Now, let's take the briefest background look at some issues
concerning living standards and also factor shares
during the Industrial Revolution.
There are literally thousands of pieces on this topic,
but I'm going to consider just one for our purposes
and that's a piece by Robert Allen.
The published title is listed here,
but that's not actually the title of the version of the piece,
which is available online, and that one is called
Engels' Pause: A Pessimist's Guide to the British Industrial Revolution.
This is one good overview of what we're learning
from the modern analysis of data drawn from this period.
It really does seem there was slow progress
during the early years of the Industrial Revolution.
Ricardo, Malthus, and Marx, smart people,
they all believed that real wages would remain roughly constant
during a process of economic growth.
For a long time this seemed like a simple error,
but, in fact, the more we learn about the data,
the more it seems this is a fairly reasonable interpretation
of part of the Industrial Revolution period.
For instance, if we look at the time period 1780 to 1840,
spanning 60 full years,
it appears that over those decades real wages grows only about 12%
which of course is a very moderate increase.
At the same time, output per worker rose 46%.
So there were productivity gains, but, for the most part,
these gains were not being reaped by labor.
Labor starts reaping benefits from productivity gains
starting around 1840, and, indeed, we see that from 1840 to 1900,
the real wage in Great Britain rose about 123%,
at least as best we can measure it.
Allen refers to there being actually two distinct phases
of the British Industrial Revolution.
If we look at output growth, that's given by this blue line here,
and what we see is a steady upward movement
throughout the late 18th and also the 19th century,
pretty much without serious interruption.
If we look at the series for real wages, that's this pink line here,
what we see is the pink line from 1770 to 1840
is barely budging upwards and real wages do start to rise,
and continue to rise from 1840 onwards,
but it really takes quite a bit of time within the Industrial Revolution
for those real wage increases to be realized.
From the period 1770 to 1840,
what really was going up was simply returns to capital, not to labor.
What about rent or the returns to land?
Well, both Adam Smith and David Ricardo had predicted that land would take up
an increasing percentage of a national income.
But if we look at the best available data, what do we see?
Well, the returns to land; they're given by this pink line.
Here we are in 1770,
the returns to land are slightly above 20% of GDP.
And then, as time passes, the returns to land are pretty clearly,
pretty unambiguously falling throughout the entire 19th century.
On this question, it really does seem that both Smith and Ricardo were wrong.
On these questions there's really an enormous amount more you can read,
and, I stress, the data I've been using are far from perfect.
To look at some other sources, go to our own video on the machinery question,
and also our video on Adam Smith and the Industrial Revolution.
There's a very good piece by Gregory Clarke
on living standards in England over the course of several centuries.
Very important is the work of Nicholas Crafts
and also see pieces with Crafts that were also with Harley and Nick.
There's a very good piece by Charles Feinstein,
may be the best single piece on wages, and that's called "Pessimism Perpetuated".
And then finally, if you'd like a somewhat more optimistic take
on wages during the early part of the Industrial Revolution,
I would direct you to a piece by Jeffrey Williamson and Peter Lindert
on the work of Crafts.