort. Apart from the development of railroad and cars as a means of transport, waterways were also established. The first steam boats were established in 1817, and from 1820, canal booms were introduced. Due to the formation of waterways, farmers were able to distribute their goods via ship transport. Canals reduced the costs of shipping, which boosted the farmers to manufacture. Rapid urbanization in the 19th century was followed by smooth progress, matching gradual changes in industrialization and demography structure. This approach is defined by Davis as the cycle of urbanization model. Davis stated that the breakthrough of urbanization in a given territory can be explained by a curve in the form of an attenuated S. The cycle of urbanization can be used to explain the demographic changeover of the European and American countries. At the beginning of the century, urbanization was slow as well as the rate of population growth. Urbanization was recorded when the demography cycle posted the low fluctuating stage. Urbanization and industrialization influenced each other; many classists argue that industrialization is a major cause of urbanization, while others explain that urbanization without industrialization may have a negative effect on the demographic development. Urbanization involves gradual modernization and interdependent economic and social change, and industrialization itself creates many technical and highly skilled jobs. Urbanization was used as a force of social change, which was determined by a number of reasons. During the mid19th century, the industrial revolution was at its peak, the United States had moved from being dependent on the agricultural economy to an industrial economy. At this time, the banks had the power to issue paper money and many more banks were set up, and were given the power of issuing money to the banks that used to distribute large amounts of money. In the 1819, there was a financial crisis that generated a serious commercial slowdown. This was because the federal government had difficulties in raising money during the war, the Madison administration harbored to issuing treasury notes. Due to the expansion of the money, it increased the number of banks; these banks were associated with the expansion on the westward of cotton farmers. Nevertheless, during this period there was an economic problem and this was due to the central bank being run by knowledgeable officials. They manipulated the available credit and money supply. They would also involve themselves with counter cyclical activities and smooth and extreme bumps of the business cycle. They would also maintain the banking system by being the lenders of the last resort to stabilize banks that faced liquidity crisis, or banks that lacked gold and silver to satisfy a swarm. The lender of the last resort was termed as a bad idea; this is because the central bank was required to provide elasticity of the money supply and the national banking era period had inelastic money supply. This meant that there was no governmental structure to assure a greater expansion of the money supply, especially during panic and depressions. The panic of the 19th century occurred because banks were bankrupted and depositors had lost their money. Free banking was also used in America; it was a movement towards highly decentralized monetary system. Rising inflation caused money panic and bank failure. The free banking used to allow anyone to deposit financial suitable securities with a state banking authority, to receive a bank charter and make loans. The success of free banking depended on tender balances of state regulation and freedom of enterprise. During the civil war, there was the development of the national bank that ended the era of free banking the United States. During the national banking era, the United States banking system suffered a financial panic. Throughout the era, all banks issuing US currency operated under legal restriction that was imposed by the National Currency Act. Banks were more liquid on an absolute basis during the national banking era than they are today. National banking didn’t permit unrestricted notes and banks were forced to meet the increased currency demand by paying out reserves and making adjustments to their loan assets as they issued uniform currency. The national bank was inelastic, since its issue of notes was dependent on banks deposit of government bonds at the treasury. During this time many bankers wanted to transform the Americans banking system by establishing a central bank. Business cycles are patterns of increase and decrease in the Gross Domestic product, which occur in an economy. A business cycle can be referred to as an economy wide fluctuation in total national output, income, and employment, usually lasting a period for 2-10 years. A business cycle has two cycles’; recession and expansion. A growth recession can be termed as a recurring period of slow growth in the total output, income, employment, and trade, while expansion is a term used for the upward phase of the cycle .The most unexpected thing that happened in America was the high growth rate of population growth, and this brought about many concerns that there was an increase in population yet there were limited resources. The population growth was due to the increase in birth rates, low death rates, and the increased immigration from Europe, which changed the business cycle pattern in America. Business cycle has changed in several ways under the impact of development during the time of depression. Recessions are known to decrease in frequency and duration; the main reason for this is due to the structure and policy changes. In conclusion, a lot of development took place in the 19th century. The large industrial working class replaced craft workers, while the labor market entered a period of labor homogenization. This was followed by a lot of deskilling and mechanization. After the Second World War, the labor market was divided into the primary and secondary labor market. Other changes that took place include developments in transport, banking, the economy, and urbanization. The 19th century was known as a period of true labor. It was during this time that the railway, steam engine and long distance transport were invented. The development of the transport system made it easier, cheaper and faster to move from one place to the other. Banks had been established and people used currencies in business transactions and payments. Read More