Industrial Revolution and the Standard of Living
By Clark Nardinelli
Between 1760 and 1860, technological progress, education, and an increasing capital stock transformed England into the workshop of the world. The industrial revolution, as the transformation came to be called, caused a sustained rise in real income per person in England and, as its effects spread, the rest of the Western world. Historians agree that the industrial revolution was one of the most important events in history, marking the rapid transition to the modern age, but they disagree vehemently about various aspects of the event. Of all the disagreements, the oldest one is over how the industrial revolution affected ordinary people, usually called the working classes. One group, the pessimists, argues that the living standards of ordinary people fell. Another group, the optimists, believes that living standards rose.
The debate over living standards is important because it represents a place where the critics and defenders of capitalism meet head-on. It is no coincidence that the debate heated up during the Cold War. The pessimists wanted to show that the English industrial revolution, which took place within a capitalist economy, necessarily made working people worse off. Optimists defended capitalism by showing that the industrial revolution made everyone better off.
This disagreement over the standard of living is confined almost entirely to academicians. Most other people, if they think about it at all, consider it well established that the industrial revolution was a disaster for the working classes. Indeed, the ghastly images of Dickens’s Coketown or Blake’s “dark, satanic mills” dominate popular perceptions of what life was like during the early years of English industrialization. Economic historians, however, have gone beyond popular perceptions to try to find out what really happened to ordinary people.
First, we must consider what “standard of living” means. Economic historians would like it to mean happiness. But the impossibility of measuring happiness forces them to equate the standard of living with real income. Real income is money income adjusted for the cost of living and for the effects of things such as health, unemployment, pollution, the condition of women and children, urban crowding, and amount of leisure time.
Because a rise in real income was precisely what made England’s transformation “revolutionary,” it would seem that, by definition, the industrial revolution led to a rise in the standard of living. According to the estimates of economist N. F. R. Crafts, British income per person (in 1970 U.S. dollars) rose from $333 in 1700 to $399 in 1760, to $427 in 1800, to $498 in 1830, and then jumped to $804 in 1860. (For many centuries before the industrial revolution, in contrast, periods of falling income offset periods of rising income.) Both sides in the debate accept Crafts’s estimates. But if the distribution of income became more unequal and if pollution, unemployment, and crowding increased, the real incomes of ordinary people could have fallen despite the rise in average income.
If significant economic growth is sustained over a century or so, the only way the poor become worse off is if inequality increases dramatically. Crafts’s estimates indicate that real income per person doubled between 1760 and 1860. Therefore, the share of income going to the lowest 65 percent of the population would have had to fall by half for them to be worse off after all that growth. It didn’t. In 1760 the lowest 65 percent received about 29 percent of total income in Britain; in 1860 they got about 25 percent. So the lowest 65 percent were substantially better off. Their average real income had increased by over 70 percent.
This evidence means that the optimists have won the debate on the big issue of whether the industrial revolution helped or hurt ordinary people. It helped. But smaller debates remain. Did the working class become worse off during the early years of England’s industrialization, 1790 to 1840, when real income per person grew at only about 0.3 percent per year? Growth at such a slow rate made a deterioration in the lot of the working classes possible. A simple numerical illustration will show why. If we take 0.3 percent per year as the annual rate of growth of real income, average real income in 1840 would have been about 16 percent higher than in 1790. The share of total income going to the lowest 65 percent of the income distribution need only have fallen to 86 percent of its 1790 level to negate the benefit of rising average income. Although they do not agree on how much, most economic historians agree that the distribution of income became more unequal between 1790 and 1840. Moreover, if we add the effects of unemployment, pollution, urban crowding, child labor, and other social ills, the modest rise in average income could well have been accompanied by a fall in the standard of living of the working classes.
The modern debate over this issue, which began with a 1949 paper by T. S. Ashton, has focused on other measures of living standards, especially wages. Ashton himself used changes in the cost of living-measured by the prices of basic commodities-to conclude that real wages rose after 1820.
