MODERN ECONOMIC GROWTH STARTED 200 YEARS EARLIER: evidence from England

21 Oct 2019

Economists Jane Humphries and Jacob Weisdorf have uncovered new evidence to show that modern economic growth started in the late 16th Century – 200 years earlier than previously thought. They also argue that Britain’s early economic growth was driven by having longer work years.

In research published in the October 2019 issue of The Economic Journal, the authors challenge the widely held view, based on wage rates paid to British day labourers, that western societies began to grow rich as late as the 19th Century.

They re-estimate the starting point of modern economic growth by collecting wage data for historical British workers who worked for an annual stipend rather than the daily wages used by previous researchers.

Previously, daily wage rates were used to measure living standards in the past and turned into estimates of workers’ annual incomes without information about the length of the working year. They simply assumed that workers always and everywhere worked for 250 days per year.

However, this assumption is in conflict with historical evidence that shows that the days worked varied from century to century and that consumption per person began to increase long before the 19th Century and in the absence of increasing daily wage rates. Using annual remunerations solves the problem of not knowing how many days a given daily wage rate was paid, since annual pay provides a direct measure of workers’ yearly income.

This new estimate downscales the importance of the medieval ‘Golden Age of Labour’ that followed in the wake of the Black Death when almost half of Britain’s population perished. It also pushes the take-off into modern economic growth back to the late 16th Century.

The research shows that income continued to increase during the 17th Century’s advances in intellectual understanding of the natural world and further through the technological progress of the classical years of the Industrial Revolution. This contrasts with the early modern ‘Malthusian plateau’ of stagnant incomes exhibited by previous studies based on day wage rates and an unchanging work year of 250 days.

They argue that longer work years were a key driving force in Britain’s early take-off, with historical workers working for less than 150 days each year during the medieval period, but well over 300 days during the Industrial Revolution.

The study also provides estimated long-run trends in labour’s share of total income. It finds that labour’s share rose markedly after the Black Death and fell from a peak of over 80% in the late 1500s to less than 60% during early industrialisation, when labour-saving technologies spread. The authors argue that the recent post-1980s decline in labour’s share leaves it within the historical range, suggesting that the current global downturn might be a temporary effect of labour-saving technology.

Unreal Wages? Real Income and Economic Growth in England, 1260-1850 by Jane Humphries and Jacob Weisdorf is published in the October 2019 issue of The Economic Journal

Jane Humphries

Centennial Chair in Economic History and Professor of Economic History (Emeritus) | London School of Economics and University of Oxford | jane.humphries@history.ox.ac.uk

Jacob Weisdorf

Professor of Economics | University of Southern Denmark | jacobw@sam.sdu.dk