The debate heated up considerably during exchanges between the pessimist Eric Hobsbawm and the optimist Max Hartwell in the late 1950s and early 1960s. According to Hobsbawm, Ashton’s evidence on real wages was inconclusive. He argued that high unemployment indicated that living standards may have deteriorated before 1840. Hobsbawm stressed that evidence on consumption also implied that living standards did not rise and may have fallen between 1790 and 1840. He placed particular emphasis on these estimates of consumption, reasoning that a decline in food consumption per person indicated a decline in the standard of living. He noted that the number of beef and sheep slaughtered at various markets failed to keep pace with the growth of population before 1840.
Hartwell criticized Hobsbawm’s use of evidence. The problem with looking at the volume of beef and sheep sold at particular markets, he noted, was that new markets were appearing. Hartwell also emphasized the appearance of new, previously unavailable consumer goods after 1820, such as popular periodicals, inexpensive cotton clothing, and the exotic fruits made available by improved transportation. But Hartwell’s main point was that few theories can explain falling real wages in the face of economic growth-particularly when rising labor productivity accompanied that growth. He emphasized that it would take implausibly high increases in unemployment or inequality for living standards to fall when average income was rising.
The debate gradually receded into the background until a 1983 paper by Peter Lindert and Jeffrey Williamson brought new life to the controversy. Lindert and Williamson produced new estimates of real wages for the years 1755 to 1851. Their estimates were based on money wages for workers in several broad categories, including both blue-collar and white-collar occupations. Their cost of living index attempted to represent actual working-class budgets.
The Lindert-Williamson series produced two striking results. First, real wages grew slowly between 1781 and 1819. Second, after 1819 real wages grew rapidly for all groups of workers. For all blue-collar workers-a good stand-in for the working classes-the Lindert-Williamson index number for real wages rose from 50.19 in 1819 to 100 in 1851. That is, real wages doubled in just thirty-two years.
Lindert and Williamson’s findings were reinforced by estimates that economist Charles Feinstein made of consumption per person for each decade between the 1760s and 1850s. He found a small rise in consumption between 1760 and 1820 and a rapid rise after 1820. Other evidence that supported the hypothesis of rising real wages came from statistics on life expectancy at birth and on literacy rates. According to historians E. A. Wrigley and Roger S. Schofield’s population history of England, life expectancy at birth rose from thirty-five years to forty years between 1781 and 1851. A modest increase in literacy in the generation before 1840 also supported Lindert and Williamson.
Although the evidence favors the optimists, doubts remain. For example, pessimists have long maintained that the largely unmeasurable effects of environmental decay more than offset any gains in well-being attributable to rising wages. Wages were higher in English cities than in the countryside, but rents were higher and the quality of life was lower. What proportion of the rise in urban wages reflected compensation for worsening urban squalor rather than true increases in real incomes? Williamson-using methods developed to measure the ill effects of twentieth-century cities-found that between 8 and 30 percent of the higher urban wages could be attributed to compensation for the inferior quality of life in English cities. Yet even the 30 percent estimate was much too small to fully offset the rise in real wages before 1850.
Another criticism of Lindert and Williamson’s optimistic findings is that their results hold only for workers who earned wages. We do not know what happened to people who worked at home or were self-employed. Because the consumption per person of tea and sugar failed to rise along with real wages, Joel Mokyr has suggested that workers who were not in the Lindert-Williamson sample may have suffered sufficiently deteriorating real incomes to offset rising wage income and leave the average person no better off.
Contemporary pessimists argue that for at least some part of the industrial revolution the happiness and well-being of the lower classes was not rising much, if at all. Even if one accepts their argument, however, it is not necessary to abandon the optimists’ position. For example, the industrial revolution had a positive effect on real income, but its positive effect may well have been offset by the negative effect of frequent wars (the American Revolution, the Napoleonic wars, the War of 1812). Some economic historians include bad harvests, rapid population growth, and the costs of transforming preindustrial workers into a modern labor force as additional causes of slow growth before 1820.
So careful economic research has narrowed the debate. Whether one is an optimist or pessimist today depends on whether one believes that the sustained rise in real wages began in the 1820s or the 1840s. Virtually all participants agree that growth was slow at best before 1820 and rapid after 1840.